The Philippine Competition Commission (PCC) welcomed the Supreme Court’s (SC) ruling declaring certain anti-competitive regulations implementing the Contractors’ License Law unconstitutional, paving a level playing field for local and foreign firms to undertake construction activities in the Philippines.
In a 14-1 vote, the high court voided the nationality requirement in licensing rules set by the Philippine Contractors Accreditation Board (PCAB). Prior to the ruling, regular licenses for multiple projects per year were reserved only for local firms, while foreign contractors were only granted a special license per project.
Based on PCC’s study, a foreign contractor would have to spend 12 times more for license applications than a local firm in order to engage in the same level of activity.
The SC cited PCC’s amicus curiae brief that the nationality-based restrictions by PCAB effectively barred entry of foreign contractors and violated the state’s constitutional policy against unfair competition.
With the regulatory barrier struck down, competition among contractors should fall squarely on merit and not based on undue advantage based on nationality alone. The PCC also underscored the importance of fostering competition by enabling the entry of new players, local or foreign, on equal footing with incumbents.
The decision is expected to encourage contractors to enter the market, produce and price their products competitively, provide consumers with more choices in carrying out infrastructure projects, and open the construction sector to new technologies and global best practices.
“As opined by the PCC, it would encourage healthy competition among local and foreign contractors and the market will have alternative options depending on the needs of each construction project. This will also open opportunities for development and innovation that the foreign industry may introduce to our local contractors to make them more competitive in the world market,” reads the SC decision.
“This is a game-changing ruling that unlocks the benefits of competition through effective competition advocacy. The country stands to significantly benefit from this development especially amid the government’s “Build, Build, Build” program. With fair competition in the construction industry, Filipinos obtain more value from taxpayers’ money through lower priced and better-quality infrastructure projects,” said PCC chairperson Arsenio M. Balisacan.
The ruling stemmed from the dispute between PCAB and Manila Water Company Inc., where PCC intervened as amicus curiae (friend of the court) with its mandate to issue advisory opinions on competition matters and advocate pro-competitive government policies.
The PCC also earlier submitted a position paper to a Congressional inquiry to spur competition in the construction sector and issued a policy note on the same concern.