OECD kpcdb

1. Scope

 

Section 20 of the PCA prohibits merger and acquisition agreements that substantially prevent, restrict, or lessen competition in the relevant market or in the market for goods and services. Under Section 12(b), the PCC has the power to review proposed mergers and acquisitions and to prohibit those which are covered by Section 20.

 

Exemptions: According to Section 21, a merger or acquisition agreement may be exempt from prohibition when the parties establish either of the following:

 

a)  The merger or acquisition is likely to bring about gains in efficiency that are greater than the effects of any anti-competitive effects that are likely to result from the merger or acquisition; or

b)  A party to the merger or acquisition is faced with actual or imminent financial failure, and the agreement represents the least anti-competitive arrangement among the alternative uses for the failing entity’s assets.

 

The burden of proof is incumbent upon the parties seeking this exemption.

 

The acquisition of stocks or shares solely for investment and not used for voting or exercising control and not to otherwise bring about, or attempt to bring about the prevention, restriction, or lessening of competition in the relevant market are not prohibited.

 

2. Notification

 

Section 17 of the PCA establishes a pre-completion mandatory notification regime for merger or acquisition agreements, where the value of transaction exceeds PHP1 billion. Rule 4, Sections 2 and 3 of the Rules and Regulations to Implement the Provisions of the Act (“IRR”) further sets out the notification obligations. The Commission has the power to publish, from time to time, regulations adopting, modifying, rescinding or otherwise changing the notification thresholds.

 

Under the IRR, parties to a merger or acquisition are required to provide notification when:

 

a)  The aggregate annual gross revenues in, into or from the Philippines, or value of the assets in the Philippines of the ultimate parent entity of at least one of the acquiring or acquired entities, including that of all entities that the ultimate parent entity controls, directly or indirectly, exceeds One

Billion Pesos (PhP1,000,000,000.00).

 

and

 

b)  The value of the transaction exceeds One Billion Pesos (PhP1,000,000,000.00), as determined in subsections (1), (2), (3) or (4), as the case may be.

 

(1) With respect to a proposed merger or acquisition of assets in the Philippines if either:

i. the aggregate value of the assets in the Philippines being acquired in the proposed transaction exceeds One Billion Pesos (PhP1,000,000,000.00); or

ii. the gross revenues generated in the Philippines by assets acquired in the Philippines exceed One Billion Pesos (PhP1,000,000,000.00). 

(2) With respect to a proposed merger or acquisition of assets outside the Philippines, if: 

i. the aggregate value of the assets in the Philippines of the acquiring entity exceeds One Billion Pesos (PhP1,000,000,000.00); and

ii. the gross revenues generated in or into the Philippines by those assets acquired outside the Philippines exceed One Billion Pesos (PhP1,000,000,000.00).

(3) With respect to a proposed merger or acquisition of assets inside and outside the Philippines, if: 

i. the aggregate value of the assets in the Philippines of the acquiring entity exceeds One Billion Pesos (PhP1,000,000,000.00); and

ii. the aggregate gross revenues generated in or into the Philippines by assets acquired in the Philippines and any assets acquired outside the Philippines collectively exceed One Billion Pesos (PhP 1,000,000,000.00).

(4) With respect to a proposed acquisition of (i) voting shares of a corporation or of (ii) an interest in a non-corporate entity:

i. If the aggregate value of the assets in the Philippines that are owned by the corporation or non-corporate entity or by entities it controls, other than assets that are shares of any of those corporations, exceed One Billion Pesos (PhP1,000,000,000.00); 

or

ii. The gross revenues from sales in, into, or from the Philippines of the corporation or non-corporate entity or by entities it controls, other than assets that are shares of any of those corporations, exceed One Billion Pesos (PhP 1,000,000,000.00);

 

and iii. If

A. as a result of the proposed acquisition of the voting shares of a corporation, the entity or entities acquiring the shares, together with their affiliates, would own voting shares of the corporation that, in the aggregate, carry more than the following percentages of the votes attached to all the corporation’s outstanding voting shares:

I. Thirty-five percent (35%), or 

II. Fifty percent (50%), if the entity or entities already own more than the percentage set out in subsection I above, as the case may be, before the proposed acquisition;

or

B. as a result of the proposed acquisition of an interest in a non-corporate entity, the entity or entities acquiring the interest, together with their affiliates, would hold an aggregate interest in the non-corporate entity that entitles the entity or entities to receive more than the following percentages of the profits of the non-corporate entity or assets of that non-corporate entity on its dissolution:

I. Thirty-five percent (35%), or

II. Fifty percent (50%), if the entity or entities acquiring the interest are already entitled to receive more than the percentage set out in subsection I immediately above before the proposed acquisition.

 

c) Where an entity has already exceeded the 35% threshold for an acquisition of voting shares, or the 35% threshold for an acquisition of an interest in a non-corporate entity, another notification will be required if the same entity will exceed 50% threshold after making a further acquisition of either voting shares or an interest in a non-corporate entity.

 

d) In a notifiable joint venture transaction, an acquiring entity shall be subject to the notification requirements if either

i) the aggregate value of the assets that will be combined in the Philippines or contributed into the proposed joint venture exceeds One Billion Pesos (PhP1,000,000,000.00) or

ii) the gross revenues generated in the Philippines by assets to be combined in the Philippines or contributed into the proposed joint venture exceed One Billion Pesos (PhP1,000,000,000.00). 

 

3. Procedural rules 

 

Pursuant to Section 17, parties cannot consummate their agreement until 30 days after providing notification to the PCC. The PCC can extend the review period for an additional 60 days should it require further information to assess the merger or acquisition.

 

When the above periods have expired and no decision has been made for whatever reason, the merger or acquisition is deemed approved and the parties may proceed to implement or consummate it.

 

4. Assessment

 

In evaluating the competitive effects of a merger or acquisition, the Commission shall endeavour to compare the competitive conditions that would likely result from the merger or acquisition with the conditions that would likely have prevailed without the merger or acquisition.

 

In its evaluation, the Commission may consider, on a case-to-case basis, the broad range of possible factual contexts and the specific competitive effects that may arise in different transactions, such as:

 

1. the structure of the relevant markets concerned;
2. the market position of the entities concerned;
3. the actual or potential competition from entities within or outside of the relevant market; 
4. the alternatives available to suppliers and users, and their access to supplies or markets;
5. any legal or other barriers to entry.

 

5. Remedies and Sanctions

 

Under section 17, a merger or acquisition agreement that violates the notification requirement is considered void and the parties to the agreement are subject to an administrative fine of 1 percent to 5 percent of the value of the transaction.

 

An anti-competitive merger or acquisition is also subject to fines specified under Section I.4 above.