Merger Control 2024 Comparisons

The primary merger control legislation is the Philippine Competition Act (Republic Act No 10667, or PCA), its implementing rules and regulations, and other rules and guidelines issued by the Philippine Competition Commission (PCC).

The Revised Corporation Code (Republic Act No 11232) may also be applicable, as may various issuances by the Securities and Exchange Commission (SEC).

Merger control provisions may also be provided for in special laws that apply to specific industries. For example, the Electric Power Industry Reform Act (EPIRA) provides restrictions as to the percentage of the installed generating capacity of a grid and/or national installed generating capacity that an entity may own, operate or control, singly or in combination with others.

The Guidelines on the Computation of Merger Notification Thresholds (the “Merger Rules”) provide the rules for determining whether a merger, acquisition of shares or assets, or joint venture has met the merger notification thresholds set by law and is thus subject to compulsory notification.

The Foreign Investments Act (Republic Act No 7042), as amended, and its implementing rules and regulations provide the general framework for foreign investments in the Philippines. Foreign equity investments in certain industries may be subject to restrictions, as provided in the 1987 Constitution and various pieces of legislation. Notably, Republic Act No 11647, further amending Republic Act No 7042, was passed into law on 2 March 2022, lowering the minimum paid-in capital required for foreign nationals to own micro, small and medium-sized enterprises, subject to certain conditions.

The Foreign Investment Negative List identifies the industries that are subject to nationality restrictions and indicates the foreign equity allowed. It compiles the foreign ownership restrictions found in various laws and regulations, and is amended from time to time to reflect changes in the legislation. On 21 March 2022, the Philippines amended the Public Service Act (Commonwealth Act No 146) to allow full foreign ownership of entities providing services that qualify as public services. On 8 December 2022, Department of Energy Department Circular No 2022-11-0034 (“DOE Circular”) took effect and removed certain limitations on foreign participation in the exploration, development and utilisation of the Philippines’ renewable energy sector. The DOE Circular now allows 100% foreign investment in solar and wind energy projects. However, certain aspects of the business are still subject to foreign ownership restrictions, such as land ownership.

Various government agencies regulate foreign investments in the Philippines. However, the primary agencies concerned with ensuring compliance with the rules and regulations on foreign investment in the Philippines are the SEC and the Department of Justice. Republic Act No 11647 introduced the new Inter-Agency Investment Promotion Coordination Committee (IIPCC), which is intended to integrate all the promotion and facilitation efforts to encourage foreign investments in the Philippines. The IIPCC has representatives from various government agencies, including the Department of Trade and Industry, the Department of Finance, the Board of Investments, the Philippine Economic Zone Authority, the National Economic Development Authority and the Department of Information and Communications Technology.

Meanwhile, the PCC has original and primary jurisdiction to review proposed mergers, acquisitions and joint ventures. Other government authorities may assist in enforcing and reviewing compliance with the relevant regulation on foreign investment, depending on the industry in which the entity operates and the incentives availed of.

Notification is compulsory if a transaction exceeds the mandatory notification thresholds, namely:

• the aggregate annual gross revenues in, into or from the Philippines, or the value of the assets in the Philippines of the ultimate parent entity (UPE) of at least one of the acquiring or acquired entities, including that of all entities that the UPE controls, directly or indirectly, exceeds PHP7.8 billion (“Size of the Party Test”); and
• the value of the transaction exceeds PHP3.2 billion (“Size of the Transaction Test”).

These new thresholds took effect on 1 March 2024 and represent increases from the Size of the previous Party Test and Size of the Transaction Test of PHP7 billion and PHP2.9 billion, respectively, which were in effect from 1 March 2023 to 29 February 2024. However, the revised thresholds do not apply to transactions that were notified to the PCC before 1 March 2024, nor to transactions that have already been the subject of a decision by the PCC.

Calculating the value of the transaction depends on the type of the transaction.

Notably, parties to a merger or acquisition with transaction values falling below the above-discussed thresholds may nonetheless voluntarily notify the PCC, and the PCC may, at its discretion, give due course to the same. Voluntary notification to the PCC may be made on the basis of an executed binding preliminary agreement or a definitive agreement.

Mergers and Acquisitions

For mergers or acquisitions of assets in the Philippines, in determining whether the Size of the Transaction Test is met, the amount is calculated based on the value of the assets that are the subject of the transaction or the gross revenues generated in the Philippines by such assets.

