PLDT-Digitel Merger : Who Gets To Say It's For the Public Good?

CURRENT LEGAL CONCERNS 30 May  2011
Atty. Elpidio V. Peria

PLDT-Digitel Merger : Who Gets To Say It's For the Public Good?

            President Noynoy Aquino according to a news article yesterday by Philippine Daily Inquirer has recently ordered the Department of Science and Technology (DOST) and the National Telecommunications Commission (NTC) to investigate whether the merger between Philippine Long Distance Telephone (PLDT) and Digitel may have any undue disadvantage to other players in the telecom industry.

             Earlier this month, we also have Senator Joker Arroyo asking the Senate Committee on Public Services chaired by Sen. Bong Revilla to determine whether the same merger is in accordance with their respective legislative franchises, especially when there's a provision in the legislative franchise of Digitel, Republic Act 9180, which says that Digitel “cannot lease or transfer its assigned franchise to any other commercial or legal entity nor shall the controlling interest of the grantee be transferred without prior approval of the Congress of the Philippines."

            While he's at it, Sen. Joker Arroyo has a barb to the government agencies dealing with the merger, saying : “The NTC, SEC, PLDT, and Digitel are talking among themselves about the merger or sale of the controlling interest of Digitel to PLDT as if Congress does not exist,", as reported by Malaya in its online edition dated May 19, 2011.

             Meanwhile, in a May 26, 2011 posting at NEWSBYTES Philippines, it was reported that  Party-list Congressman Teddy Casino also filed his opposition to the merger before the NTC saying  that :  “obviously, a 70 percent market share results in tremendous market power for PLDT-Digitel, giving rise to a situation where they can dominate the market, dictate prices and influence the entire industry in their favor. This is precisely what happened in the past, when PLDT monopolized the telecommunications industry”, 

            From the news item, it was not only the legislator  who opposed the merger, but also industry players GLOBE Telecom, consumer groups and third-party players like Eastern Telecoms which argued before the NTC that with the merger, “PLDT will control 70 percent of the entire telecom market, including mobile, landline, inter-carrier services, international gateway facilities, broadband, and value-added services, including  six out seven international cable systems that carry outbound voice and data traffic, and four out of five cable landing stations.”

             “With such dominance, PLDT will be able to discriminatorily price its services, subsidize underperforming units with income of dominant brands, and leverage its assets and command of the market in interconnection disputes so as to delay or hinder interconnection,” the Makati-based firm said.

            “The dominance will extend to a commanding control of Internet Exchanges and local Internet peering. PLDT will be in a position to restrict access to locally hosted content by disallowing traffic from competitors to pass through its network,” the company added.

            PLDT on the other hand, points out in its press releases, like in a statement sent to Sun.Star Cebu, that consumers will benefit from the merger, saying the PLDT Group combined with Digitel will give them higher quality and more affordable services to fixed line, wireless and broadband subscribers.

            PLDT also said that it intends to keep the operations of Sun Cellular “separate and intact.” It also wants to maintain and capitalize on Sun Cellular’s operations and brand equity to continue serving specific segments of the market, “especially those who prefer ‘unlimited’ type of services.”

            It is good these concerns and commitments to serve the public good are all coming out now, but ultimately,  under what rules will the PLDT be really held into account for these commitments including  the resolution of these fears and concerns?

            In addition to clarifying what these rules are, which of these entities identified earlier, from  President Noynoy Aquino, the NTC or the Congress which has two branches, the Senate and the House of Representatives, will have the  final say on whether this merger goes ahead or not?

            Or maybe it is up to Manuel V. Pangilinan himself, the PLDT CEO, who, perhaps in an act of delicadeza similar to his initiative in owning up to the plagiarized graduation speech he delivered some years back, might just drop this deal, as the opposition to it is now hurting the image of his company.

            But will these actions be enough to finally resolve the issue of monopolies or the lack of competition in the telecoms industry?

            As pointed out by former NEDA Chief Ciel Habito in his NO FREE LUNCH column, the Philippines does not have the comprehensive competition policy that the US has long had, to give it a strong legal basis to stop the PLDT-Digitel merger.

            Ultimately, without an anti-trust law and an anti-trust agency to resolve these concerns in an orderly manner, the oppositors to this deal will just have to go to the Supreme Court to resolve their concerns, and one principle that will guide them is already articulated by the Supreme Court in the case of Tatad v. The Secretary of the Department of Energy, G.R. 124360, November 5, 1997, which said that :

            the fundamental principle espoused by section 19, Article XII of the Constitution is competition     for it alone can release the creative forces of the market. But the competition that can unleash           these creative forces is competition that is fighting yet is fair. Ideally, this kind of competition            requires the presence of not one, not just a few but several players. A market controlled by   one        player (monopoly) or dominated by a handful of players (oligopoly) is hardly the market where           honest-to-goodness competition will prevail. Monopolistic or oligopolistic markets deserve our       careful scrutiny xxx...

