Mergers below P 50B to escape PCC scrutiny

The competition watchdog began the week under a tight leash that would stay on for two years after lawmakers put a provision in the latest Bayanihan law ordering the antitrust body to look away from mergers and acquisitions (M&A) it would otherwise flag for review.

The Philippine Competition Commission (PCC) issued new rules on Monday to implement a section in the Bayanihan to Recover As One Act (Bayanihan 2), one that they were never consulted about but nevertheless a policy they now have to follow.

For two years, companies will not be legally required to notify the PCC about their M&A, unless the deal is priced beyond P50 billion, according to Bayanihan 2.

The same law also bars the PCC from launching its own investigations of questionable M&As that cost below P50 billion even if it had a reason to suspect the deal might harm consumers and other market players. This will last for a year.

This was inserted by the bicameral committee, even though the original versions of Bayanihan 2 passed in both chambers of Congress never had this provision. At P50 billion, lawmakers have taken PCC’s threshold 20 times higher than the current level.

Under the rules PCC issued and which took effect also on Monday, M&As that are “at least” P50 billion still need to be notified, the antitrust body said in a statement on Monday. Moreover, the PCC said that it would still review M&As entered into before Bayanihan 2 took effect and which exceeded applicable thresholds at the time the definitive agreement was signed.

Before Bayanihan 2, M&As need to be notified to PCC if they pass two thresholds—if the value of assets or revenues of the ultimate parent entity of at least one of the parties is at least P6 billion and if value of assets or revenues of the acquired entity is at least P2.4 billion. Now both values need to be at P50 billion.

The PCC also said that M&A parties below P50 billion could still 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 the first phase and another 90 days for further review.

The PCC said it could still launch a review of M&As on its own if the M&A was entered into before Bayanihan 2 took effect, if there is a pending PCC review before the effectivity of Bayanihan 2 and when the one year freeze of the law expires.

“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,” said PCC Chair Arsenio Balisacan.

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

Out of more than 200 M&As that the PCC reviewed in the past four years, only 14 were priced above P50 billion. Moreover, none of these 14 deals were considered harmful, or anticompetitive in competition jargon, a renowned competition expert previously told the Inquirer on condition of anonymity.

They were not considered anticompetitive because they were deals of this size were usually global transactions that had little impact in the Philippines and were only reviewed here because the business had some operations or assets in the country, the expert said.

On the contrary, the problematic deals that the PCC flagged, corrected and even blocked were M&As by local players that cost billions of pesos, sometimes as much as P10 billion, but certainly not more than P50 billion.

“They have a mistaken notion of what harms the economy. They think only big M&As [over P50 billion are the problem]. That is not based on evidence and facts,” the expert said. INQ