Acquisitions of Voting Shares

For acquisitions of voting shares of a corporation or of an interest in a non-corporate entity, the amount is calculated based on the aggregate value of the assets of the acquired entity (other than assets that are shares of said entity and entities it controls) or gross revenues from sales in, into or from the Philippines. Furthermore, as a result of the proposed acquisition, the entity acquiring the shares, together with its affiliates, should own voting shares or interests of:

• more than 35%; or
• more than 50%, if the entity or entities already own more than 35%.

Joint Ventures

For joint ventures, the amount is calculated based on the aggregate value of the assets that will be contributed into the proposed joint venture or the gross revenues generated by such assets, including any amount of credit or any obligations of the joint venture that any of the joint venture parties agreed to extend or guarantee.

Creeping Transactions

A merger or acquisition consisting of successive transactions that will take place within a one-year period between the same parties or entities under common control shall be treated as one transaction – ie, a creeping transaction.

Parties that exceed the thresholds are required to notify the PCC within 30 days from the execution of the definitive agreement.

For creeping transactions, if a binding preliminary agreement provides for such successive transactions, the entities shall provide notification on the basis of such preliminary agreement. If there is no binding preliminary agreement, notification shall be made when the parties execute the agreement relating to the transaction that exceeds the thresholds when taken together with the preceding transactions.

A transaction that met the notification thresholds but was not notified to the PCC, and that was consummated prior to the expiration of the waiting period, is considered void and will subject the parties and their UPEs to an administrative fine of 1% to 5% of the value of the transaction.

Pursuant to Memorandum Circular No 21-001, which implemented adjustments to the fines imposable under the PCA, parties that fail to notify the PCC within the period for notification but have yet to consummate the transaction will be fined in the amount of 0.05% of the value of the transaction for the first 30 days of delay or fraction thereof. The fine shall be increased by 0.01% of the value of the transaction for every additional 30 days of delay or fraction thereof, provided that the total amount of the fine to be imposed shall not exceed PHP2.2 million.

The decisions imposing the penalties are made public.

Joint Ventures

Joint ventures, mergers and acquisitions of shares and assets, and issuances of new company shares have been found by the PCC to have failed to comply with the compulsory notification requirements.

“Joint venture” refers to a business arrangement where two or more entities or groups of entities contribute capital, services, assets or a combination thereof towards undertaking an investment activity or a specific project where each entity will have the right to direct and govern the policies of the joint venture with the intention to share in both profits and risks. An acquisition of shares may be considered as a joint venture if joint control will exist between or among the new existing joint venture partners after the acquisition.

Other Agreements

Other definitive agreements that grant parties the option to acquire the shares of stock, or other conversion agreements that allow other entities to gain or obtain control over an entity, may potentially be covered by the notification requirement.

The following transactions are exempt from the rules on compulsory notification:

• internal restructuring within a group of companies wherein the acquired and acquiring entities have the same UPE;
• consolidation of ownership wherein the merger or acquisition involves several entities controlled by the same natural person and there is no change in control over the acquired entity post-transaction;
• land acquisition not for the purpose of obtaining control; and
• joint ventures formed by winning bidders in solicited public-private partnership projects under the Build Operate Transfer Law, upon application by the procuring government agency.

“Control” refers to the ability to substantially influence or direct the actions or decisions of an entity, whether by contract, by agency or otherwise. Control is presumed to exist when the parent owns – directly or indirectly, through subsidiaries – more than half of the voting power of an entity, except in exceptional circumstances where it can clearly be demonstrated that such ownership does not constitute control.

Control may also exist even when an entity owns 50% or less of the voting power of another entity, namely when:

• there is power over more than half of the voting rights by virtue of an agreement with investors;
• there is power to direct or govern the financial and operating policies of the entity under a statute or agreement;
• there is power to appoint or remove the majority of the members of the board of directors or equivalent governing body;
• there is power to cast the majority votes at meetings of the board of directors or equivalent governing body;
• there is ownership over or the right to use all or a significant part of the assets of the entity; or
• there are rights or contracts that confer decisive influence on the decisions of the entity.

With respect to joint ventures, the granting of veto powers may also be deemed to vest control if the veto rights relate to strategic decisions in the business policy or activities of the corporation, such as:

• the appointment of corporate officers or key management personnel;
• determination of the budget;
• adoption of and amendments to the business plan; and
• other similar aspects of business management.

The existence of any such right may be sufficient to constitute control, depending on the content of the veto right and the importance of this right in the context of the specific business of the corporation.

