Introducing Competition Law: Reaching out to the Filipino MSME - - PowerPoint PPT Presentation
Introducing Competition Law: Reaching out to the Filipino MSME Community Rachel Burgess, University of Southern Queensland Gwen De Vera, University of the Philippines Overview Introduction to the Research Project (RB) Methodology (RB)
Introduction to the Research Project (RB) Methodology (RB) MSMEs in the Philippines (GD) MSMEs and the Emerging Competition Law Landscape in the Philippines (GD) Risk Areas for MSMEs (RB) Awareness of PCA – Survey Results (RB) MSME Seminar and FGD (GD) Policy Recommendations (GD) Recommendations for Further Research (RB)
“Evaluating the level of awareness of the Competition Act in the Filipino MSME community”
Research Grant awarded in 2017
Desk based research on MSMEs and competition law issues in the Philippines
Field work:
Survey
APEC-funded project: Capacity Building for Small and Medium-sized Enterprises (SMEs) on Competition Policy and Law
Ongoing involvement and support from:
University of the Philippines (UP) Institute for Small Scale Industries (ISSI)
UP Institute for Government and Law Reform (IGLR)
Industry e.g. PCCI and Phil Export
Outputs:
Survey results report
FGD and MSME Seminar – UP
Paper published in UP Law Journal
East Asia Academic Network on Competition Policy and Law (EANCP) conference held in Sydney
Final research paper
Quantitative method - 10 question survey Based on Schaper - used in Australia Approximately 330 surveys collected
UP-ISSI PCC PhilExport
Supplemental questions – size of business, industry, gender of respondent,
role of respondent
Convenience sample only
Based on 2016 figures, the top five (5) industries in terms of number of MSMEs were:
Wholesale and retail trade Accommodation and food service activities Manufacturing Other service activities Financial and insurance activities
Based on 2016 figures, MSMEs –
Generated a total of 4,879,179 jobs (against 2,831,729 for large enterprises) Accounted for 25% of the country’s total exports revenue Contributed to exports through subcontracting arrangements with large firms,
The Magna Carta for Small Enterprises (as amended) established the following categories of enterprises:
MSME Asset size Micro Not more than PhP3,000,000 (AUD75,000) Small PhP3,000,001.00 – PhP15,000,000 (AUD75,000 - 375,000) Medium PhP15,000,001 – PhP100,000,000 (AUD375,000 - 2.5million) Large More than PhP100,000,000 (>AUD2.5million)
The Philippine Statistics Authority classifies MSMEs on the basis of number of employees as follows:
MSME Number of employees Micro 1 - 9 Small 10 - 99 Medium 100 - 199 Large More than 200
Promote the productivity and viability of MSMEs Reduction of business costs by directing government agencies to practice
minimum regulation of MSMEs
Registration Provision of financing Other government services and assistance
The law also made it mandatory for all lending institutions to set aside a
percentage of their loan portfolio for MSMEs
Department of Trade and Industry (DTI)
Negosyo Centers
Small and Medium Enterprise Development Council (SMED Council) under the
Department of Trade and Industry, later renamed to the Micro Small and Medium Enterprise Development Council (MSMED Council)
Small Business Guarantee and Finance Corporation (SBGFC), attached to the
DTI and under the administrative supervision of the SMED Council
Five strategic goals under the MSMED Plan 2017-2022
improved business climate; improved access to finance; enhanced management and labor capacities; improved access to technology and innovation; and improved access to market
PCA 2015 applies to MSMEs
Applies to any person or entity engaged in any trade, industry and commerce in the
Republic of the Philippines (PCA, Section 3)
While no statutory exemption, offers specific safeguards against abuse of dominance for
conduct involving directly or indirectly imposing unfairly low purchase prices for the goods or services of, among others, marginalized agricultural producers, fisherfolk, micro-, small-, medium-scale enterprises, and other marginalized service providers and producers (PCA, Section 15g)
Some agreements and conduct between competitors are automatically prohibited (price fixing and bid rigging)
This means that MSMEs can fall foul of these provisions if they enter into agreements to
price fix or rig bids with competitors
Other types of agreements and conduct between competitors only breach the PCA if they have the object or effect of substantially preventing, restricting or lessening competition
