Published 30 September 2022, The Daily Tribune

The Philippine Competition Commission (PCC) adjusted the merger notification threshold effective 16 September 2022.

Commission Resolution 18-2022 was issued by the PCC on 13 September 2022 to provisionally set the mandatory merger notification threshold to P6,100,000,000 for the Size of Party, and P2,500,000,000 for Size of Transaction (“Notification Threshold”).

Under Republic Act 10667, otherwise known as the “Philippine Competition Act,” PCC, the country’s antitrust agency is empowered to review mergers and acquisitions (M&A) having a direct, substantial, and reasonably foreseeable effect on trade, industry, or commerce in the Philippines. In conducting the review, the Commission shall assess whether a proposed merger or acquisition is likely to substantially prevent, restrict, or lessen competition in the relevant market or in the market for goods and services as may be determined by the Commission; and consider any substantiated efficiencies put forward by the parties to the proposed merger or acquisition, which are likely to arise from the transaction.

In relation to PCC’s power to review M&A transactions, parties to M&A transactions that exceed the Notification Threshold are required to notify PCC before the execution of the definitive agreements relating to the transaction. A definitive agreement sets out the complete and final terms and conditions of a merger or acquisition, including the rights and obligations between or among the transacting parties. This may be in the form of a share purchase agreement, asset purchase agreement, joint venture agreement or other similar agreement.

Pursuant to Commission Resolution 18-2022, parties to an M&A transaction are required to notify the PCC if it breaches the following thresholds:

  1. Size of Party Test. 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 P6,100,000,000; and
  2. Size of Transaction Test. The value of the transaction exceeds P2,500,000,000.

The Notification Threshold shall also apply to joint venture transactions. A transaction that exceeds the Merger Notification Threshold but does not comply with the notice requirement shall be considered void and will subject the parties to an administrative fine of one percent to five percent of the value of the transaction.

Prior to the provisional adjustment, PCC issued Commission Order 22-2020 to exempt mergers and acquisitions transactions with transaction values below P50,000,000,000 from the compulsory notification if entered into within a period of two years from 15 September 2020. This was issued pursuant to Section 4(eee) of Republic Act 11494, otherwise known as the Bayanihan to Recover as One Act, which granted the exemption to promote business continuity and capacity building during the Covid-19 pandemic.

It is expected that the PCC will adjust the notification threshold for the year 2023. PCC stated in Commission Resolution 18-2022 that the adjustment is only provisional and that it shall undertake further studies to consider all factors relevant to the adjustment of notification thresholds.

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