See 2.1 Notification. There are no special jurisdictional thresholds applicable to particular sectors.

The Size of the Party Test is calculated based on the value of the assets and revenues in the Philippines of the UPE, including all the entities it controls.

The Size of the Transaction Test is calculated based on the value of the assets being acquired and/or gross revenues generated by the assets being acquired, or of the acquired entity and entities it controls, depending on the type of transaction.

In determining the value of the assets being contributed for joint venture transactions, the following shall be included:

• all assets that the joint venture partners agreed to transfer, or for which agreements have been secured for the joint venture to obtain at any time; and
• any amount of credit or any obligations of the joint venture that any of the joint venture parties agreed to extend or guarantee to the joint venture.

The aggregate value of assets or revenues in the Philippines shall be as stated on the most recent audited financial statements or, if the entity is not required to prepare audited financial statements, the last regularly prepared balance sheet in which those assets are accounted for.

The value of the assets or revenues in the Philippines of an entity shall be expressed in Philippine peso. If the financial statements were presented in a foreign currency, the value of the assets shall be converted into Philippine peso according to the average of the foreign exchange rate quoted by the Bangko Sentral ng Pilipinas over the 12 months of that financial year.

To satisfy the Size of the Party Test, at least one of the notifying UPEs, including all the entities it controls, directly or indirectly (the UPE and all entities it controls, directly or indirectly, collectively comprise the “Notifying Group”), must either have aggregate annual gross revenues in, into or from the Philippines or have assets “in” the Philippines exceeding PHP7.8 billion.

The annual gross revenues from sales in, into or from the Philippines of the Notifying Group shall be as stated in the UPE’s consolidated financial statements, in accordance with the general principles discussed above. If, based on the accounting principles adopted by the UPE, the Notifying Group does not prepare consolidated financial statements, the annual gross revenues shall be determined by aggregating the gross revenues from sales in, into or from the Philippines of the entities within the Notifying Group, as booked or reflected in their separate statements of income and expenses.

Note that the gross revenues from sales in, into or from the Philippines of an entity within the Notifying Group that is jointly controlled with a different entity shall be proportionate to its ownership interest. Changes in the business are reflected in the financial statements, in accordance with accounting principles.

The PCA covers entities engaged in trade or industry in the Philippines or international transactions that have direct, substantial and reasonably foreseeable effects on trade in the Philippines. Thus, even if it occurs offshore or involves an entity not based in the Philippines, a transaction may be subject to notification to and review by the PCC if the notification thresholds are met. For the purposes of calculating the notification thresholds, the assets or revenues generated by the acquired or acquiring entity in the Philippines, including the entities they control, are material.

There is no market share jurisdictional threshold, but restrictions on market share may be imposed by special laws. As discussed in 1.1 Merger Control Legislation, the EPIRA, for example, provides restrictions as to the percentage of the installed generating capacity of a grid and/or national installed generating capacity that an entity may own, operate or control, singly or in combination with others.

Joint ventures may be formed by:

• incorporating a joint venture company;
• entering into a contractual joint venture; or
• acquiring shares in an existing company (if joint control will exist between or among the existing joint venture partners).

Joint ventures are subject to compulsory notification if the notification thresholds for size of the party and size of the transaction are met. For the purposes of calculating the size of the party, the contributing entities shall be deemed the acquiring entity, and the joint venture shall be deemed the acquired entity.

The size of the transaction is based on the aggregate value of the assets that will be combined in the Philippines or contributed into the joint venture, or the gross revenues generated in the Philippines by such assets exceeding PHP3.2 billion.

Calculating Asset Value

For purposes of calculating the aggregate value of the assets to determine the size of the transaction, the following shall be included:

• the value of all assets that are not owned by any of the joint venture parties for which agreements have been secured by any of the joint venture parties for the joint venture to obtain at any time, whether or not such joint venture entity is subject to the requirements of the PCA;
• any amount of credit or any obligations of the joint venture that any of the joint venture parties agreed to extend or guarantee to the joint venture, at any time; and
• the value of the assets owned by any of the joint venture parties that will be combined in the Philippines or contributed into the proposed joint venture.

In the formation of a joint venture through the acquisition of shares in an existing corporation, the assets to be combined through such acquisition will include the assets or revenues generated by the assets of the existing corporation.

The PCC, on its own or upon notification, has the power to review mergers and acquisitions that have a direct, substantial and reasonably foreseeable effect on trade or industry in the Philippines.