Where MSMEs have small market shares, agreements or conduct between them are
unlikely to have the effect of ‘substantially preventing, restricting or lessening competition’
However, the agreement or conduct could still have the object of substantially
preventing, restricting or lessening competition’
Recognise the importance of MSMEs – key stakeholder in Communications and
Advocacy Strategy (PCC 2016 Annual Report)
Advocacy efforts not yet focused on MSMEs Publications for SMEs: http://phcc.gov.ph/pcc-faqs-smes/
Trade or industry associations
Facilitating exchanges of commercially sensitive information Reaching agreements on prohibited matters during association meetings Making recommendations on pricing or output which are followed by members
Other ASEAN Member States
MSMEs have fallen foul of competition laws Mostly because of ignorance or a lack of understanding Often when meeting as part of a trade or industry association
Most of early MyCC cases involved SMEs
Cameron Highlands Floriculturist Association (CHFA) case (2012)
Agreement reached at CHFA meeting:
10% increase in price of flowers announced in the press
150 members of CHFA reported to have ’agreed’
No fine imposed (first case)
What is interesting?
Announcement made in the press
Good reasons for price increase – increases in cost of workers, fertilisers, plastics, wood
Evidence?
Minutes of meeting during which 10% price increase was agreed
List of names of CHFA members
First seven infringement decisions involved SMEs
Collusive Tendering (Bid-Rigging) for Termite Treatment in Singapore (2008)
6 pest control companies Approved to use ‘Agenda’ pesticide in Singapore (approved by the National Environment
Agency)
Bid rotation arrangement – the bidder whose ’turn’ it was to win would put in a bid,
while the other 5 would put in a ’cover’ bid above the price to be quoted by the bidder whose turn it was to ‘win’
Minimum price issue – not addressed by CCS
Fined S$263,000 (USD194,000) based on annual turnovers and level of cooperation
What is interesting?
Investigation commenced as result of complaint Concurrent raids on premises Information found at raid resulted in further raids at other company premises
Evidence? Emails found at premises
“Hi Pat/Joseph,
Could you quote for corrective treatment with Agenda for entire landscape areas … above $120,000.
To install termite baiting station around the planters areas … above $48k.
Thank you for your support owe you guys.” (emphasis added)
Requests for information sent to project managers (who had received
Interviews of personnel involved (oral evidence) In Singapore, bid rigging agreements are considered restrictive of
This is legislative position taken in the Philippine Competition Act
Price fixing agreement reached through Vietnamese Insurance Association
What is interesting? Firms didn’t realise they were doing anything wrong. Thought it was
Companies had been experiencing a price war in the form of
Evidence? Agreement was posted on website, publicly enforced compliance
Capacity Building for Small Medium Enterprises on Competition Policy and
Law
Completed in 2017 Outputs:
FAQs for SMEs Policy notes – Advocacy, Competition Enforcement, Levelling the Playing Field,
Infrastructure Competition and SMEs, Lessons for SMEs, Government Restrictions
Four key policy recommendations
Priority Goal 4 – increase awareness and understanding of CPL issues
Household Survey 2017
1,500 responses 53% had heard or read about the PCC Less than 1% understood its functions Only 5% had heard about, seen or read the PCA.
Government and Business Survey 2018
Firms (358) 21% aware of the PCC and understood its mandate to promote market competition.17%
31% of respondents said that they were aware that there was a law in the Philippines
that promotes market competition. Only 1% could name the PCA (without assistance). 8%
Government and Business Survey 2018
Government (521) - government owned or controlled corporations (GOCCs), non-
government associations (NGAs) and local government units (LGUs).
17% of respondents said that they were aware of the PCC and understood its
mandate to promote market competition. 12% of respondents understood its functions (based on follow-through questions).
46% of respondents said that they were aware that there was a law in the
Philippines that promotes market competition but only 3% could name the PCA (without assistance). 8% of respondents provided correct answers about the PCA on the follow-through questions.
