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President Aquino’s Most Evil Proposal: Antitrust Law

August 7, 2010
There's a legislative proposal that will make successful businessmen in this country criminals: Antitrust Law! Say no to this non-objective law!

There’s a legislative proposal that will make successful businessmen in this country criminals: Antitrust Law! Say no to this non-objective 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.

Here are some of the evils of an anti-trust law, according to Raymond Niles, who wrote an article entitled The Case Against Capitalism.

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.

21 Comments leave one →
  1. Jester Cahayag permalink
    August 1, 2011 3:38

    I agree with what you said that we do not need a plagiarized copy of American anti-trust laws, however, I believe that our country needs an effective deterrent against monopolies, not for the protection of the competitors of the outstanding firms, but for the protection of the consumers. We need laws to promote competition. To illustrate this, let us remember sun cellular before it was bought by Smart. Before it entered the the market, unlimited call promos were essentially non-existent, but after it introduced it, we were bombarded by a seemingly infinite array of promos from the other two networks. They had to do that because of the increasing market share of sun cellular. Today, we would no longer expect to hear new promos from Smart, they now claim almost 60% of the market share i.e. basically having a safe spot in the market. Another danger lies with the multinational corporations. These corporations have at their disposal, very large amount of resources and technology. They can easily dominate our market. This spells trouble for our local entrepreneurs, who obviously cannot keep up with this kind of competition, and the consumers, who would be left powerless.

    • August 1, 2011 3:38

      “I agree with what you said that we do not need a plagiarized copy of American anti-trust laws, however, I believe that our country needs an effective deterrent against monopolies, not for the protection of the competitors of the outstanding firms, but for the protection of the consumers.”

      Jester Cahayag,

      But I’d like to ask first, what’s the source of monopoly in RP and kindly mention a few monopolies… Thanks!

      • Jester Cahayag permalink
        August 2, 2011 3:38

        It’s funny that you asked, knowing that you mentioned the answer to that question in your article. Anyways, I see where you are going here. I am just suggesting that you should rethink your stand. You are suggesting that we should not bother to install a defense against the potential dangers of corporations accumulating power. I can sense that something is very wrong with your stand. I know that you have complete trust with the system of free enterprise, however the system would not take care of itself. It is one of the functions of the government to promote competition, and it needs the legal infrastructure to support it. I just think that saying that those who wants to pass this bill is either stupid or has business interest in it’s implementation uses the same logic as the one’s who are saying that those who hinders its implementation is either stupid or would benefit in status quo(The big corporations). Just think again.

      • August 2, 2011 3:38

        “Anyways, I see where you are going here. I am just suggesting that you should rethink your stand.”

        — No, it’s you who should rethink your stand because it seems that you don’t know he whole issue here.

        “You are suggesting that we should not bother to install a defense against the potential dangers of corporations accumulating power.”

        — That’s not what I’m suggesting. See? Antitrust law allegedly seeks to prevent monopoly and ensure competition. In the Philippines only the government can make cronies and monopolies thru laws, contracts, subsidies, protection, etc.

        Let me give you examples of government-created monopolies:

        1. Pagcor
        2. NHA
        3. Public hospitals
        4. Public schools, colleges and universities
        5. Meralco
        6. Napocor
        7. MWSS
        8. Nawasa

        And who got rich through government laws, contracts, support, subsidies and protection? Some of them are as follows:

        1. The Independent Power Producers who were allowed by law to maintain a power monopoly in the country.

        2. In effect, the country’s super-rich (e.g., Lopezes, Ayalas, Gokongweis, Tan, among others who’re protected by our protectionist constitution against foreign business competition. They can easily maintain their power through protectionist laws, merger, and regulations.

        3. Businessman Enrique Razon who got rich during the term of Mrs. Gloria Arroyo.

        4. Mike Defensor who put up two mining companies through Arroyo admin help despite lack of experience in mining.

        Regulations make it very difficult for new entrants or potential businessmen to enter the market. This situation protects established businesses and corporations to control the market.