The statute of limitations for any action arising from a violation of any provision of the PCA or its implementing rules and regulations is five years, calculated from:

• the time the violation is discovered, in the case of criminal violations; and
• the time the cause of action accrues, in the case of administrative and civil actions.

The parties to a transaction that is subject to compulsory notification are not allowed to consummate the transaction before either the approval of the transaction or the expiration of the relevant period of review.

A transaction that meets the thresholds and does not comply with the waiting periods for PCC review prior to consummation shall be considered void and will subject the parties and their UPEs to an administrative fine of 1% to 5% of the value of the transaction.

Transactions that meet the notification threshold are required to comply with the mandatory notification to the PCC, except those transactions that are expressly exempted from the notification requirements, as provided in 2.3 Types of Transactions. There are no exceptions to the waiting periods for transactions subject to compulsory notification.

Even if the transaction is not included among the exempt transactions, parties may consider applying for a Letter of Non-Coverage to confirm that the transaction is not subject to compulsory notification, such as when the notification thresholds are not met or the transaction does not involve any change in control over the entity. Furthermore, as discussed in 2.1 Notification, voluntary notification may likewise be resorted to, if the parties intend to get an assessment from the PCC as to whether the transaction poses competition concerns. The Merger Rules do not expressly provide a specific period for voluntary notification.

Parties can only consummate a notified transaction without the clearance of the PCC if the PCC fails to issue a decision within the period provided in the law. The PCA provides that the PCC has 30 days from commencement of the Phase 1 review to review the transaction. Within those 30 days, the PCC shall, if necessary, inform the parties of the need for a more comprehensive and detailed analysis of the transaction under a Phase 2 review, and request other information and/or documents that are relevant to its review.

The issuance of such a request has the effect of extending the period within which the agreement may not be consummated for an additional 60 days, beginning on the day after the request for information is received by the parties. The parties shall provide the requested information within 15 days from receipt of said request; otherwise, the notification shall be deemed expired and the parties must refile their notification.

If the PCC does not issue a decision within the period provided by law, the transaction is deemed approved.

Notably, where notification is voluntary and notification was given to the PCC, parties are prohibited from consummating the transaction pending clearance from the PCC. In the case of voluntary notification, the review periods are 45 days for Phase 1 and 90 days for Phase 2 review.

Parties to transactions that exceed the thresholds are required to notify the PCC within 30 days from the execution of the definitive agreement. See 2.2 Failure to Notify.

Notification may be made based on a binding preliminary agreement upon its execution, even if the complete and final terms and conditions of the merger or acquisition are yet to be agreed upon. A binding preliminary agreement refers to such terms and conditions on which parties to a planned merger or acquisition have reached a consensus and on the basis of which the parties intend to complete the transaction in good faith. The agreement may be in any form, such as a memorandum of agreement, term sheet or letter of intent.

If there is no binding preliminary agreement or if the parties do not wish to notify at that stage, notification to the PCC may be made prior to the execution of the definitive agreement relating to the merger or acquisition. The terms and conditions of the most recent draft of the definitive agreement shall be the basis of the notification, provided that the parties issue an undertaking that they intend to sign the agreement in good faith and to send to the PCC a copy of the executed version. However, if the parties amended or made changes to the agreement, they will be required to renotify the PCC.

Notification filing and Phase 1 review are subject to a fee of PHP250,000.

Phase 2 review is subject to a fee of 0.01% of the value of the transaction, which shall not be less than PHP1 million nor exceed PHP5 million.

The fees are payable within ten days from receipt of an order of payment from the PCC.

If notice to the PCC is required for a merger or acquisition, then all acquiring and acquired pre-acquisition UPEs, or any entity authorised by a UPE to file notification on its behalf, must notify.

The notifying parties shall complete the Notification Form provided by the PCC. This includes information on the parties to the transaction, the value of the transaction and the assets and shares, the operations of the parties in the Philippines, horizontal and vertical relationships, and other relevant information. Documents to be submitted include:

• the definitive agreement or binding preliminary agreement;
• corporate documents;
• secretary’s certificates that the transaction was approved by the shareholders;
• studies, surveys, analyses and reports that were prepared in relation to the transaction;
• confidential information memoranda;
• ordinary course documents; and
• financial statements and annual reports.

The submission must be in English. Certifications must be notarised, and consularised or apostilled if executed abroad.