      
            The constitutional provision cited in that case reads:

            Sec. 19. The State shall regulate or prohibit monopolies when the public interest so  requires. No combinations in restraint of trade or unfair competition shall be allowed.

            Fr. Joaquin Bernas said that “as the provision is worded, monopolies are not necessarily prohibited by the Constitution. The State must still decide whether public interest demands that monopolies be regulated or prohibited. On the other hand, combinations in restraint of trade and unfair competition are prohibited by the Constitution.”

            At the end of the day, absent any anti-trust law in our current setting, the key question that should be asked is whether the public interest is served by this merger and all the entities we have mentioned, including President Pnoy will have their take on this issue. It is the Supreme Court then that will become the final arbiter of this issue, unless the parties will find ways to resolve this on their own and drop this deal and just spin themselves off into  independent entities that will compete on their own in the currently burgeoning telecoms market.

                        oOo

 
            Comments are welcome : pingperia16@yahoo.com; pingperia16@gmail.com

Filipinos going bananas on Australia's import restrictions

EMERGING LAW –  TRADE LAW

Atty. Elpidio V. Peria

22 May 2011

Banana Split  to  Australia ?

What the Filipino Banana Exporter May Do to Make Sense

of Australia's Sanitary and Phytosanitary (SPS) Measures

            Malaya's online edition last May 20, 2011 headlined that Filipino banana growers are “going bananas” over Biosecurity Australia's requirement that the Philippine bananas exported to Australia  should be plants that have eight leaves, and these eight leaves should be there in the plant before the bananas are harvested and not only that,  the Filipino exporters are also required to use a non-perforated plastic to wrap the fruits.

            The application of this strict or strange rule, whichever way one looks at it,  not only threatens the export prospects of Philippine bananas to Australia  but highlights an obscure part of trade law dealing with sanitary and phytosanitary (SPS)  measures which is part of a set of agreements in the World Trade Organization (WTO), to which both the Philippines and Australia are members.

            According to a handbook from the World Trade Organization (WTO) website, The WTO Agreements Series, the Agreement on the Application of Sanitary and Phytosanitary Measures (“the SPS Agreement”) sets out the basic rules for food safety and animal and plant health requirements.

            The Series says that  while the SPS Agreement allows countries to set their own standards on  food safety and animal and plant health requirements, it also specifies that regulations must be based on scientific findings and should be applied only to the extent that they are necessary to protect human, animal or plant life or health; they should not unjustifiably discriminate between countries where similar conditions exist.

            The question that must be asked here is whether the eight-leaf rule  as well as the non-perforated plastic requirement  is a reasonable requirement in accord with WTO rules and one approach which Filipino banana exporters may do to clarify this is to recall art. 2.2 of the SPS Agreement which states:

            2. Members shall ensure that any sanitary or phytosanitary measure is applied only to the extent    necessary to protect human, animal or plant life or health, is based on scientific            principles and is not       maintained without sufficient scientific evidence, except as provided for in paragraph 7 of Article 5.

            This provision, among its other details, deals mainly with the question on whether there is enough scientific evidence to justify the SPS requirement.

            From the WTO analytical index on the SPS Agreement found in the WTO website, based on the WTO Dispute Settlement Panel on Japan-Apples case,  the kind of scientific evidence to be considered here is

            evidence gathered through scientific methods, excluding by the same token information not           acquired through a scientific method. We further note that scientific evidence may include evidence that a particular risk may occur … as well as evidence that a particular requirement        may reduce or eliminate that risk ….

            What this means is that there has to be a clear scientific basis for the eight-leaf rule, including that of the non-perforated plastic requirement, which is based on a study which uses the scientific method. There must also be scientific evidence that  a particular risk may occur if the banana is harvested not from an eight-leaf plant and it should also be shown that the eight-leaf requirement will reduce this risk.

            Who has the burden of proof in raising this matter relating to scientific evidence?

            In the same Japan-Apples case found in the WTO website analytical index, the Appellate Body said that : “although the complaining party bears the burden of proving its case, the responding party is responsible for proving the case it seeks to make in response”.

                What the Filipino exporter has to do is to raise a presumption that there were no relevant scientific studies or reports to prove that the measure at issue imposed by Australia was not supported by sufficient scientific evidence.

