Farmer, Baron, Trader, Sugar: Competition and Industry Regulation of the Philippine Sugar Sector (original) (raw)

An edited version of this paper was published in the Philippine Law Journal, Volume 93, No. 2 (April 2020) The Philippines is the 8th largest sugar producing country in the world, but not a major player in the international sugar trade because of higher production costs. 1 The industry is highly regulated with quantitative import/export restrictions and production quotas, which impact sugar output, supply, and prices. There have been reports of a cartel among sugar traders and other anti-competitive conduct. It appears that the newly-formed Philippine Competition Commission (PCC) has similar concerns when it included the sugar industry in its 2019 priorities for market investigation. If the competition concerns can be substantiated, we have a curious case of government regulations facilitating collusion and other anti-competitive conduct, or at least, failing to thwart them. It can mean a confrontation between the PCC and the Sugar Regulatory Administration (SRA), and not to mention an old, but still strong political class with ties to the industry. This paper analyses the possible competition issues in the sugar sector and the interface between sector-specific regulations and competition rules. To understand these competition issues, we take a brief overview of the structures and practices in the industry that have deep historical roots dating back to American colonial times (Part I). It analyses their anti-competitive effects within the industry itself, on consumers, and downstream manufacturing industry (Part II). The paper does not attempt to conclusively prove anti-competitive behaviour, which will require a thorough sector investigation. However, it identifies possible competition issues, based on existing literature on competition and the sugar industries in the Philippines and other countries. To address these issues, we need to know the competition law framework and its boundaries with sector regulations. Part III summarizes the Philippine Competition Act’s (PCA) key provisions, prohibited acts, and PCC’s powers vis-à-vis sector regulators. Possible overlaps between competition and regulation are discussed in Part IV. In view of the competition framework and overlap with regulations, and the structural, behavioural and regulatory constraints identified in the first four parts, Part V delves into approaches that a nascent competition authority can take as it tests its wings and attempts to establish a strong competition framework, while avoiding unnecessary conflicts with sector regulators and the political establishment, which can clip the wings of the competition law before it can take flight.