Incomplete notifications shall not be deemed filed and shall not stop the running of the 30-day period after execution of the definitive agreement within which the parties are required to file. Failure to complete the notification shall result in it being deemed unfiled and subject the parties to the penalties for a failure to notify.

The Notification Form includes a certification that the information and all appendices and attachments are complete, true and correct to the best of the ability of the authorised representative of the party filing the notification. If the party is deemed to have supplied incorrect or misleading information, the PCC may, after due notice and hearing, impose upon the party a fine of up to PHP1.1 million. The party may also be liable for perjury.

The supply of incorrect or misleading information has been defined to mean:

• providing information that is false, inaccurate or erroneous; or
• omitting, concealing or failing to make known information reasonably likely to be relied upon by the PCC in the performance of its official functions, provided that such omission, concealment or failure may mislead, tend to mislead, or otherwise create a false impression on the PCC.

Where the incorrect or misleading information is supplied in written or printed form, the supply of such information in any single document shall constitute one violation.

The PCC has yet to issue a decision fining a party for having supplied inaccurate or misleading information. If the information is unclear or incomplete, the PCC usually requests clarifications from the parties.

Upon submission of the notification, the PCC will conduct a sufficiency check over a 15-day period (“Sufficiency Period”) to determine whether it has sufficient information to conduct a Phase 1 review. If the PCC requests further information about the transaction, the parties will have 15 days to provide this information. The PCC will assess the compliance with the request for further information within the period remaining from the Sufficiency Period (this remaining period starts from the issuance of the request for further information), which in no case shall be less than five days. If the PCC determines that the information is sufficient, the parties will be directed to pay a filing fee.

Phase 1

The Phase 1 review period will commence on the first business day following the date of payment of the filing fee, and will last for a maximum of 30 days. The Phase 1 review involves an initial assessment by the PCC to determine whether the transaction raises any competition concerns under the PCA that would warrant a more detailed review. If no competition concerns are raised at this stage, the transaction will be approved by the PCC within the Phase 1 review period.

However, if, for any reason, the PCC identifies competition concerns during the Phase 1 review or determines that it has insufficient information to form a conclusion as to the potential impact of the transaction on competition in the market, the PCC will refer the transaction for a Phase 2 review.

Phase 2

The Phase 2 review shall commence on the day after service by the PCC of a Phase 2 notice. The PCC will then have 60 days to conduct the Phase 2 review, during which period the transaction may not be completed. In practice, the Phase 2 review period may last longer than 60 days if the PCC requires more time to determine whether further information is required to conduct the Phase 2 review and, if so, in order for the parties to provide such further information.

Prior to filing a notification, parties that are required to notify may inform the PCC of their proposed transaction and request a pre-notification consultation. During consultations, the parties may seek non-binding advice on the specific information needed for the notification and the process for the same. The PCC encourages pre-notification consultations and this process is treated confidentially.

Requests for information are common. The PCC is allowed to issue a Notice of Deficiency if a party’s notification is insufficient before commencing Phase 1 review. In addition, the PCC Rules on Merger Procedure provide that the PCC may contact third parties, such as customers, suppliers or competitors, to obtain relevant information regarding the market, their views on the merger and any other competition issues. Accordingly, the PCC may likewise co-ordinate with the parties through conference calls or meetings to discuss theories of harm, relevant markets, voluntary commitments and timing of the review, among other matters.

The PCC may conduct an expedited review of the transaction for a shortened review period of 15 days for Phase 1 review of the following qualified transactions:

• transaction with no overlaps – the parties to the transaction and their Notifying Groups do not have any actual or potential horizontal, vertical or complementary relationship;
• global transaction with subsidiaries in the Philippines that act merely as assemblers or export manufacturers – the transaction is global where the acquiring and acquired entities are foreign and the Philippine subsidiaries export 95% of the production, while the 5% is minimal in relation to the entirety of the market in the Philippines for such product;
• global transaction with limited presence in the Philippines – the candidate-relevant geographic market of the transaction is global, and the parties have negligible or limited Philippine presence; and
• joint ventures solely for the construction and development of a real estate development project.

In reviewing transactions, the PCC assesses whether the transaction is likely to result in substantially preventing, restricting or lessening competition in the relevant market.

Market definition focuses on the extent to which customers would likely switch from one product to another (“Relevant Product Market”), or from a supplier in one geographic area to a supplier in another area (“Relevant Geographic Market”), in response to changes in prices, quality, availability or other features. The Merger Review Guidelines define a relevant market as one that could be subject to an exercise of market power that would likely result in significant harm to competition, rather than anti-competitive effects that are insignificant or transient in nature.