           

            Another aspect of the WTO SPS rules  that the  Filipino exporter can raise against Australia is whether the disputed rule is in accord with art. 2.3 of the SPS Agreement which reads :

            3. Members shall ensure that their sanitary and phytosanitary measures do not arbitrarily or            unjustifiably discriminate between Members where identical or similar conditions prevail,           including between their own territory and that of other Members. Sanitary and phytosanitary      measures shall not be applied in a manner which would constitute a disguised restriction on     international trade.        

           

            From the same WTO analytical index, this provision has the following elements based on the Panel on Australia — Salmon (Article 21.5 — Canada) :

            “[T]hree elements, cumulative in nature, are required for a violation of this provision:

            (1) the measure discriminates between the territories of Members other than the Member imposing the         measure, or between the territory of the Member imposing the measure and that of another Member;

            (2)the discrimination is arbitrary or unjustifiable; and

            (3)identical or similar conditions prevail in the territory of the Members compared

            There are a lot more things to be considered in relation to these provisions and also a thoroughgoing assessment of emerging legal principles from WTO jurisprudence, and the Filipino exporters' lawyers familiar with the nuances of world trade law would know all of these things.

            If only to clarify these matters so as to guide the actions of the rest of the Filipino banana exporting community, there must be initiated some action here, actions which are not limited to diplomatic initiatives but also to other means at our disposal to address the concerns of Australia on Filipino banana exports not limited to the implementation mechanisms established under the ASEAN-Australia New Zealand Free Trade Agreement (AANZFTA) of which this issue is a legitimate concern.

            The said bilateral trade agreement is based on the parties' commitments to the WTO's SPS Agreement, there should be no problem raising the same principles outlined above as both of the parties to this case are WTO members.

            Short of this, if this issue is not resolved, the exporters concerned should take this issue, with the help of the DTI and the DFA and our Permanent Mission to the WTO, before the WTO and initiate legal action before the dispute settlement  body of such organization, to clarify the application of this rule, once and for all.

            Now, if the exporters find this process tedious costly or too complicated beyond their understanding and experience, why don't they just repackage instead those fresh bananas and export processed bananas, like, among other incarnations of the fruit, banana splits, though that will most likely  require another discourse on what sorts of trade rules will apply to these kinds of products.

oOo .

 Comments are welcome :  pingperia16@yahoo.com

A Test For Congressman Pacquiao

CURRENT LEGAL CONCERNS

16 May  2011

Atty. Elpidio V. Peria

 Double Prosperity Amidst Adversity in Sarangani Bay :

A Test Case  for Congressman Manny Pacquiao ?

            While the Panamanian vessel M/V Double Prosperity  that has run aground the coral reefs off the coast of Kiamba town, in Sarangani Province recently may seem like a harmless  incident with the Philippine Coast Guard already making assurances that the vessel will be towed soon, the incident may be an opportunity for Congressman Manny Pacquiao to demonstrate if he may have learned some sense about environmental protection and recovery from one of his early patrons, former DENR Secretary Lito Atienza.

            A Manila Bulletin news item from 14 May 2011  quoting the Protected Area Superintendent (PASu) of the area, yes, the area is protected by law, the National Integrated Protected Areas System (NIPAS) Act or Republic Act 7586, shows initial estimates of damage to the coral reef at Php 30 million.

            How the PASu came up with his estimates it would be surely enlightening for the people to know as it indicates how rich  the marine resources of the area is, though these same people  may be disheartened to realize that such amount is something that is not easily convertible to cash, especially with  so many poor people along the coast in that part of Sarangani Province, and lest it be missed, Sarangani Province is one of the “poorest of the poor” provinces in the country.

            So, how can Congressman Pacquiao, showcase his ability as a legislator in this situation?

            One thing that he can do, and this is in the realm of unsolicited advise as he has able and competent advisers in his Congressional staff, is for him  to file a House Resolution to conduct an inquiry in aid of legislation, to determine the causes of the grounding and the steps so that this incident will not happen again.

            While not really constituting a Board of Marine Inquiry, which is only constituted in cases of severe mishaps with many lives lost, this legislative inquiry should gather the facts which led to the grounding of the ship and to determine the culpability of those involved, be it the ship captain, the one in charge of the wheel at the time of the grounding, and even the ship owners or those who have chartered the boat that appeared to have wandered into the coral reefs in a manner of being off-course from its usual route. .

            While the data gathered from this legislative inquiry may be used by the managers of the Sarangani Bay Protected Seascape, the Protected Area Management Board, by which they can make a decision on any legal action they may wish to take against those who may have caused the damage, the inquiry may also bring to light the various steps which can now be taken to ensure that the Sarangani Bay will be adequately protected from these types of navigational mishaps.

