1. UNFAIR TRADE PRACTICES KEY FINDINGS OF SURVEY, ANALYSIS AND RECOMMENDATIONS THE CASE OF THE PHILIPPINES Kathrina G. Gonzales, Maureen Ane D. Rosellon, and Josef T. Yap 12 September 2012

2. Distribution of respondents by sector Sector No. of RespondentsPercent Business25 62.5 Business associations7 17.5 Consumer4 10.0 Government4 10.0 TOTAL40100 ● Survey respondents

3. Which practices do you think are unfair trade practices? Misleading Advertisement had highest response in this query. Unfair trade practices Business Business associations ConsumerGovernmentTotal Percent Unfair pricing 76.085.710075.080.0 Predatory pricing 48.085.710050.060.0 Tied selling 60.057.110075.065.0 Coercive dealing 56.057.110050.060.0 Misleading advertisement 84.0100 75.087.5 Refusal to deal 52.042.910025.052.5 Resale price maintenance 28.042.975.0032.5 Discriminatory dealing60.085.710075.070.0 Unreasonably high price 64.0100 50.072.5 Systematic obstruction of competition 64.071.4010050.067.5 Fidelity rebates24.028.675.025.030.0 Margin squeeze36.071.475.050.047.5 Abuse of IPR, including harming other businesses reputation 60.085.710075.070.0

4. Which of these practices have you ever come across in the course of doing business/in the markets where you shop and/or as regards the products/services you buy/in your country? ● However it seems Unfair Pricing is the UTP that is most encountered Unfair trade practices Business Business associations ConsumerGovernmentTotal Percent Unfair pricing 48.042.950.010052.6 Predatory pricing 8.057.150.0 25.0 Tied selling 20.071.425.075.035.0 Coercive dealing 20.014.325.050.022.5 Misleading advertisement 32.071.475.0 47.5 Refusal to deal 8.028.675.025.020.0 Resale price maintenance 8.028.625.0012.5 Discriminatory dealing 20.028.625.050.025.0 Unreasonably high price 20.071.475.0 40.0 Systematic obstruction of competition 24.028.625.0022.5 Fidelity rebates 12.028.650.0017.5 Margin squeeze 12.028.60012.5 Abuse of IPR, including harming other businesses reputation 24.028.625.075.030.0

5. How widespread are these UTPs in the normal business/in the markets where you shop and/or as regards the products/services you buy/use in our country? UTPs are considered to be moderately to highly widespread Response Business Business associations ConsumerGovernmentTotal FrequencyPercentFrequencyPercentFrequencyPercentFrequencyPercentFrequencyPercent Insignificantly14.000125.00025.0 Moderately1456.0114.3250.0125.01947.5 Highly936.0457.100125.01435.0 Extremely00.0228.6125.00012.5 Don’t know/can’t say 14.000020.0125.0410.0 No answer000000125.012.5

6. Do such practices still prevail or they have been resolved? (in percent) ● General Perception is that UTPs still prevail

7. Do you think these UTPs are negatively affecting the business, especially small and medium-sized enterprises (SMEs)/ the consumer interests/ business environment in our country in any way? (in percent) ● General Perception that impact of UTPs is negative

8. To what extent do you think that the business/ consumer/overall business environment in our country is affected by the existence of such practices? (in percent)? And the impact of UTPs is moderate to significant

9. What do you think is the cause of such UTPs? ○ Existence of Monopoly has highest frequency although not majority Causes of UTPsBusinessBusiness associationsConsumerGovernmentTotal FrequencyPercentFrequencyPercentFrequencyPercentFrequencyPercentFrequencyPercent Discrepancy in the bargaining power of relevant parties 832.0342.9250.0001332.5 Information asymmetry 312.0228.6250.000717.5 The existence of monopoly 1040.0571.4250.0001742.5 Absence of the relevant laws and institutions 416.0457.1375.0125.001230.0 All of the above 1144.0114.3250.0125.001537.5 Others28.0114.300250.00512.5 Don’t know14.000000012.5

