PCC raises alarm over proposed state-backed ARISE Inc

MANILA, Philippines – The Philippine Competition Commission (PCC) flagged contentious provisions in the proposed creation of a state-backed holding company, which seeks to help private companies struggling with the coronavirus pandemic.

The PCC noted that the creation of Accelerating Recovery to Intensify Solidarity and Equity, Incorporated or ARISE Inc may distort the market and encourage anticompetitive behavior, as the bills want bailed-out companies to be exempted from several laws and to enjoy tax perks.

ARISE Inc is proposed in House Bill No. 6795 and included in Senate Bill No. 1564 or the proposed Bayanihan to Recover as One Act.

What is ARISE Inc?

ARISE Inc is a proposed investment vehicle which aims to authorize the Land Bank of the Philippines (Landbank) and the Development Bank of the Philippines (DBP) to invest in or enter into a joint venture agreement with private companies experiencing solvency issues due to the COVID-19 pandemic. 

Companies may be engaged in agriculture, infrastructure, services, manufacturing, or other identified industries.

ARISE Inc will be led by the finance secretary, president of Landbank, president of the DBP, a Monetary Board member of the Bangko Sentral ng Pilipinas, 2 independent directors, and 3 directors appointed by Landbank, the DBP, and private equity investors.

What are the perks?

Private companies to be saved by the special holding company or ARISE Inc would get the following assistance and exemptions:

What's wrong with it?

The PCC underscored that the exemptions may expose the public to abuses by "unscrupulous businesses."

"An abdication of the enforcement of antitrust law, even though on a temporary basis, will likely create more harm than good, especially at a time when the structural foundations of our economy are still reeling from the ill effects of COVID-19," the antitrust body said.

"[R]elaxing competition rules may not be prudent. While the PCC recognizes the seeming objective behind this to allow businesses to have greater flexibility in adapting to a post-pandemic economic environment, there might be other ways to achieve such objective without necessarily imposing a carte blanche restriction on PCC's enforcement powers."

The PCC proposed that it be consulted first before ARISE Inc and any private company get into a joint venture.

The PCC would then provide comments on competition matters involving the transaction to avert any harm to the market.

The antitrust body stressed the importance of checking for anticompetitive behavior especially during the pandemic, as a distorted market may adversely impact Filipino consumers.

The PCC also cautioned against skirting procurement laws, as it may create increased risk of anticompetitive behavior.

"Suppliers may coordinate to disproportionally pass through cost increases to consumers or to coordinate volumes of supply. Firms could likewise take advantage of expedited procurement processes to engage in bid rigging," it said.

Meanwhile, Marikina City 2nd District Representative and former PCC commissioner Stella Quimbo also raised concerns on ARISE Inc, noting that the planned state-owned enterprise would have undue competitive advantage over private companies.

"If you have a distressed company, a dominant [firm] in an existing market, and that is now in trouble, this ARISE Inc can take over this distressed firm. In this case, now your state-owned enterprise would be the dominant firm in that market. My worry is there are potential competition concerns, particularly competitive neutrality," the economist-turned-lawmaker said.

"All joint ventures, mergers, and acquisitions should be subject to PCC scrutiny," Quimbo added.

Another lawmaker allied with President Rodrigo Duterte also shared Quimbo's concerns.

"It was not part of what we wanted, so I'm hoping that the bicam will fix this," said the lawmaker, who refused to be identified. – Rappler.com

Ralf Rivas

A sociologist by heart, a journalist by profession. Ralf is Rappler's business reporter, covering macroeconomy, government finance, companies, and agriculture.

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