A6 Friday, February 22, 2019 • Editor: Angel R. Calso
Opinion BusinessMirror
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editorial
The new laws: It’s about time
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N the past week, President Duterte has signed into law some 19 measures. Our question is, why has it taken so long for these bills to become the law of the land?
Perhaps, the one that all of us have a vested interest in is the “Mobile Number Portability Act” that allows us to keep the same cell-phone number for as long as we want. While this is not a matter of national security, it is a matter of convenience for the tens of millions of cell-phone users. Certainly, the telecom companies could have done this easily a long time ago with only some expense on their part. But it is a national issue that has long-term consequences and should be a law. So again, why did it take so long? Article VI of the 1987 Philippine constitution creates a bicameral legislature that vest in Congress, among other powers, “the power of investigation and inquiry in aid of legislation, the power to declare the existence of a state of war and the power of eminent domain.” While these duties are important, we thank the current Congress for taking time off from “investigation and inquiry” to actually write some important laws. It is hard not to be a little sarcastic and cynical about the Legislative process. However, all the “television face-time” spent in public hearings and shouting matches do not seem to translate into actual law unless we are missing something, which is probably the case. Two of the new laws are systemic in nature—meaning they improve and enhance current regulations. These are “The New Central Bank Act,” which increases the monetary authority’s paidup capital to P200 billion from P50 billion, and the “Revised Corporation Code.” The financial strength of the Bangko Sentral ng Pilipinas is now better and it expands regulatory powers to other nonbank financial institutions, such as money service businesses, credit-granting businesses, and payment system operators critical in 2019 and beyond. The changes in the Corporation Code should make it much easier for entrepreneurs to get into business at a higher level, and the law does more to protect minority stockholders, which is also very important. We will withhold judgment on the creation of a Human Settlement Department and the law on career guidance counseling for high school because the implementation may be the key to these issues. Nonetheless, expanding PhilHealth coverage to all Filipinos and expanding the maternity leave law to guarantee 105 days of paid maternity leave from the current 60 days of paid leave credits are both overdue. Why did these laws take so long to come to the people? What prevented their passage in previous congressional sessions? Thorough review and deliberations are absolutely necessary before a law is presented to the President for signature. But you have to wonder why these important laws were all able to come to life at the same time only now? Since 2005
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The stuff you post James Jimenez
SPOX
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UCH has been said of the Commission on Election’s recent foray into establishing a rudimentary regulatory framework for the use of social media in the coming midterm elections. The woefully—and sometimes willfully—uninformed trumpet the fear that the Comelec’s social media “regulations” curtail freedom of expression. Whether or not arising from a genuine misunderstanding of what these regulations actually are, these apprehensions are unfounded. The new Comelec rules on socialmedia use for elections, contained in Comelec Resolution 10488, in fact, seeks to monitor only two aspects of such use: the cost of content production, and the cost of content promotion. Cost of content production relates to the expenses incurred by the candidate and the campaign in, well, producing content. As anyone with more than a glancing familiarity with social media ought to be able to tell you, the only way to really make an impact on social media is to release content that is likely to be shared
from user to user. Some people call this virality, or the tendency of an image, video, or piece of information to be circulated rapidly and widely from one Internet user to another. If content is king, then a viral video is king of kings. In the past—back when uploading video was nowhere near as easy to do as it is now—videos that went viral were often those that captured real life shenanigans of real people. Today, a few short years after videos began to be routinely uploaded and shared on social-media platforms, virality is no longer confined to authentic, shot-from-
the-hip, content. Virality can now, in fact, be synthetically manufactured, albeit at significant cost, with public relations professionals now typically including “viral videos” in their list of deliverables. Up until this point, the cost of producing content for online use has gone largely unreported, allowing candidates to essentially circumvent the campaign spending limits imposed by election laws. By specifically requiring campaigns to report how much is being spent on the kind of highly produced and well-funded content that now forms the cornerstone for may political campaigns, the Comelec hopes to plug this particular leak. Another gap in the reporting law involves the cost of online content promotion. Apart from monitoring traditional political advertisements online—essentially the online versions of print ads and television commercials—the Comelec is now going to monitor the cost of engaging in the practice of boosting. On social media, the size of the audience exposed to the content you produce (political advertisements, for example) is determined by the number of “followers”—the accounts that are subscribed to your account—you have. “Boosting” in-
