The Philippine Competition Commission (PCC) has charged 12 onion importers and traders a total of P2.423 billion following its anti-competitive and ‘cartel’ practices.
On 9 July, the PCC Enforcement Office filed before the commission a Statement of Objections against 12 traders for violating Section 14 of the Philippine Competition Act.
The biggest fine was charged to an entity with P113.231 million, while seven violators were charged with a P330 million fine, four with P773.231 million, and one with P443.231 million.
“The respondents were charged with market allocation and the administrative exchange of business information in violation of Section 14 and Section 14 of the PCA, respectively,” said PCC Competition Enforcement Office Director Christian Loren B. De Los Santos.
Section 14 violations are also called cartels, or those businesses conniving to manipulate the market to their advantage, he explained.
According to the PCC official, these cartels may cause significant harm to consumers by engaging in coordinated anti-competitive conduct inducing price fixing, bid rigging, and output restriction.
“These violations are also known as issues of the supply chain and are known to be a part of the issue. In a competitive market, businesses must independently determine their quantity and prices,” he said, further explaining that in the onion market, importers and traders decide on the number of sanitary and phytosanitary import clearances (SPSIC) they will apply for and utilize and the actual volume of onions to import.
Thus, importers and traders in the process will compete by maximizing the utilization of SPSICs, increasing their import volume, and lowering their prices. He, however, noted that with market allocation, the ideal situation is replaced with collusion, resulting in poor SPSIC utilization, limited import volume, and high prices.
“In this case, the investigation by the Enforcement Office revealed that respondents agreed to allocate the supply of imported onions in the Philippines,” he said. “Our evidence showed that respondents assigned amongst themselves the sanitary and phytosanitary import clearances issued by the Department of Agriculture, Bureau of Plant Industry, and the distribution of the volume of imported onions.”
“By agreeing to allocate SPSICs and divide among themselves the actual volume of imports, respondents effectively controlled more than 50 percent of the volume of onions imported into the Philippines during the relevant period,” he added, noting that based on their evidence, traders, despite being competitors, “shared extremely little and exchanged and discussed commercially sensitive business information such as price, suppliers, customers, volume, shipping, distribution, and storage.”
“With this scheme, respondents avoided competing with each other. They did not independently decide their policies but have substituted the risk of competition with cooperation. Such agreement has the object of restricting or distorting competition and has inherent restrictions on the market,” he added.
Dawn Raid
Moreover, PCC said the case marked a milestone for its law enforcement as this is the first time an investigative tool—Dawn Raid—was conducted wherein the enforcement office executed an administrative search on the premises of the violators.
“Through the Dawn Raid, the enforcement office obtains the right to conduct an investigative search or Dawn Raid on the premises of the respondents' relevant information and documents, such as letters, emails, contracts, shipment monitoring lists, SPSICs, corporate documents, sales ledgers,
receipts, and many more. Many of these were later used as evidence in the case,” he said.
The case had the largest recommended fine in the total amount of P2.4 billion. De los Santos said the fine was computed based on the sales of the respondents, the gravity of the violation, the duration of the agreement, and other factors.
“Sales and import documents and other business files found in the premises of the respondents revealed that the cartel earned millions from the collusive agreement. Documents obtained also showed that the anti-competitive conduct among the respondents existed as early as 2019 and was implemented by the officers of the involved entities,” he said.
“Lastly, the fine was tripled as it involved onion, which is classified as a prime commodity or under the Price Act,” he added.