10. Name any such rules, regulations, or laws you know. ○Business Firms are generally not aware of important laws related to UTPs Business Business and Consumer associations Government  no return no exchange  price ceiling  everyone should follow same standard or set price  price tag law  intellectual property law  COA rules  anti-cartel/anti-monopoly  Consumer Welfare Act  oil deregulation law  cheaper medicine law  IPO code  DOJ/DTI rules  revised penal code  Republic Act 7394 - Consumer Act of the Philippines  IPO code  price tag law  civil code of the Philippines  general banking law  revised penal code

11. Do you think that the existing rules, regulations or laws do a sufficient job to check all unfair trade practices and protect the legitimate rights and interests of the business in general and those of SME’s in particular/protect consumer welfare and competitive process in our country? ○ Business firms seem to be ambivalent about UTPs Response BusinessBusiness associationsConsumerGovernmentTotal FrequencyPercentFrequencyPercentFrequencyPercentFrequencyPercentFrequencyPercent Yes1144.00000375.01435.0 No416.07100375.0125.01537.5 Don’t know 312.000125.000410.0 No answer 728.0000000615.0

12. Do you recommend that a law or regulation should be enacted specifically to check these practices and protect the consumer more effectively? ○ Business and Consumer Associations are apparently more proactive. Response BusinessBusiness associationsConsumerGovernmentTotal FrequencyPercentFrequencyPercentFrequencyPercentFrequencyPercentFrequencyPercent Yes 1872.071004 375.03280.0 No 312.000000037.5 Others 0000000000 No answer 416.00000125.0512.5

13. Will you be willing to sign investigation reports as third parties or testify for the Department of Trade and Industry (DTI)/the court if necessary or requested by them? ○ There is apparent reluctance on the part of firms to counter UTPs Response BusinessGovernment FrequencyPercentFrequencyPercent Yes14.0250.0 No936.0125.0 Depends on circumstances1144.000 No answer416.0125.0 Total251004

14. Will you be ready to cooperate with investigator(s) of the DTI during the investigation process or with the court during hearings? There is apparent reluctance on the part of firms to counter UTPs Response BusinessBusiness associationConsumerGovernment FrequencyPercentFrequencyPercentFrequencyPercentFrequencyPercent Yes28.0342.9375.0250.0 No1248.00000125.0 Depends on circumstances 1144.0342.9125.000 Don’t understand 00000000 No answer00114.300125.0 Total251007 4 4

15. Key Findings Many respondents indicate that UTPs are moderately to highly widespread Overwhelming majority believes that UTPs have adverse impacts on business transactions and consumer welfare. Not many are aware of the legal remedies against UTPs. Business firms interviewed are reluctant to participate in legal action against UTPs. Reluctance implies either of two things: 1) there are gaps in the legal infrastructure to address B2B UTPs; 2) While businesses are aware of the adverse impacts of UTPs, they do not seek to “rock the boat”.

16. Key Findings Adequate laws to address B2C cases Not many cases are filed: only 3,249 in 2010 and 4,720 in 2011 Case study on misleading advertisement: “DTI- National Capital Region’s records show that numerous administrative complaints have been filed against Aowa Electronic Philippines, Inc. by different consumers, or a total of at least two hundred and seventy-three (273) from the year 2001 until 2007.” Case was filed only in 2008. Capacity of DTI to implement law is limited

17. FGD inputs FGD participants: representatives from the government, consumer and industry associations On low awareness on laws for UTPs: Firms/establishments may not be as aware as the officers of industry associations There is no specific agency or department that handles B2B complaints; Available legal remedy for B2B UTPs – The Consumer Act allows the Department of Trade and Industry to act on B2B complaints if these can be shown to impact on consumer welfare Possible private sector initiative: an industry association may at first mediate if a member firm is reported to be practicing unfair business acts

18. Policy Recommendations Greater information dissemination on existing laws related to UTPs Enhance capacity of Department of Trade and Industry to handle UTP cases Allow industry associations to mediate UTP cases among their members but provide associations with capacity Closer coordination between business organizations and consumer groups and government Is the private sector its own worst enemy? Lack of culture of competition Competition policy and competition law

19. 감사합니다 Maraming Salamat!!! Terima Kasih ขอบคุณครับ ありがとう Cảm ơn rất nhiều ຂອບໃຈຫລາຍໆ 謝謝你。 THANK YOU !!!