        Since the government own and control lots of corporations like PAGCOR, NFA, public hospitals, etc., the government can easily create OLIGARCHS.

        Mere giving of contracts to favored individuals can create cronies and new rich.

        Someone asked me on Facebook: “I really need a direct point, why and how oligarchs are called good in terms of business. Because? They create foreign investors?”

        My answer— Oligarchy is a political term. It means “a small group of people having control of a country, organization, or institution.” The oligarchs maintain, keep, gain control of a country’s economy due to government help (e.g., protection, subsidies, contracts, licenses, regulations that bar others from entering the market, etc.)

        In short they became monopolists through government help. Our political system and constitution create two kinds of monopolists:

        1. Government monopoly. Examples: PAGCOR, NFA, public schools and hospitals, etc.

        2. Corporate monopoly. These are the people – the oligarchs- who get help from the government.

        The oligarchs cannot exist in a free market economy. They would be wiped out. What happened to the old rich in the past when we opened our economy to foreign and American investors? They were wiped out.

        Come of think of this scenario. You’re politically connected with the current administration. You proposed to build a railway that would connect Manila to Ilocos. That would be a big project. Since you don’t have any money and some investors are afraid to invest, the government gives you subsidy to complete the project. All you have to do is hire the right people such as engineers, architects, railway experts, among others. You finished the project but you cost the government and taxpayers billions of money. You promise to pay for a period of 25 years.

        Are you good? Well. You are good politically…

        Here’s how a government or any of its powerful agency creates oligarchs:

        From the news article: “Besides shelling out P1 billion for overpriced coffee, Philippine Amusement and Gaming Corp. (Pagcor) spent huge sums for energy drinks during the Arroyo administration, Pagcor chair Cristino Naguiat Jr. said on Monday.

        “An associate of former Pagcor chair Efraim Genuino, Carolina Matsuda, got a contract to supply Pagcor casinos with bottled energy drinks which the Commission on Audit (COA) found to be overpriced by more than 300 percent, Naguiat said.”

        http://newsinfo.inquirer.n​et/34589/more-pagcor-scams​-bared

      • August 2, 2011 3:38

        Also, someone told me on Facebook: “i know jackshit about capitalism or free-market economy or neoliberalism; i have my reservations about these ideologies nonetheless, especially those espoused by the free-market extremists. i do think they are susceptible to monopoly/oligopoly (in which case govt intervention is sought to enforce competition and fair pricing). and they seem to disenfranchise the ordinary people- the working class, children, the pensioners, the disabled etc.”

        My reply: monopolies are a creation of the government. The only monopoly created by the free market is Microsoft due to patents and IP rights. But reality has it “free market monopoly” would have to go after a few years, as Microsoft is now facing fierce competition from new market entrants like Apple and Google.

      • August 2, 2011 3:38

        Jester Cahayag said: “It is one of the functions of the government to promote competition, and it needs the legal infrastructure to support it. I just think that saying that those who wants to pass this bill is either stupid or has business interest in it’s implementation uses the same logic as the one’s who are saying that those who hinders its implementation is either stupid or would benefit in status quo(The big corporations). Just think again.”

        Let’s analyze you statements one by one.

        “”It is one of the functions of the government to promote competition, and it needs the legal infrastructure to support it.”

        — How? By giving subsidies and by protectionism?

        Or: by passing the antitrust law to guarantee what they call free and open competition in the marketplace?

        You have to understand that ‘free competition enforced by law’ is a grotesque contradiction in terms.

        Like I stated on this post:

        “Under the antitrust laws, a man becomes a criminal from the moment he goes into business, no matter what he does. If he complies with one of these laws, he faces criminal prosecution under several others. For instance, if he charges prices which some bureaucrats judge as too high, he can be prosecuted for monopoly, or rather, for a successful “intent to monopolize”; if he charges prices lower than those of his competitors, he can be prosecuted for “unfair competition” or “restraint of trade”; and if he charges the same prices as his competitors, he can be prosecuted for “collusion” or “conspiracy.”