            But another thing that the inquiry can do is identify the various ways in which the Bay can sustain its recovery so that the resource will  bring double the prosperity to the province by way of sustainable fisheries, but also ecotourism, and other forms of ecosystem services that ensure the well-being of the people in the area and its surrounding environment.

            Given that he may wish to conduct his public hearings on this item on-site, near Kiamba town itself, that in itself is a worthwhile endeavor as it brings to national attention the natural beauty of the place including the innate warmth of its people.  With Manny Pacquiao's media-drawing ability,  the projection of the province  will not only be up to the limits of Manila, but also in places where Paris Hilton or Bob Arum resides, in the USA, and beyond.

            Now, while national attention is riveted on how the hearings are being conducted by the Congressman and the Congressional Committee that may be tasked to do it, this  may also be an opportune time for this legislative inquiry to move the process of enacting the legislation to upgrade the current legal basis for protection of the Bay, Presidential Proclamation 756 issued by then President Fidel V. Ramos, so that the current Sarangani Bay Protected Seascape will become a full-blown protected area with a stronger legal mandate.

            Once it has a legislative enactment behind it, the Protected Area Management Board of the Bay will now have the necessary funds  and enforcement powers to ensure that incidents like these, among other things, will never happen again.

            The law on the Protected Seascape will also help to clarify and delineate the roles and responsibilities of the stakeholders in the area from the local government officials, the fisherfolk as well as indigenous and local communities and the civil society organizations and the business sector who also depend on the Bay for various activities from transportation, food and water supply, solid waste management, and others.

            Another thing that the boxer-legislator can do is to prod the Provincial Board of the Province to finally adopt an Environment Code for the Province, which has stagnated for quite some time in the august halls of the legislative chambers of the Province, due to various reasons but some say it is also due to the aversion of  various businesses in the province for any type of regulatory measure that will hamper their operations and affect their profit margins.

            South Cotabato may have some hiccups in its anti-open pit mining ban in its Environment Code, but implementation of the other noteworthy provisions of the said measure is proceeding at its usual pace and is leading the other provinces in environmental stewardship and protection. 

            Of course, all these suggestions are not only for the Congressman's attention, but to all well-meaning citizens of the Province, who wish to take action on this important issue, which, even though may not immediately bring food to the table, will however ensure that that food on the table is capable of being eaten without any adverse side-effects to the eater, among other beneficial effects of a clean and healthy environment.

            oOo

The Republic v. Danding Cojuangco Case : What Chance of a Resurrection for this Loser of a Case for the Government ?

Image via Wikipedia
By Elpidio V. Peria


Last April 12, 2011, the Supreme Court en banc rendered its ruling on one of the most crucial case against the ill-gotten wealth of the Marcoses and their associates dating back from the Martial Law era involving the shares in San Miguel Corporation (SMC) allegedly bought with coconut levy funds exacted from the poor marginal coconut farmers all over the country. This block of shares was purportedly owned by businessman Eduardo “Danding” Cojuangco and is one of many cases filed way back in 1987 by the Presidential Commission on Good Government, as part of its mandate to recover ill-gotten wealth.

In a nutshell, four justices of the Supreme Court ruled that the Government of the Philippines (dubbed as the Republic of the Philippines or Republic, for short, in this case) failed to submit further evidence to prove that the loans from United Coconut Planters Bank (UCPB and the Coconut Industry Investment Fund (CIIF) secured by Eduardo “Danding” Cojuangco to purchase the shares of SMC, were public in character. A dissenting opinion by Justice Conchita Carpio-Morales held the view that it was Dganding who has failed in his burden of showing that such funds were not taken from public funds, while another dissenting opinion, by Justice Brion, takes the view of the majority handing a loss to the Government but urging instead a prosecution of the government lawyers handling the case of Danding, for their mishandling of the case, citing several instances when they could have presented stronger evidence and have taken other steps to bolster their case, but didn't.

To illustrate how significant this SMC-Danding Cojuangco case is, Justice Brion noted that the SMC is a leading food, beverage and packaging company in the country, now with diversified interests and substantial investments in non-related industries like power and other utilities, banking, mining, energy, tollways, infrastructure, and airports with total assets in 2009 amounting to P438.5 billion and income of P57.8 billion – double the amount appropriated in 2010 for health and social welfare, and one-third of that for education. Justice Brion also observed that the SMC generates nearly 4% of the gross national product and pays 6% of the total taxes collected.

