After months of study and public consultations, the Philippine Competition Commission (the Commission) has issued implementing rules (the Rules) for the Philippine Competition Act. The Rules took effect on June 18. We outline below some salient details in the Rules.
Merger notification thresholds
The Rules clarify the PHP1 billion (approx. US$22 million) threshold for compulsory notifications of mergers or acquisitions. For example, in a proposed merger or acquisition of assets outside the Philippines, the Commission must be notified only if each of (i) the acquiring entity's assets in the Philippines and (ii) gross revenues generated in the Philippines by such assets exceed PHP1 billion. With respect to sales of shares in a corporation, a notice is required if (i) the corporation's assets in the Philippines, or its gross revenues from sales in, into, or from the Philippines, exceed PHP1 billion and (ii) the proposed transaction would cause the acquirer to own more than 35 percent of the corporation's outstanding voting shares. Joint ventures also require notifications if either the assets to be combined in the Philippines or contributed to the joint venture or the gross revenues generated by such assets exceed PHP1 billion. Furthermore, a merger or acquisition to be carried out via successive transactions within one year between the same parties shall be treated as one transaction. Notification shall be made on the basis of the binding preliminary agreement providing for such successive transactions. Parties to a proposed merger or acquisition may request a pre-notification consultation with the Commission to seek non-binding advice on the contents of their planned submission.
Procedure for merger notification
Each party to a covered merger or acquisition must submit a notification form to the Commission. The Commission has 15 days to determine whether the notification is sufficient to commence Phase 1 review. Once the Commission deems the notification sufficient, the Commission has 30 days to determine whether to study the transaction further under a Phase 2 review. When the Commission requires additional documents from the parties for the purpose of a Phase II review, it shall publish on its website certain information about the proposed transaction, including the names of the involved entities, the type of transaction and the markets or lines of businesses covered by the proposed merger or acquisition.
Substantial lessening of competition
In ruling on the lawfulness of a notified merger or acquisition, the Commission will assess whether the transaction 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. The Commission will also take into account any substantiated efficiencies the parties put forward as likely to arise from the transaction.
Trade secrets or other confidential information submitted to the Commission shall not be disclosed to third parties, unless the Commission deems disclosure necessary for its review. When a decision or case summary adopted by the Commission contains trade secrets, the parties may prepare a separate, non-confidential version. If the Commission decides that the confidential treatment requested by the parties is not justified, it may decide to make the information accessible. In addition, if a merger or acquisition is under review in multiple jurisdictions, the parties may allow the Commission to exchange confidential information with competition authorities in other countries.
Overall, the Rules give more specific guidance to players in the Philippine market. This is the first time that the Philippines has legislated merger notifications specifically to address competition law concerns, so there might still be some uncertainty on the finer details pertaining to the contents and timing of notifications. The fact that the Rules prescribe a formal mechanism for prior consultations with the Commission is a positive sign that the government is willing to work with market players to make sure that their notifications are prepared in accordance with the Rules and the expectations of the Commission.
For prior coverage of the Philippine Competition Act, see our previous Sidley Update “Philippine Competition Act Set to Become Law,” available at: http://www.sidley.com/en/news/06-30-15-antitrust-competition-update.