PCC pushes pro-competition practices in franchising sector

MANILA, Philippines — The Philippine Competition Commission (PCC) said there is a need to promote pro-competition practices in the franchising sector, which is becoming an important contributor to the economy, as some contracts may have anti-competitive provisions.

“Franchising is a popular gateway for starting businesses and an established track record of bringing in international brands to the country. As the antitrust regulator, the PCC recognizes PFA’s (Philippine Franchise Association) important role in ensuring that pro-competition practices are observed in the sector,” PCC chairperson Arsenio Balisacan said in a statement yesterday.

As part of PCC’s enforcement of the Philippine Competition Act (PCA), the antitrust body said it is keeping a close watch on the sector where a franchisee is granted the right to market a product or service in exchange for royalties and other payments to the franchisor.

PCC said franchisees are required to follow a set of formats or supplies offered by franchisors to maintain the brand’s standards.

It also said there may be anti-competitive provisions in franchising contracts  that impose the prices or geographic market of franchisees.

While Section 15 (e) of the PCA prohibits the imposition of restrictions on the contract for sale of goods or services, it recognizes franchising, licensing, merchandising and distributorship agreements as permissible business practices.

“The franchising industry represents a challenging issue for competition as it requires balancing competition enforcement with maintaining contractual limitations that protect intellectual property rights and trade secrets of franchisors. For this reason, the PCC wants a proactive approach to ensure that the sector remains competitive as it grows,” Balisacan said.

As franchising is becoming more popular and, in turn, a key contributor to the economy, PCC said its sees the need to strengthen competition awareness in the sector.

Last week, PCC held a webinar on competition law and policy with the PFA which groups over 1,000 franchise brands in the country.

The webinar is part of PCC’s ongoing initiative to work with trade associations to raise awareness on competition law and policy.

PFA sees last year until 2025 as the golden years of franchising as the pandemic opens opportunities for new franchise concepts and expansion.

PCC is encouraging business owners across different industries to get in touch with the antitrust body for any concerns or clarifications on anti-competitive practices through [email protected].