According to Justice Brion, the Republic’s Third Amended Complaint, filed in 1995, claimed ownership over the 16,276,545 of SMC shares that were allegedly acquired by Cojuangco in 1983 with the use of coconut levy funds. At the time of acquisition, this Cojuangco block of SMC shares constituted 20% of the total shareholdings of SMC and was purchased for US$49 million. Because of the issuance of new shares, the Cojuangco block’s shareholding was reduced to 17% in 2007 and 15% in 2010. As of December 2010, the remaining 15% shareholding translates to 493,375,183 common shares, and is worth about P84.56 billion or US$1.86 billion. At the current exchange rate, the original acquisition cost of the shares is now equivalent to P2.23 billion, which means that over the past 27 years, the shares have ballooned 38 times its original value.

Farmers' groups all over the land, especially coconut farmers, decried the ruling as it showed how farmers are again being screwed by Government, first during the Marcos era when the coconut levy was exacted from them through the various Marcos Presidential Decrees and now, with this ruling which effectively forfeits their rights to claim a share of this potential windfall, if the disputed SMC shares are sold in the stock market, which, from the point of view of the farmers, belonged to them in the first place.

The core of the case involves involves a simple rule in evidence and is centered on the issue of who now has the burden or the task of showing that one's allegations are correct and are further beyond dispute by the other side and is now supposed to be binding on the court and all the parties?

The majority ruling states that the Republic utterly failed to present evidence to show that the sources of funds used by Eduardo “Danding” Cojuangco are public in character saying that the earlier landmark 2007 ruling by the Supreme Court that such coconut levy funds are “prima facie” public in character does not excuse the government lawyers from presenting further proof that such coconut levy funds were public in character and thus also, ill-gotten by Eduardo “Danding” Cojuangco.

Dissenting Justice Conchita Carpio-Morales holds that the Republic does not have to do anything to prove a “negative averment” (that the coco levy funds are not private) since it behooves on the lawyers of Eduardo “Danding Cojuangco” to show that this is instead private and failing to do this, the presumption that the funds are public had solidified the Republic's claim.

Dissenting Justice Brion holds that the Republic's lawyers already have in their possession, among others, the papers showing the loans made by Eduardo “Danding Cojuangco came from the alleged sources UCPB and CIIF, he was mystified why it was not presented when they had an ample opportunity to do so during the trial of the case at the Sandiganbayan.

If you also note the gaps in time in the prosecution of this case, from 1987 and with constant amendments up until 1999, one will really wonder how zealous the government lawyers were in really wanting to finish this case sooner. Unless they were bribed by the other side, which no sector is making openly, this will remain speculation, unless the current administration takes the suggestion of Justice Brion seriously and will take steps to look for evidence if indeed the government lawyers bungled this case.

How will this case be finally resolved? Senator Joker Arroyo, a key stalwart of the first Aquino administration, is aghast at the public's lack of outrage in this dismissal of the government case, save of course the farmers' groups who are up in arms and are taking steps to push the government to file a motion for reconsideration of the Supreme Court ruling. He is also wondering why there is no statement of anger from within the Office of the President, which to him is just a bunch of amateurs like in a high school student government.

The PCGG said they will take their time and go through the decision and perhaps be guided by the Dissenting Opinion of Justice Carpio-Morales and file the expected motion for reconsideration within the given time.

Come to think of it, the fate of this case does not lie squarely in the hands of the Supreme Court Justices, they have already ruled on the merits. The PCGG in turn, has to make a very good argument in showing that the alleged ineptness of government lawyers do not actually harm the case they are supposed to prosecute. If this sounds like going through the eye of a needle, it surely is and if this will not happen, perhaps the next best thing for the Government is to take up Justice Brion's suggestion and take steps to remedy the alleged bungling of this case by the Republic's own lawyers.

Or perhaps in a gesture of magnanimity when this case has come to finality and the decision at present becomes final or becomes unmodified after the motion for reconsideration, Eduardo “Danding” Cojuangco might take it upon himself to set up a Farmers' Relief Fund, taken from the proceeds of part of the disputed SMC shares, to finally write finis to this case and perhaps shame the Marcoses into doing also the right thing and settling the scores of other cases which to this day, are still pending. Perhaps if these people will start to do these things, then the public may took kindly to finally letting Apo Ferdinand Marcos be buried in the Libingan ng Mga Bayani.

This is wishful thinking, but perhaps, because today is Easter Sunday, this optimism, however misplaced, can be indulged in, even just for a day, but really, things can happen, and what we need to do is await the further developments in this case.
oOo

Comments are welcome! Email me at : pingperia16@yahoo.com
(The author is a Partner at Cartojano Peria & Associates, a full service law firm based in the Philippines)