Closure of Investigation: Alleged Violation by Entities of the Philippine Competition Act in the Conduct of Fumigating Vessels

Industry: Vessel Fumigation
Case Reference: CEO-201711-FAI005
Case Closed: 19 February 2018
Issue/s: Abuse of dominance and other anti-competitive agreements in the vessel fumigation business
Relevant Provision/s: Sections 14 (c) and 15 (b), Philippine Competition Act

Based on the information and data obtained during the investigation, it was determined that there is no actual or potential adverse impact on competition in the relevant market caused by the alleged agreement or conduct.

On the alleged anti-competitive agreement, the findings are:

• There was no evidence to indicate that the inspectors under investigation colluded to undermine the complainant company’s vessel fumigation business; and
• There was no incentive for the subject inspectors to engage in the purported anti-competitive agreement in that sabotaging an inspection will not lead to an increase in their profits. Worse, such unprofessional conduct may even ruin their reputation as quality assurance providers and deprive them of potential clients.

On the alleged abuse of dominance to prevent a competitor from growing within the vessel fumigation business, the findings are:

• The complainant’s rival fumigation company does not have sufficient market power to be considered dominant in the vessel fumigation business in that its market share is way below 50%, it is not the largest fumigation company operating in the Philippines, and there are numerous companies that can provide vessel fumigation services;
• It is relatively easy for a prospective fumigator to comply with regulatory and financial requirements and enter the vessel fumigation business; and
• There are low switching costs in the fumigation business, that is companies requiring fumigation services may easily choose and switch between fumigators without incurring any significant additional cost.

Given the evidence available, it is more likely than not that the entities under investigation did not engage in anti-competitive agreement or conduct.

Consequently, the Enforcement Office closed the investigation in February 2018.

The closure of the investigation does not necessarily mean that there is no anticompetitive agreement or conduct in the vessel fumigation business in the country. The PCC, through the Enforcement Office, may still conduct another investigation in this industry if the circumstances so warrant.