BATU, Indonesia. Photo by Jes Aznar

Friday, September 29, 2017

My Special Report on the Philippine Competition Commission

(Here is my two part special report on the Philippine Competition Commission, the newly formed anti-trust body in the country. Its actions affect business, is it a boon or bane? Read on)

PCC: Boon or Bane?

SOMEWHERE in the bustling business district of Ortigas, there is an inconspicuous, grey building along San Miguel Avenue that is hardly noticeable and easy to miss.

The Philippine Competition Commission (PCC), the government’s anti-trust body, occupies some of its floors. Indeed, it doesn’t even have its own office.

Yet, inconspicuous as its office is, the PCC is overwhelmingly powerful whether businessmen like it or not. Inside the boardrooms of some of the country’s top corporations, businessmen are cracking their brains on how best to deal with the newly formed government body.


It’s no secret that even before PCC chairman Arsenio Balisacan could even hit the ground running last year, the PCCalready had to battle against the telecom industry’s duopoly, PLDT and Globe Telecom.

In 2016, at a time when the PCC was still in transitory phase, PLDT and Globe Telecom embarked on a co-acquisition of the telco assets of San Miguel Corp. for P69.1 billion.

The PCC insisted that it should be allowed to review the deal but the telcos said that under the transitory rules of the PCC, the deal "only needed a notice" to the commission and is already deemed approved.

However, the PCC maintained that it is only deemed approved if the notice is sufficient.

The case is pending in court.

Aside from telco players, other businessmen are quietly sighing in frustration over the fact that they have to deal with the PCC. They consider it an unnecessary layer in the labyrinthine Philippine bureaucracy that is already difficult to navigate.


The head of one of the country’s biggest conglomerates said having to go through the PCC causes uncertainty for businesses.

“Supposedly, it’s only one month but even after that one month, if they deemed that it’s not complete, then the review will continue. That causes uncertainty,” the CEO told The STAR in an interview but declined to be named, saying that it may affect the company’s future dealings with the PCC.

The official said that for a transaction to be scrutinized by the PCC has its advantages but it also brings uncertainty.

“It adds too much risk to the transaction. While the review is ongoing, the transaction is at a standstill. The operations are halted. You don’t know if you will have a new boss or not,” the CEO said.

The same source said PCC’s definition of “having control in a company” isn’t very clear.

“For other companies, it’s accounting control. There are instances when you have majority control but you do not manage it. Or is it being able to control the board?”

Another executive, a top-ranking official from a property company that had to deal with the PCC said they experienced the same problem.

“The submissions we have were always inadequate. So (the approval) of our transaction took some time,” said the executive who also declined to be named.

The same source said they just had to explain to their foreign partner that they needed more time.


But Balisacan said the prescribed period for review as mandated by law is up to 30 days for the Phase 1 and a total of 90 days if the review moves to Phase II.

“Most are cleared within 30 days. If there are concerns, we would move to Phase 2 so it’s 90 days in total,” he said.

The countdown can only begin once the parties submit complete application requirements. This is when the formal "notification" happens.


Balisacan explained that this pre-notification process takes time because the lawyers hired by companies to deal with the PCC sometimes move slowly. 


The PCC, created under Republic Act 10667 or the Philippine Competition Act, is an independent quasi-judicial body mandated to implement the national competition policy by regulating anti-competitive conduct and protecting the wellbeing and efficiency of competition markets for the benefit of consumers and businesses.

Specifically, it seeks to protect consumers by giving them more choices over goods and services at lower prices in the market and to promote competitive businesses, large or small, that will, in turn, encourage economic efficiency and innovation in the country.

It was established with the premise that markets with enough competition directly benefit the poor. This is because competitive markets offer a wider variety of goods and services at the lowest possible prices.

“This means that the poor, with their limited income, have expanded choices and can afford to buy more with the same amount of money.
It also protects small business owners, including farmers and other small-scale entrepreneurs from unfair and predatory business practices that bigger businesses might implement,” the PCC said.

Companies embarking on mergers and acquisitions with a transaction value of at least one billion pesos need the approval of the PCC.

“”Parties to the merger or acquisition agreement where the value of the transaction exceeds one billion are required to notify the PCC of such agreement. They cannot consummate the same without the approval of the PCC. The PCC is also empowered to promulgate other criteria — increased market share in the same relevant market in excess of minimum thresholds that would trigger this notification requirement,” the PCC said in a primer.


At least three businessmen interviewed by The STAR said the one-billion peso threshold is too small.

“That’s practically everything,” said one businessman.

For big conglomerates and foreign companies looking for acquisitions, that threshold is small.

Balisacan said the threshold could change if the commission deems it necessary.

“(The one billion threshold) is mandated by the law but the law nonetheless empowers the PCC to update the threshold as we deem necessary,” he said.

“We will revisit this eventually but for now, it’s not a very high priority but we can update it anytime,” he said.