The PCC assesses market definition within the context of the particular facts and circumstances of the merger under review. In determining the relevant market, the PCC considers the following factors, among others:

• the possibilities of substituting the goods or services;
• the cost of distribution of the goods or services, their raw materials, supplements and substitutes from other areas and abroad, and the time required to supply the market from those areas;
• the cost and probability of users or consumers seeking other markets; and
• national, local or international restrictions that limit the access by users or to alternative sources of supply, or the access of suppliers to alternative consumers.

Once a market is defined and where circumstances require, the PCC will consider market shares and concentration as part of the evaluation of competitive effects.

Determining Overlap

To determine whether there are overlaps between the parties’ activities, the PCC looks at horizontal and vertical relationships between the parties in the relevant market. There is a horizontal relationship when the parties and/or entities within their respective Notifying Groups (which include subsidiaries, affiliates and other entities controlled by the UPE) provide products or services that directly compete in the same market. There is a vertical relationship when the parties and/or entities within their respective Notifying Groups operate at different levels of a production or supply chain (such as when an entity from a party’s Notifying Group produces goods that use raw materials processed by an entity in the other Notifying Group).

An “overlap” in the form of a vertical or horizontal relationship does not necessarily void the transaction, unless it is shown that the transaction is anti-competitive.

The PCC assesses market definition within the context of the particular facts and circumstances of the transaction under review. Relevant markets identified in past investigations in the same industry or investigations conducted in other jurisdictions may be informative but are not necessarily applicable to the PCC’s assessment of transactions.

The PCC looks at unilateral effects and co-ordinated effects. In analysing the potential of a horizontal merger to result in anti-competitive unilateral effects, the PCC assesses whether the merger is likely to harm competition significantly by creating or enhancing the merged firm’s ability or incentives to exercise market power independently. In analysing the potential for co-ordinated effects, the PCC assesses whether the merger increases the likelihood that firms in the market will successfully co-ordinate their behaviour or strengthen existing co-ordination in a manner that harms competition.

Anti-competitive mergers may be exempted from prohibition by the PCC when the parties establish that the merger has brought about or is likely to bring about gains in efficiencies that are greater than the effects of any limitation on competition that will likely result from the transaction. Efficiencies that increase competition in the market may also be considered.

In order to be taken into account by the PCC, the efficiencies must be demonstrable, with detailed and verifiable evidence of anticipated price reductions or other benefits. Moreover, the efficiency gains must be merger-specific and consumers must not be worse off as a result of the merger. For that purpose, efficiencies should be substantial and timely, and should, in principle, benefit consumers in those relevant markets where it is otherwise likely that competition concerns would arise.

There is no explicit authority for the PCC to consider “non-competition” issues when reviewing transactions. However, as discussed in 4.2 Markets Affected by a Transaction, the Merger Review Guidelines provide that the PCC assesses market definition within the context of the particular facts and circumstances of the merger under review.

Rules governing foreign direct investment (specifically, the limitations thereon) are not governed by the PCA or other rules or issuances of the PCC. The PCC does not require special filings for foreign direct investment.

An acquisition of shares in a corporation will be deemed a joint venture transaction if joint control will exist between or among the new and existing joint venture partners post-transaction.

In the context of joint ventures, joint control refers to the ability of the joint venture partners to substantially influence or direct the actions or decisions of the joint venture, whether by contract, by agency or otherwise. Joint control exists when an entity has the ability to determine the strategic commercial decisions of the joint venture (positive joint control) or to veto such strategic decisions (negative joint control).

For purposes of calculating the aggregate value of the assets to determine the size of the transaction, any amount of credit or any obligations of the joint venture that any of the joint venture parties agreed to extend or guarantee to the joint venture at any time shall be included.

The PCC may prohibit or interfere with a transaction if it will likely result in substantially lessening, restricting or preventing competition in the relevant market. The PCC may prohibit the implementation of the agreement or require modifications or amendments to address competition concerns. It may also impose penalties on the parties and nullify transactions that were consummated in violation of the compulsory notification requirements.

Decisions shall be in writing, and the merger parties shall be furnished with a certified copy of the decision. A non-confidential version may also be furnished to such persons as the PCC considers appropriate and published on the PCC website for public information.