Asian Institute of Management (AIM) Rizalino S. Navarro Policy Center for
Competitiveness
May to June 2017 Survey of SMEs in Metro Manila to determine attitude to competition 530 businesses – half small, half medium sized enterprises Around a third of SMEs reported agreements in terms of pricing and product
variety = price fixing (per se prohibition)
327 responses 10 questions True/False English and Tagalog
Micro Small Medium Large Unknown
Manufacturing Retail Agriculture Pharma Other Unknown
Correct answers Incorrect answers
Correct answers Incorrect answers
Correct answers Incorrect answers
Correct Incorrect
Correct Incorrect
Correct Incorrect
Correct Incorrect
Correct Incorrect
Correct Incorrect
Held in collaboration with the University of the Philippines Law Center – Institute of Government and Law Reform (UPLC-IGLR)
Introduce the PCA to MSMEs and other sector
stakeholders
Provide basic information on the scope of the
PCA and importance of (a) compliance and (b) looking at competition as policy tool for enhancing the MSME sector
The Philippine Competition Act and its Relevance to the Small Business Sector
Highlights of AIM RSN Survey Anti-competitive, abuse of dominance,
merger review regime
The role of the Philippine Competition
Commission (PCC)
Recent decisions that may inform
enforcement activities of the PCC
Case studies of selected ASEAN jurisdictions
Results of the APEC Capacity Building for SMEs on Competition Policy and Law
Competition v. competitiveness Results of FGDs under the APEC Project,
particularly in leveling the playing field
Purpose of the FGD FGD Questions and Guidelines FGD Participants Highlights of the FGD
MSME contracts and transactions Difficulties in relation to contracts and transactions Form of competition concern most relevant or significant for MSMEs Business practices of MSMEs
“Cut throat competition”
The start-up ecosystem
“Most frustrating period is the “ber-months” and Christmas season because
prices of commodities typically go up. Suppliers (of vegetables and other goods) claim that supply is low. But, based on experience, the suppliers hold
“Price of sugar went up and the price difference is very little within a
particular municipality. But as soon as the MSME surveyed prices just outside the municipality, they were much lower.”
“Large players (retailers included), can demand contractual terms perceived
to be unfair to MSMEs – amount of goods to be produced and consigned, but 90-day payment remittance period.”
Should SMEs be awarded special treatment in ASEAN as some of the ASEAN member states seem to feel that there is a need to do so?....especially on the merger review front...
Should competition agencies be concerned with imposing regulations or play as think tanks to spot market failures?
What is/are the appropriate and effective enforcement tool/s against SMEs who have been found to infringe the competition law: fines, settlement, consent order?
For the established competition agency, how do you effectively advocate and protect/empower MSMEs? Also, how do you promote/keep fair competition among MSMEs and between MSMEs and large businesses/conglomerates?
SMEs may hold significant market power in narrow relevant markets and possess an incentive for anticompetitive behavior. What is the suitable approach in disciplining anticompetitive behavior by SMEs without constraining their ability to compete?
Should a dedicated policy unit be created to take charge of the competition issues faced by SMEs?
How should competition authorities enforce the law with small businesses that commit anti-competitive practices without alienating small businesses as a group? With lower fees and penalties? Should they merely order them to desist?
Need to formulate awareness and advocacy programs for MSMEs Review of existing laws and regulations affecting MSMEs (and competition) for
consistency and alignment (more effectively deploy competition law as tool for intervention)
Determination by the competition authority of enforcement policy in relation
to MSMEs; improve coordination among relevant government agencies
Development of knowledge products providing guidelines on the
Competition policy landscape Regulatory landscape Nature of competition law as multi-dimensional and highly technical, with
malleable legal standards
More education is needed for MSMEs in this area:
MSME-focussed seminars - who to target, how to focus them? Online training for SMEs Educating trade associations on competition law Competition law short course for UP-ISSI to use Designing a compliance programme for MSMEs
Creating materials for dissemination:
Case studies
Rachel Burgess: rbcompetitionlaw@gmail.com Gwen De Vera: ggdevera@outlook.com