Balisacan noted that there were indeed some initial concerns on the one billion threshold from businesses concerned that the PCC may be deluged by applications because the amount practically covers almost all major possible mergers and acquisitions of companies.

“But there shouldn’t be a problem because the law prescribes a maximum (review period) of 90 days and so far, we’ve been able to comply,” Balisacan said.


Another role of the PCC is to ensure that entities do not abuse their dominant position by engaging in conduct that would substantially prevent, restrict or lessen competition.

These include predatory pricing, imposing barriers to entry in an anti-competitive manner and unfair exercise of monopsony – a situation where there is one buyer and many sellers.

For mergers and acquisitions, a comprehensive review includes a determination of the relevant market whether there will be substantial changes to the market structure and the potential impact of the transaction on public welfare.

Some key factors that may be considered when determining the effect of a merger or acquisition on competition in a relevant market include number of competitors in a market.

For instance, the PCC said a market with only a handful of players may raise a red flag. Fewer players in the market could have an implication on the level of competition.

Furthermore, mergers that significantly decrease the number of competitors in the market require a closer review of possible anti-competitive effects that could harm consumers.

Mergers among competitors need thorough review for potential lessening of competition especially when costs of entering a market are high.

There are many examples of barriers to entry include high cost of infrastructure investments and regulatory barriers.

If the merger results in a market with fewer competitors who have similar market shares, the potential for collusion is high.

These are just among the roles of the PCC but businessmen insist the PCC is just a thorn on their side. ###

When President Benigno Aquino III appointed then Socioeconomic Planning Secretary Arsenio Balisacan as chairman of the Philippine Competition Commission (PCC), the government's antitrust body, he had his hands full at the National Economic and Development Authority (NEDA).

There were so many infrastructure projects up for approval – the agency was so busy.

But Balisacan, a well-known economist who holds a PhD in Economics from the University of Hawaii, did not hesitate to accept the job.


An expert on economic development, poverty and inequality, Balisacan believed that a competitive market is necessary to achieving inclusive growth.

“The growth that we’re seeing is not as inclusive as what we would have wanted. It’s these anti-competitive factors that contribute to that. It’s really a big part of the story – that lack of competition that concentrates the benefits to a small group of people,” Balisacan told The STAR.

“If there is level playing field, growth becomes inclusive,” he added.

The Philippines posted a stellar economic growth of 6.8 percent in 2016 but such growth has yet to be inclusive, with 25 percent of the 100 million population still living below the poverty line.

Balisacan recalled that it wasn’t easy to set up the PCC, the first time for the country.

“We started from scratch. It’s never been done in this country. We started in February last year and all I had was the commissioners with me and five borrowed staff from NEDA,” he said.

But he and his team persevered because of the crucial role that the PCC can play.

Without the PCC, he said, “the big companies can kill SMEs. They can simply reduce prices so the SMEs won’t be able to compete. This is a very common practice of cartels. The big ones eat the small ones.”

Balisacan who has been studying the behavior of industries and other players in the economy said industries that are vulnerable to anti-competitive behavior are those with few players.

Thus, in looking at mergers and acquisitions, PCC makes sure the merger will not substantially lessen competition.

“These merged companies could have a much larger influence in the market,” he said.

The PCC also makes sure that the merger would not prevent any potential competitor to come in if there is no competitor yet.

“We have to look at the barriers to entry,” he said.

The PCC is also strongly pushing for its advocacy of having a competition environment in the Philippines and is not limited to reviewing M&As.


Given these roles of the PCC, Balisacan said that in the end, businesses should realize how good the PCC can be for the country’s business environment.

“The PCC is actually good for business because competition is good. They will improve on their products and services,” he said.

Businessmen don't necessarily agree. They said the PCC is just another layer in the already labyrinthine Philippine bureaucracy. 

However, Francis Lim, a prominent corporate lawyer, a senior partner at ACCRA Law Offices and who has worked as an antitrust lawyer in Washington, said the creation of the PCC is good for the country.

“It’s good overall. All businesses have a chance. What is important is to have a competitive environment for everyone. Those big businesses have nothing to fear if they don’t do anything illegal,” Lim told The STAR.  

So far, the PCC has reviewed 114 mergers and acquisition transactions, of which 95 deals have been approved.

Among the recent approvals is the acquisition by Japan Tobacco Inc. of the Philippines’s second largest cigarette company Mighty Corp. from the Wongchuking family.  JTI, the world’s third biggest cigarette company acquired Mighty for P46.8 billion.

Now whether or not these approved deals would actually lead to a more competitive environment; prevent market leaders from abusing their dominant position; and improve businesses’ products and services – and in the process translate to inclusive growth for the Philippines – remains to be seen. ###

Sunday, September 17, 2017

My Russian Journal

In the port city of St. Petersburg on the Baltic sea, many chilly nights before I had my first shot of Russian Standard, or before I met a beautiful long-legged Russian lady named Anastasia or whispered my dreams to the griffins, I had already found myself in a place filled with long held traditions, enigmas and a rich historical past.A lifetime is not enough in this city, Russia’s second largest. Its charm will blow your mind; its history will haunt you; the view of its elegant canals lined with the grandest mansions and Baroque-style buildings will take your breath away; the bright city lights won’t cease to amaze and the legendary White Nights of May – when the northern sun takes its sweet time dipping into the horizon – will trick you into believing a day is as long as you dream it to be.

