PCC bucks extension of suspension of its merger and acquisition review

Published June 12, 2021, 8:00 AM

by Bernie Cahiles-Magkilat

The Philippine Competition Commission (PCC), the anti-trust authority in the country, has expressed opposition to any extension on the suspension of its motu proprio review power on mergers and acquisitions (M&As).

PCC Chairman Arsenio Balisacan said this at the virtual “Enhancing Competition for Competitiveness and Economic Recovery” forum organized by the Joint Foreign Chambers (JFC) of the Philippines, noting that the suspension of its motu proprio review power as provided in the Bayanihan 2 law will lapse in September this year.

PCC Chairman Arsenio Balisacan

“We are looking forward to September 2021 when the provision in Bayanihan 2 that suspends motu proprio review will lapse. We are glad (and keeping our fingers crossed) that current versions of the Bayanihan 3 proposal do not include an extension of the motu proprio review suspension or restrictions of competition policy enforcement,” said Balisacan.

By then, he said, PCC will be able to review merger transactions in the past year and identify those that may have led to anticompetitive effects.

Bayanihan 3 is the third economic stimulus of the Duterte Administration during this pandemic period.

The House of Representatives already passed on third and final reading the P401 billion economic stimulus package or Bayanihan to Arise as One Bill 3 or Bayanihan 3, but which counterpart bill was not tackled at the Senate with Senators urging government to spend first the Bayanihan 2 funds before asking for a third package.

Section 4 (eee) of Bayanihan 2 exempts from compulsory notification M&As with transaction values below P50 billion if entered into within 2 years from the effectivity of Bayanihan 2 on 15 September 2020. Additionally, it suspends PCC’s exercise of motu proprio review of these transactions for 1 year.

However, M&As are still subject to compulsory notification: such as those transaction value is at least P50 billion, or entered into before the effectivity of Bayanihan 2 and exceed the applicable thresholds when the definitive agreement was signed.

In determining the transaction value, the rules apply P50 billion as the new size of person (SOP) and size of transaction (SOT) thresholds for compulsory notification. Prior to the law, the thresholds were adjusted annually and set at P2.4 billion for SOT and P6 billion for SOP for 2020. At that time, the PCC was reviewing 5 transactions notified before Bayanihan 2’s effectivity.

In terms of motu proprio review, the following M&As are not covered by Bayanihan 2’s exemption are transactions entered into before the effectivity of Bayanihan 2 which have not yet been the subject of PCC review; or those pending review by PCC before the effectivity of Bayanihan 2.

At that time, Balisacan said that M&As that are likely to substantially lessen competition may be reviewed motu proprio after 1 year from Bayanihan 2’s effectivity.

PCC urged parties to M&As below the P50-billion threshold may choose to voluntarily notify their transaction to undergo merger review. In its discretion, the PCC may give due course to the voluntary notification, with review periods of 45 days for Phase 1 and 90 days for Phase 2.

“The PCC recognizes the need to strike a balance in implementing the policy objectives of promoting business continuity under the Bayanihan 2 and looking after market efficiency and consumer welfare under the Philippine Competition Act,” Balisacan said earlier.

“With fewer merger notifications expected, the PCC will intensify action in other areas of enforcing the competition law especially against anti-competitive agreements and abusive practices that harm consumers or unscrupulously take advantage of the crisis,” Balisacan added.