PCC to resume review of mergers, acquisitions as Bayanihan 2 moratorium expires

The Philippine Competition Commission (PCC) on Wednesday said it is set to resume reviewing “potentially problematic” mergers and acquisitions (M&As) as the one-year moratorium under the Bayanihan to Recover as One Act (Bayanihan 2) expires on September 15, 2021.

“With the year-long suspension lifted, and based on its increased market monitoring efforts, PCC can now launch motu proprio reviews and flag M&As which may have potentially anti-competitive effects regardless of any transaction value,” PCC chairman Arsenio Balisacan said in a statement.

Section 4 (eee) of the Bayanihan 2 states that “the Philippine Competition Commission (PCC) shall promote business continuity and capacity building, as such, all mergers and acquisitions with transaction values below P50 billion shall be exempt from compulsory notification under Section 17 of Republic Act No. 10667 or the ‘Philippine Competition Act’ if entered into within a period of two years from the effectivity of this Act, and further, shall be exempt from the PCC’s power to review mergers and acquisitions motu proprio provided in Section 12 of Republic Act No. 10667 for a period of one year from the effectivity of this Act.”

Pursuant to the Bayanihan 2, the PCC issued rules detailing the exemptions from compulsory notification and motu proprio review, computation of new thresholds, and the option for voluntary notification of M&A transactions while the law is in effect. 

Under the rules, the following M&As are still subject to compulsory notification:

• Transaction value is at least P50 billion
• Entered into before the effectivity of Bayanihan 2 and exceed the applicable thresholds when the definitive agreement was signed

In terms of motu proprio review, the following M&As are not covered by Bayanihan 2’s exemption:

• Entered into before the effectivity of Bayanihan 2 which have not yet been the subject of PCC review
• Pending review by PCC before the effectivity of Bayanihan 2

M&As that are likely to substantially lessen competition may be reviewed motu proprio after 1 year from Bayanihan 2’s effectivity, according to the PCC.

The antitrust body noted that since the effectivity of Bayanihan 2 in September 2020, there have been only four transactions that breached the P50-billion threshold.

It added that there were three transactions notified during the same period which were reviewed under the old thresholds.

Prior to Bayanihan 2’s passage, the PCC’s prevailing size of transaction threshold was P2.4 billion while the size of party threshold was P6 billion. 

The PCC said that it received 46 notifications in 2019, 26 notifications in 2020, and four notifications in 2021, “indicating a significant decrease in M&A notifications since the pandemic.”

As part of the antitrust body’s market surveillance function, a motu proprio review allows the PCC to investigate any M&A transaction that it believes is likely to substantially lessen competition in the market, even if the transaction does not meet the thresholds for compulsory notification.

“We are hopeful that the return of PCC’s motu proprio review powers would discourage deals that are potentially anti-competitive. We continue to encourage firms to voluntarily notify the Commission to avoid the taxing possibility of unwinding their transactions after,” Balisacan said.

“Keeping watch over M&As in the post- COVID-19 economic environment is critical to ensure that consolidation does not remain unchecked and is not allowed to lead to highly concentrated markets,” he added.

As of 14 September 2021, the PCC said it has received a total of 225 M&A transactions with a combined transaction value of P4.56 trillion.

The top five sectors based on frequency of M&A notifications are manufacturing (50), financial and insurance (37), real estate (33), electricity and gas (27), and transportation and storage (18), it said. --KBK, GMA News