Peter the Great, he who reigned with valor and a long silver sword, is everywhere. You’ll see him in the sprawling fortress along Neva River, the oldest landmark in the city; in the cathedrals adorned with golden angels on top, in the museums, in the age-old bridges that part at half past one in the morning for the ships to pass, on the cobblestoned streets and in the bookshops. 

Russia’s first emperor after all built St. Petersburg out of nothing, expanding the country into a larger empire that made it a major European power, and leading a cultural revolution that replaced medieval systems long held by the country’s aristocrats.

And hundreds of centuries after, I suspect, St. Petersburg is as magnificent as it was before, largely frozen in time.

I arrived in the city in the latter part of May, not to go on vacation but to trail Philippine businessmen who traveled to the Eurasian country to explore potential business deals here and in Moscow during President Duterte’s official visit.

But in between deadlines, I managed to go around. For how can I not, what with the splendor, the sights, the gastronomic delights and the magnificence of history teeming all over? Not even the chilly breeze from the Baltic Sea would deter me from seeing the city.

And so I roamed its streets and ducked into the corners of its churches and museums. I looked in awe at the intricate paintings on the ceilings and found myself amazed with the overload of gold in every important piece of historical architecture.

Yes, a lifetime is not enough in St. Petersburg but for lovers of history, one should immediately visit the Peter and Paul Cathedral, a Russian Orthodox Church that’s now been turned into a museum.

It is the gateway to the Romanov dynasty of the past because it is home to the graves of nearly all the rulers of Russia since Peter the Great. 

Peter’s grave is at the front right, and to this day, Russians still shed tears over it. Catherine the Great, the Empress of Russia for 34 years is also buried here.

Another place to visit is the Hermitage Museum, one of the largest and oldest museums in the world. Some of the finest pieces of art are found here, including Rembrandt’s “The Return of the Prodigal Son.”

The Church of the Savior on Spilled Blood, another must-see, is perhaps the face of St. Petersburg, dazzling with its five spiral multi-colored domes. It stands out in the city’s predominantly Baroque and Neoclassical architecture because of its medieval Russian style. I never imagined a piece of architecture could enthrall me as much as it did, transporting me back to the olden times, in the truest spirit of romantic nationalism.

Outside the city, I went to see the Peterhof Palace, described as the Versailles of Russia and inscribed as a Unesco World Heritage Site. Spending hours inside it will give one a feel of how it was to live like a Russian monarch. One will see the beds of grand emperors and empresses, draped with light pink curtains, the collection of silver and gold cutlery in the dining rooms, the floor to ceiling mirrors – oh, the grandeur of it all!
Outside, the complex is dotted with gardens filled with flowers and a vast collection of sparkling fountains. 

A long walk from the palace is the mouth of the Baltic Sea, with its ice-cold breeze, whispering waves and breathtaking view. 

There are many other places to see in the city. One can also just meander aimlessly and simply take it all in. Or linger on balconies overlooking the cityscape.

The city is as surreal as can be – painters paint the dead for a living; strangers who will not smile at you will pay for your ride; most men share the same names – Igor, Sergei, Yuri and, of course, Vladimir; soup is served with sour cream and nobody gets drunk even with endless shots of vodka.

On my last day in St. Petersburg, I boarded the bullet train to Moscow where the rest of the business delegation would converge and meetings for Duterte’s official visit would be held.

In Moscow, it wasn’t easy chasing over 200 businessmen, especially with the presidential visit cut short to only 24 hours from the scheduled week. Meetings were cancelled left and right and the schedules were suddenly revised many times over. 

But when one is in Russia, its picturesque beauty will dazzle and delight and one will easily forget if not find a way around the nuisances – the horrendous traffic, the cancelled meetings, the jet lag and that one unbearably chilly afternoon when the thermometer read five degrees and the well-planned rendezvous with the legendary billion-dollar spy failed.

In the end, there will always be something about Russia that will penetrate deep into the senses, though I haven’t quite figured out yet which one it was exactly. 

Was it the classical music at the Mendeleevskaya metro station at midnight or the art in the subway? Was it the powerful voice of Anna Karenina before she faced her death or the bronze horseman in Alexander Pushkin’s mind? Or could it be the soothing vodka in a Country That Does Not Exist one fine evening or the sight of the well-lit Bolshoi Theater across it? Was it the unforgettable Anastasia whose beauty enamored me, or the dashing gentleman’s warm kiss on my cold hand?

Maybe it’s all these and more. Or maybe, just maybe, it’s simply sitting behind a dark cherry wood desk in a room in the Ritz-Carlton trying to figure out where to find Stalin’s seven sisters.