An active competition authority

Yellow Pad

An active competition authority
By Don Mercer

Can an active competition authority contribute to the fight against corruption in the Philippines? The answer can be a resounding "yes" provided that a newly minted competition authority has sufficient independence and can be so free of corruption that it becomes a beacon of hope for all Filipinos.

This author had the privilege recently of presenting to a seminar organized by the nongovernmental organization (NGO) Action for Economic Reforms, at which other NGOs, senatorial staff, an elected congressional representative, departmental officials, including an undersecretary, were present. It was quite heartening to see how committed all present were to fighting corruption and using their creativity towards creating institutions and related laws that can be made to work for the good of all Filipinos. One element of the discussion related to the proposals in the Senate and House of Representatives for a competition law and a competition authority. Such is a condition upon which the Philippines can truly enter the world of free trade and open government among Asian nations.

Here are the factors by which a competition authority can contribute to this all-important battle:

FACTORS IN THE LAW ITSELF

• Combating conspiracies to fix prices and bid-rigging on government and private contracts can reduce the corruption and abuse of economic power as well as make the economy more competitive and innovative;

• Merger and acquisition review can prevent the emergence of dominant firms that are at risk of abusing economic and political power;

• National treatment requirement of modern competition law means that all companies/competitors, domestic or foreign, must be treated equally under the law. This means that Filipino corrupt practices cannot be applicable, without high risk of challenge, to competition authority investigations and decision-making which apply to corporations that are subject to anti-corruption laws elsewhere;

• Interventions by the authority before regulatory bodies (if the competition authority is provided with such a power) can reduce abuses of regulatory power by regulators;

• Industry studies (if the authority has such a power) can complement the intervention power in illuminating the abuses of power within the self-regulated professions to the degree that the professions define their own self-interest as the public interest;

• Requiring competition policy authority input into other government economic policies in the interest of reducing potential negative impact of these policies and their implementation on healthy competitive forces, can help challenge policies and implementation emerging from corrupt practices.

FACTORS IN THE FAMILY OF COMPETITION AUTHORITIES

• The requirement for competent investigations nationally, provincially and locally (seamless economy argument) as well as internationally in terms of the collaboration required for cross-border investigations requires competent, honest, career civil servants without conflict of interest and thereby fosters an anti-corruption culture;

• Any country embracing competition law and a related authority that has the necessary international credibility to be trusted in multi-country investigations is making the statement that corruption has no place in that society.

That anti-corruption stance can also be spread to laws against misleading advertising, market deception and deceptive communications, as well as to the laws related to labelling of consumer goods, textiles and precious metals marking if they are also brought under the competition authority (assuming that they are not effectively enforced elsewhere within the government machinery).

Thus, competition policy and a bone fide competition agency can foster a culture of integrity and competence and be a beacon of anti-corruption in the Philippines through the application of competition law, the principle of national treatment and the expectations of the International Competition Network (ICN) of Competition agencies.

FLAWS IN THIS ARGUMENT

• Trifurcated economy combined with smuggling and lack of border controls means that competition policy may not be as effective as when the Philippines gains complete control over its borders;

• An overwhelming level of corruption potentially blocks setting up of a competent competition authority.

OFFSETS TO THESE FLAWS

Political will to build an oasis of competent honesty in a sea of corruption. This step will require, at least in the new competition authority, a competent, integrity-driven, professional and independent civil service that will speak truth to power and which embodies a Code of Values and Ethics which can be exported elsewhere in the government.

Several areas of competence that have emerged under the will of governments of the Philippines come to mind: the regulatory and deregulation framework that resulted in the privatization of Manila Water, a much more competitive and pro-consumer airline industry, the huge changes in the telecommunications industry and the revamping of maritime transport with roll-on, roll-off ships.

A competition authority that can operate proudly and competently locally and in the international arena could be the next beacon towards eliminating the denigration of corruption.

Mercer, who visited the Philippines for about two months recently, is a retired executive of the Competition Bureau of Canada (donmercer@shaw.ca).