PCC wrapping up review of SM’s purchase of Goldilocks

Goldilocks president Richard Yee

The Philippine Competition Commission (PCC) will soon close its review of SM Investments Corp.’s purchase of Goldilocks Bakeshop amid concerns that this may affect the market chances of other cake and pastry companies, a top official said.

In a press briefing on Tuesday, PCC Commissioner Stella Alabastro-Quimbo said that the antitrust body is close to wrapping up the second phase of its review of the deal. At the end of this phase, they would eventually decide one of three possible verdicts: to reject the transaction, approve it as is, or approve it with conditions.

The main concern, Alabastro-Quimbo said, points to how the country’s largest player in the retail market would treat the rival companies of the popular bakery chain once SM already owns it. Goldilocks has over 500 stores nationwide, according to the company’s website.

READ: SM confirms talks to invest in Goldilocks

“We are currently undergoing phase two review for the acquisition of Goldilocks by the SM Group. We are nearing the 60th day so we should be able to hopefully close this soon,” the commissioner said.

Only transactions that meet the P1 billion threshold need PCC approval. There are two phases of the review. The first phase lasts at most 30 days. If the competition watchdog still couldn’t conclude that there are no competition concerns, the transaction enters a more detailed review under phase two. The second phase has a maximum of 60 days.

““The main concern has to do with the vertical relationship between SM and Goldilocks. SM is a space to Goldilocks. So suppose the transaction where SM would now own Goldilocks, a potential concern has to do with how SM would relate to competitors of Goldilocks,” she explained.

A vertical relationship refers to the relationship between two firms that are part of the same supply chain such as suppliers and retailers. This is different from a horizontal relationship which refers to that of rival companies in the same line of business.

PCC issued a so-called statement of concern last week, giving the retail giant up to December 14 to respond. After such point, the commissioner said there are two ways the case could go: either PCC would use the response as a consideration in its final verdict, or SM would “volunteer certain commitments.”

Moreover, Alabastro-Quimbo said that PCC has a “very detailed and technical analysis” that outlined possible incentives in terms of increased profits if market foreclosure was done either totally or partially against competitors in the cake and bakeshop market.

Partial foreclosure, she said, happens when competitors are allowed to operate in SM but put at a disadvantage compared to Goldilocks. As a matter of example, she said that such would be the case when SM would put a rival bakeshop in a “worse location” inside the mall. /jpv