Cartel: A crime that remains unpunished

We are known all over the globe as friendly and hospitable. Though such trait is admirable, its downside, however, is inexplicably outrageous. Our yielding nature has been a thorn as we give in so easily even to the most unethical proposition. Such submissive attitude is more often abused by people who are too selfish and too wanting to rule, dictate and dominate. Sadly, these are characteristics that happen to be requisites for a cartel to exist.

A cartel simply means an agreement among firms or companies, mostly manufacturers and distributors. Basically, these are firms that agree to coordinate production for the primary pur-pose of controlling prices. Cartels normally happen when there are too few players in the market for a particular product. Members in a cartel may agree on concerns like production out-put, allocations, price fixing, sharing of profits, bid rigging or a combination of these. 

Obviously, therefore, by mere definition, cartel is simply the glamorized jargon for collusion. The principal motive for such collusion is to increase individual member's profits by reducing or eliminating competition. Competition laws in highly developed countries forbid cartels. Identifying and breaking up cartels has been an integral part of their competition laws. However, despite their sophistications, they still encountered difficulties in proving the existence of a cartel, as firms are usually too careful in not documenting their agreements to collude on paper.

Some cartels are popular and their selfishness is more pronounced. One of these cartels is the Organization of Oil Exporting Countries (OPEC). Selfishly, they've been feasting on the world's money for many decades by regulating production and dictating prices. Their only downside so far is the economic turmoil that is obtaining today principally due to the absence of demand. The country's major oil distributors are undeniably forming a cartel too. Their greed was so evident in the rapidity by which they increase prices and the sluggishness in reducing them.   When confronted, their reasons run from the unbelievable to the unpalatable. As if, there is no way that a more understandable mathematical computation is possible. 

Truth be told, adopting a formula won't be difficult. The Deregulation Act is very explicit on how oil prices must be pegged domestically. The Deregulation Act clearly stipulates that do-mestic fuel prices will be adjusted automatically based on the Singapore Import Parity, an average of costs at Singapore refineries, and in line with international prices. Singapore Import Parity (SIP) refers to the deemed landed cost of a petroleum product imported from Singapore at a free-on-board price equal to the average Singapore Posting for that product at the time of loading. Singapore posting on the other hand refers to the price of petroleum products periodically posted by oil refineries in Singapore and reported by independent international pub-lications. Clearly, therefore, a base data is supposedly at hand for price determination purposes. Palpably, it is purely mathematical and is therefore an exact science. So that, arguments on prices are issues that are not suppose to surface.

Furthermore, while the general public accuses these oil companies of forming a cartel, the same act explicitly prohibits this practice. The Act defines cartelization as "any agreement, com-bination or concerted action by refiners, importers and/or dealers, or their representatives, to fix prices, restrict outputs or divide markets, either by products or by areas, or allocate mar-kets, either by products or by areas, in restraint of trade or free competition, including any contractual stipulation which prescribes pricing levels and profit margins."

Obviously, therefore, the law is broadly complete. However, some unscrupulous businessmen are just toying with it and have unduly taken advantage of the general public's helplessness. Unfortunately too, while the Act requires periodic submission of reports, the same Act does not explicitly authorize the Department of Energy or any government agency to examine their books of accounts or financial records like auditors do. 

Therefore, what is important now is for the Department of Energy to establish a "womb to tomb" formula that details conversions from the global prices to the oil company's retail stations' prices. 

Undeniably too, apart from the more popular oil cartel, collusions exist even in the smallest of business deals. The biddings, for instance, of office supplies in most government units are obviously rigged. Winners are rotated among themselves. Bidding participants, however, make profits as the winning bidder compensates them for throwing or giving in.

The same is true and even more rampant in bigger projects. As we all know, about two years ago, the World Bank released debilitating news about the debarment of seven firms and an individual for "engaging in collusive practices under a major Bank-financed roads project in the Philippines". The World Bank's investigating team "uncovered evidence of a major cartel in-volving local and international firms bidding on contracts under phase one of the Philippines National Roads Improvement and Management Program, known as NRIMP 1". They "closely analyzed the procurement process the firms participated in and conducted numerous interviews before closing the investigations and initiating sanctions proceedings against the entities".

Had this anomaly not been uncovered by the World Bank, majority of the Filipinos should not have heard anything about this project. True to its mandate, despite all the lobbying of politi-cians and the unnecessary use of the august hall of congress in sanitizing these fallen bidders, the World Bank never reconsidered its blacklisting and permanent debarment of the erring contractors. Consequently, these firms will no longer be allowed to participate in the bidding on future World Bank-financed contracts. 

Due to the haste by which congress cleansed the colluding bidders, it might be useless to suggest as to how we should avert these malpractices again. However, if they should care to learn from other countries' sophistication, they should take a look at the European Union's competition law which explicitly forbids cartels and related practices in its Article 81 of the Treaty of Rome. Article 81 reads: "1. The following shall be prohibited as incompatible with the common market: all agreements between undertakings, decisions by associations of undertakings and concerted practices which may affect trade between Member States and which have as their object or effect the prevention, restriction or distortion of competition within the common market, and in particular those which: (a) directly or indirectly fix purchase or selling prices or any other trading conditions; (b) limit or control production, markets, technical development, or investment; (c) share markets or sources of supply; (d) apply dissimilar conditions to equivalent transactions with other trading parties, thereby placing them at a competitive disadvan-tage; (e) make the conclusion of contracts subject to acceptance by the other parties of supplementary obligations which, by their nature or according to commercial usage, have no con-nection with the subject of such contracts."

Just like the EU, we should craft laws that could prevent collusions. Learning from the EU and our sad experiences, we must institute statutes that regulate on the amount of fines for each type of cartel and a leniency policy by which if a firm in a cartel is the first to denounce the collusion agreement, it should be freed of any responsibility.

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