President Aquino’s Most Evil Proposal: Antitrust Law
The Aquino administration is now preparing for the implementation of an antitrust law in the Philippines in order to legislate private corporations and companies’ monopolistic tendencies. The President said in his first State of the Nation Address (SONA) that it is the government’s duty to ensure that the market is fair for all- and, to fulfill his statist duty as the highest elected official of the land, he believes that he has to put an end to monopolies or cartels in the country. Thus, he said that the country needs an antitrust law “that will give life to these principles, to afford Small- and Medium-Scale Enterprises the opportunity to participate in the growth of our economy.”
Does the economist President know what he’s talking about?
The Philippine Senate already has its proposed Antitrust Act (Senate Bill 123) entitled, An Act Prohibiting Monopolies, Attempt to Monopolize an Industry or Line of Commerce, Manipulation of Prices of Commodities, Asset Acquisition and Interlocking Memberships in the Board of Directors of Competing Corporate Bodies and Price Discrimination Among Customers, Providing Penalties Therefor, and for other Purposes.
However, what is clear is that the Senate proposal authored by Senator Juan Ponce Enrile is simply a rip-off- or a plagiarized copy- of three United States laws, which are the basis of the proposed anti-trust and unfair competition laws: the Sherman Act (15 USC § 1-7), the Clayton Act of 1914, and the Robinson-Patman Act of 1936 (15 USC § 13).
Sen. Enrile wrote the following in the bill’s Explanatory Note:
Our people have been victims to big business. It behooves the Senate to provide protection to our people against price manipulators.
In a volatile economic situation such as that which we are experiencing now, it is not very difficult to imagine how artificial prices in oae or two commodities is able to directly or indirectly raise the prices of related goods and services.
In Article XII, Sectioii 19, our Constitution provides:
“Section 19. The State shall regulate or prohibit, monopolies when the public interest so requires. No combinations, in restraint of trade or unfair competition shall be allowed.”
As proof of the importance of this Constitutional mandate, Section 22 of the same article encourages the promulgation of legislation that would impose civil and criminal sanctions against those who circumvent or negate this principle. Hence, Section 22 of the Constitution provides:
“Section 22. Acts which circumvent or negate any of the provisions of this Article shall be considered inimical to the national interest and subject to criminal and civil sanctions, as may be provided by law.”
Although previous legislations have been passed pursuant to this Constitutional mandate, the increased deviousness and complexity of schemes in perpetuating monopolies in the free market landscape necessitates an equally sophisticated legislation that would ef€ectively address this concern. Generally, this bill penalizes combinations or conspiracies in restraint of trade and
all forms of artificial machinations that will injure, destroy or prevent free market competition.
For these reasons, the passage of this hill is earnestly recommended.
It is very interesting to note that Sen. Enrile is a big business owner himself. In fact, it was declared that the good senator has business interests in over 40 companies and corporations located in Makati area alone as of 2004. So in the name of the people and of public interest, there is a need to legislate corporate success, according to this explanatory note of Sen. Enrile. By personally proposing such an antitrust bill, will he benefit from the enactment of this antitrust proposal in the Philippines?
The problem with this antitrust proposal, which was imported from the United States, is that it is a non-objective law. Under this law, a business-owner is already condemned as a criminal from the moment he starts his own business, regardless of his line of business or corporate practice. According to this law, a business-owner can be held liable for monopoly or for a mere “attempt to monopolize”, “to combine or conspire, expressly or impliedly, with any other person or persons”, “to monopolize any part of the trade of commerce within the country”, among others. If evaluated very carefully, there is only one distinction in the legal treatment given to a businessman or to a criminal: the rights of the criminal are protected much more objectively than the businessman’s.
The crimes that can be committed by any business-owner, corporation, partnership, or association are provided under Sections 3 to 10 of SB 123.
As stated by Sen. Enrile’s Explanatory Note, the alleged intent of his antitrust proposal is to protect competition in the business sector. However, such an expressed intent is founded on the statist or socialistic delusion that an unhindered, unregulated market will necessarily lead to the creation of coercive cartels or monopolies. What Sen. Enrile and his cohorts failed to understand is that no unjust cartel or monopoly has even been and can ever be created or established by means of free trade on a free-market economy. Both American and Philippine history tells us that all economic crisis and coercive cartel or monopoly was caused by government interference with the economy by means of special privileges, such as subsidies or franchises, and by means of legislative action. In the Philippines, we have the Independent Power Producers (IPP) that hold a seemingly perpetual monopoly on the country’s power sector because of a franchise or a privilege given to them by the government.
Those who are advocating or proposing for the passage of this evil bill are either stupid or have vested economic interest. This bill, once enacted, may be used by incompetent businesses against their highly competent competitors. It can also be used by some of our elected politicians and public officials like Sen. Enrile who have business interests for personal economic benefits.
It is now the moral obligation of all business owners and all competent and successful companies and corporations in the country to oppose this evil bill. It is true that the 1987 Constitution permits the enactment of such a law simply because our charter is a mixture of Republicanism and socialism. The Constitutional provisions (under Article XII) cited by Sen. Enrile in his Explanatory Note simply expose the dictatorial and socialistic tendencies of the fundamental law of the land. Since we have a Constitution possessed by socialism or statism, the best thing that the concerned businesses, big or small, can do is to fight this bill by exposing its evils and flaws and how it affects the country as a whole.
Again, since this bill was plagiarized by Sen. Enrile from at least three notiorious American laws, we can fight it by citing the evils of the American antitrust and anti-competition laws.
Antitrust punishes the best companies
The list of antitrust targets reads like a Who’s Who of American business success stories. Standard Oil Company, Alcoa Aluminum Company, IBM, and Microsoft, are just a few. These companies were pioneers in developing new and beneficial products. Who doesn’t benefit from cheaper gasoline using methods pioneered by Rockefeller, the aluminum foil and light-weight aluminum parts invented by Alcoa, or the computer revolution, first in mainframes by IBM, and then in personal computing by Microsoft? These companies pioneered new industries and offered new products that were widely demanded by customers. The huge demand for their products and their large marketshare was a sign of how successful these companies were in selling products that many people wanted. Yet, that market share became the basis for antitrust lawsuits.
Antitrust is used by unscrupulous companies against their competitors
An honest businessman competes by selling a better product. It is not a coincidence that it is usually second and third-tier companies who use antitrust to hammer a more successful competitor. What does it say about the competitive spirit of a company that must cry to “mother” (i.e., the Federal Trade Commission) when the competition gets too tough? Antitrust is used by less successful businessmen to stifle competition.
Antitrust is arbitrary and non-objective; it is bad law
A good law is easy to understand and apply, so that one clearly knows in advance what is a crime and what is not a crime. Antitrust laws make it impossible to know whether one is committing a crime. Under antitrust, it can be illegal to charge less than your competitor (that is considered “price gouging” or “dumping”), to charge the same price as a competitor (that could be “collusion” or “oligarchy”), or to charge a higher price than your competitor (that could be “monopolistic behavior” or “destroying consumer surplus”). Thousands of lawyers and regulators extract hundreds of millions of dollars out of the economy wrestling with these questions. No one should be subject to such arbitrary law.
Capitalism doesn’t need antitrust
The great successes in business were achieved by companies that began small, and became large through innovation and lower prices. Antitrust did not make those successes happen. On the contrary, antitrust is poised like a guillotine at the throats of every businessman who has the foresight, perseverance and pluck to become successful. His very success, his large market share, puts a target on his back for unscrupulous competitors and eager bureaucrats.