        The only proper role of the government in a free market society are as follows:

        1. Guarantee rule of law
        2. Guarantee economic freedom by not being intrusive
        3. Investigate and punish corporations or businesses that engage in criminal activities.
        4. Punish corporations and businesses that engage in fraudulent activities.

        We have all these laws and measures in place that’s why we don’t need an antitrust legislation.

        To further educate yourself on this matter — http://www.duke.edu/~kem32/cps1/digitalethics/monopoly.html

  2. Russ permalink
    June 12, 2012 3:38

    We need the anti-trust laws. I ended up here cuz my association does not allow globe only PLDT. Im in search of a law i can slam in their face cuz i hate PLDT ive only had bad expereinces with them why the fuck should i be forced to used them if i want DSL service? my other options to avoid PLDT would be to get wimax or some bullshit wireless techynology. as a consumer I LOSE

    • June 12, 2012 3:38

      You should realize that all monopolies and cartels here in the Philippines were created by the government thru laws and protectionism. There’s no real free market situation in this country. Plus, anti-trust law is so non-objective that it makes businessmen potential criminals.

      • October 3, 2012 3:38

        I disagree with that. The government must stop monopolies before it is formed, because it discourages healthy competition between firms. For example, the acquisition of GMA-7 by the business tycoon Manny V. Pangilinan and its merger with TV5. It DOES limit consumers’ (or in the case of broadcast TV, televiewers’) choice of what to watch. It is Pangilinan’s move to control the broadcasting industry.

      • October 3, 2012 3:38

        ” The government must stop monopolies before it is formed, because it discourages healthy competition between firms”

        — May I know if you know the main source of monopoly in the Philippines? Thanks.

  3. Wendi permalink
    June 29, 2012 3:38

    As always, in every issue, there are pros and cons. What I can ultimately gather from and say for this issue is that:
    As long as we cannot trust the government we are in, I don’t think a law, which gives said government more power, can be a potential solution. Fix the system first and the rest will follow. I think.

    • October 3, 2012 3:38

      I don’t think that with the passage of this so stupid a law, people are gonna trust the government again in crafting another cybercrime law.

  4. July 4, 2012 3:38

    AS USUAL, We pay smart guys who are plagiarist… Very smart huh…..
    then, wheres their IDEAS…..
    Here is were smart your ass in school compare to a wise man.

  5. Clan permalink
    May 13, 2015 3:38

    While I am not strongly against the anti-trust law (at least not to the extent of labelling it evil), I do believe that the most effective way to foster competition is for the government to simply “step aside”.

    Why? Because the biggest hindrance for new businesses today is the government itself and the laws that it promulgates – chief among which are the non-competitive tax laws (making Ph companies unattractive investments), foreign ownership laws (i.e. one less source of funding for entrepreneurs) and the inefficiency of government agencies (who have the gall to require bribes just for them to expedite valid requests).

    How to step aside?
    – Lower taxes and, at the same time, protect tax collections (higher penalties for erring gov’t officials/employees, more stringent anti-money laundering measures to be imposed on banks, reduction in the # of gov’t employees).
    – Relaxation of foreign ownership laws and maybe even allowing foreign companies to operate here (e.g. Can you believe that I am paying almost 1.8k monthly for a 2mbps dsl connection while other countries are now moving to 1 gigabyte/sec speed? Damn you local telcos!).
    – Streamline processes (extensive use of online/internet infrastructure).

    • Clan permalink
      May 13, 2015 3:38

      So, what I’m trying to say is… you cannot seek to destroy/prevent monopolies without first lowering the barriers to entry for new competitors. I would have preferred if the gov’t focused on the latter to make it a truly free market (anti-trust law can come later or might not even be necessary if the barriers are abolished).

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