Should there be a finding that a merger is likely to substantially prevent, restrict or lessen competition, the parties are allowed to negotiate remedies to address the competition concerns. At any stage of the review, the parties may propose to amend or modify the agreements or undertake commitments that will remedy, mitigate or prevent the competition concerns identified by the PCC as arising from the merger.

Before accepting them, the PCC must reasonably believe that any commitments are clearly sufficient to address the competition concerns and are proportionate to them. In instances where the PCC considers the commitments proposed by the merger parties to be a suitable remedy, the PCC may decide to consult the stakeholders concerned or the public, and issue an invitation to comment on its website. Third parties may also be approached for their views on an individual basis.

Typical Remedies

The PCC considers two types of remedies to address competition concerns.

• Structural remedies are measures that directly alter market structure and address issues that give rise to competition problems. They include divestitures (forced sale of business units or assets, either in full or in part), licensing (compulsory licensing of legal rights, usually intellectual property rights), rescission (undoing a completed transaction) and dissolution (ending a legal entity).
• Behavioural remedies are measures that directly alter the behaviour of an entity.

The PCC may impose both structural and behavioural remedies simultaneously.

Changes and Alternative Remedies

Should the PCC decide that changes need to be made to the commitments in light of responses to the consultation, it will discuss the material changes with the parties.

The PCC may consider and impose alternative remedies, notwithstanding the merger parties’ proposals. The PCC will adopt a Commitment Decision once it has decided to accept the commitments of the merger parties. Where the PCC has rendered a Commitment Decision, the party that provided the commitment may apply to the PCC to vary, substitute or release such commitment.

There is no strict legal standard that remedies must meet in order to be deemed acceptable. However, in determining the remedy or set of remedies that would be appropriate, reasonable and practicable to address the adverse effects of the merger on competition, the PCC shall take into account the adequacy and effectiveness of the action in preventing, remedying or mitigating the anti-competitive effects of the merger.

At any stage of the review, the merger parties may propose commitments that will remedy, mitigate or prevent the competition concerns identified by the PCC as arising from the merger.

Upon submission of a proposed commitment, the review period shall be suspended for a period of 60 days. However, the PCC may shorten such period or extend it for a maximum of 30 days (“Commitment Review Period”) through the merger parties’ submission of a model request and waiver together with their proposed commitment. If the Commitment Review Period expires without the PCC’s acceptance of the proposed commitment, Phase 1 or 2 review shall resume.

The PCC will confer with the parties to discuss their proposed commitments. Should the PCC decide that changes need to be made to the commitments in light of responses to the consultation, it will discuss the material changes with the parties.

Alternative Remedies and Applications to the PCC

The PCC may consider and impose alternative remedies, notwithstanding the merger parties’ proposals. The PCC will adopt a Commitment Decision once it has decided to accept the commitments of the merger parties. Where the PCC has rendered a Commitment Decision, the party that provided the commitment may apply to the PCC to vary, substitute or release such commitment. The written application shall contain the following:

• a description of the terms of the proposed varied or substitute commitment;
• an explanation as to the impact that the variation or substitution of the commitment will have on the competition concerns;
• for applications for release, an explanation as to whether the competition concerns sought to be addressed by the commitment which the party is seeking release from still exist; and
• full contact details of the main competitors, customers and clients of the party subject to the commitment.

All explanations should be accompanied by relevant supporting documents and certified under oath by an authorised representative of the party. Before varying, substituting or releasing a commitment, the PCC will consult with such persons as it deems appropriate.

There is no PCC standard approach regarding the conditions and timing for remedies, as they are imposed or agreed upon on a case-by-case basis.

The timing for the enforcement of remedies will depend on the nature of the remedy – specifically, whether or not it is intended to take place prior to consummation (such as a simple divestment of particular assets) or after consummation (such as the submission of monitoring reports, etc).

The penalties for failure to comply with the commitments or conditions imposed by the PCC are usually indicated in the decision issued by the PCC for approval of the transaction. In addition to these penalties, failure by the parties to comply with a ruling, order or decision of the PCC after due notice and hearing may result in a penalty of between PPHP50,000 and PHP2 million being imposed for each violation. A similar amount of penalty shall also accrue for each day of non-compliance, beginning 45 days from the time that said ruling, order or decision was served and ending when the party fully complies.

Decisions shall be in writing, and the merger parties shall be furnished with a certified copy of the decision. A non-confidential version may also be furnished to such persons as the PCC considers appropriate, and published on the PCC website for public information.