volves paying the social-media platform to make your content available to people who are not even subscribed to your account. And there is a great deal of customization available here. An account that boosts its content is actually able to determine which categories of users (i.e., users aged 18 to 32, for example; or users who live in particular geographic areas, and so on) receive your unsolicited content. It is targeted advertising in its most cost-efficient form. And until the new regulations promulgated by the Comelec, the campaigns could have literally poured millions of pesos into this practice without ever reporting the expenditure on their Statements of Contributions and Expenditures. Needless to say, this ability all but renders the campaign spending limits illusory. Cost of content production and cost of content promotion are the two main objects of the Comelec regulation; not how many times you post political messages, or express your political opinions, and certainly not what’s in the stuff you post online. nnn
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Amazon’s winner-take-all approach to small business
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By Noah Smith | Bloomberg Opinion
MALL businesses are a pillar of capitalism and of a healthy economy. They provide a path into the middle and uppermiddle class for people who don’t have elite connections or a fancy college degree. And they distribute capital income broadly, so that the gains from business ownership aren’t concentrated among a few wealthy shareholders. Retail is a big component of small business. In recent decades, big chains have pushed out mom-andpop stores. But there has been hope that e-commerce would provide a lifeline for small retailers. T here’s just one problem. E-commerce in the United States is increasingly dominated by a single platform—Amazon.com Inc. As of 2018, the e-commerce giant had grabbed about half of the online retail market. That wouldn’t necessarily be a problem for small retailers if Amazon simply provided a venue that allowed small businesses to connect with customers. But increasingly, Amazon sells its own products, including privatelabel goods that compete with the offerings of independent merchants on its platform. A recent paper by economists Feng Zhu and Qihong Liu observed Amazon’s behavior over time, and found that it tends to introduce products in niches that smaller merchants did the work
of discovering by finding out what consumers like. Amazon then piggybacks on their efforts. This kind of tactic could be increasingly important as Amazon makes its own private-label products. This is similar to a classic move used by supermarkets—observe which products sell well, then introduce private-label brands to try to grab some of those markets. But technology has given online platforms superior tools to outcompete their suppliers. One of these tools is search. Customers look for products using Amazon’s internal search function. Independent sellers can try to take sales from rivals by buying placements in the search results for a rival’s brand-name product—for example, when a customer searches for Purina dog food, she might see a promoted result for Kibbles ‘n Bits. But Amazon doesn’t allow other sellers to compete with its products this way—if you search for an Amazon product, you’re invariably going to see an Amazon product
Retail is a big component of small business. In recent decades, big chains have pushed out mom-and-pop stores. But there has been hope that e-commerce would provide a lifeline for small retailers. There’s just one problem. E-commerce in the United States is increasingly dominated by a single platform— Amazon.com Inc.
first. But if you search for another company’s product, you might see an Amazon product promoted at the top of the list. Amazon now is experimenting with a feature that could, if adopted, automatically include Amazon products in searches. And search isn’t the only advantage a platform has in the digital age; Amazon also collects potentially crucial sales and marketing data that it can choose not to share with third-party merchants. Of course, any online retailer could do the same. But the world of e-commerce is subject to stronger network effects. When you buy something from a brick-and-mortar retailer, you tend to go to one that’s conveniently located, whether it’s a Wal-mart, a Target, a Best Buy or a local convenience store. But online, unless you’re searching for a specialized product, there’s often no reason
to go anywhere but Amazon. This naturally tends to push the platform market toward winner-take-all. And it’s exacerbated by Amazon’s practice of requiring merchants not to offer their products more cheaply on any other platform—a type of agreement known as a most-favored nation provision or MFN. This means that merchants who want to sell their products online have no choice but to be on Amazon, the biggest platform, and play by its rules. Some, such as business professor Andre Hagiu, argue that Amazon would be foolish to outcompete its merchants, because this would deter them from offering their products on Amazon in the future. But researchers have long known that this logic doesn’t necessarily apply in the presence of dominant market power; back in 2000, economists Joseph Farrell and Michael Katz showed that a monopoly can have incentives to confiscate the profits from the innovation of companies who produce complementary products, thus stifling innovation. Tech publisher Tim O’Reilly argues that even if eating the third-party ecosystem isn’t a good long-term decision, a platform may be tempted to do it anyway just for the short-term profits. So if Amazon is chewing up the small-business world—and the ecommerce world in general—what’s See “Amazon,” A7