To date, there have been no published decisions where the PCC required remedies or prohibited foreign-to-foreign transactions.

There is no requirement for separate notification of ancillary restraints. The PCC assessment of a transaction is holistic and, therefore, looks at all the provisions of and mechanisms in the agreement embodying the transaction, including any ancillary restraints. The PCC is not prohibited from reviewing or including in its decision any related arrangements or agreements imposing ancillary restraints if these arrangements or agreements will likely substantially prevent, restrict or lessen competition in the relevant market.

In relation to a review, the PCC has the power to require the production of documents or information from third parties and to consult them in the process of reviewing commitments. The PCC may contact third parties, such as customers, suppliers or competitors, by means of market calls or enquiry letters in order to obtain relevant information regarding the market, their views on the merger, any competition issues it may raise and how they will be affected. Third parties may also include other governmental entities, sectoral regulators, industry associations, consumer bodies, think-tanks, market research firms or centres for information, among others.

Since the PCC was recently established, it often contacts third parties in reviewing transactions to gather information about the relevant market and the possible effects of the transaction.

The decision of the PCC on a transaction subject to compulsory notification is made public. When publishing a decision, the PCC provides a summary of the transaction, subject to the parties’ claims of confidentiality.

Commercial information may be subject to claims of confidentiality. Such a claim must be substantiated, in that it must be accompanied by a detailed explanation why particular parts of the submissions should not be disclosed. A non-confidential version should also be provided at the same time as the original submission.

The PCC may share the non-confidential versions of submissions with the merger parties or third parties. Unless there is a claim of confidentiality, it will be presumed that none of the information contained in a party’s submission is confidential. The following classes of information, however, are not generally considered to be confidential by the PCC:

• the fact of the merger itself;
• information that relates to the business of any of the merger parties but is not commercially sensitive in the sense that its disclosure would cause harm to the business;
• information that reflects the merger parties’ views of how the competitive effects of the merger could be analysed; and
• information that is general knowledge within the industry, or that would likely be verified by any diligent market participant or trade, finance or economic expert.

At any time before the case is submitted for decision, the PCC may consult a sector regulator or other relevant government agencies from foreign jurisdictions, if appropriate.

Information, including documents, shall not be communicated or made accessible by the PCC insofar as it contains trade secrets or other confidential information, the disclosure of which is not considered necessary by the PCC for the purpose of the review. If a transaction is under review in multiple jurisdictions, parties to the transaction may waive the confidentiality protections to allow the PCC to exchange otherwise protected information with competition authorities in other countries.

Parties to the merger may file a motion for reconsideration of a decision, order or resolution of the PCC within 15 days from receipt thereof. A motion for reconsideration shall be based on either of the following grounds:

• the evidence on record is insufficient to justify the decision, order or ruling; or
• the decision, order or ruling is contrary to law.

A final order or decision of the PCC shall be appealable to the Court of Appeals within 15 days from the notice of the final order or decision, in accordance with the Rules of Court. The appeal shall not stay the final order or decision, unless the Court of Appeals shall direct otherwise upon such terms and conditions as it may deem just. In the appeal, the PCC shall be included as a party respondent to the case.

See 8.1 Access to Appeal and Judicial Review. There have been successful appeals of decisions of the PCC – for example, the Court of Appeals reversed the decision of the PCC and upheld the legality of the co-acquisition by PLDT Inc and Globe Telecom Inc, two of the biggest telecommunications providers in the Philippines, of the telecommunications assets of San Miguel Corp.

As a general rule, third parties cannot appeal a decision clearing a transaction. The PCC may also initiate and conduct a fact-finding or preliminary inquiry for the enforcement of the PCA upon a verified complaint being filed by an interested party.

The Philippines does not have foreign direct investment or foreign subsidies legislation that requires separate filings other than those required under the PCA.

There have been no significant changes to the PCA, except the adjustment to the notification thresholds, which have been increased to PHP7.8 billion and PHP3.2 billion for the Size of the Party and Size of the Transaction Tests, respectively. The PCC also issued two new guidelines:

• the Non-Horizontal Merger Review Guidelines, which outline the principal policy of the PCC with respect to non-horizontal mergers and acquisitions that may have an effect on trade, industry or commerce in the Philippines; and
• the Guidelines for the Motu Proprio Review of Mergers and Acquisitions in Digital Markets, which aim to guide corporations on potential competition issues that arise from mergers or acquisitions occurring in digital markets.

The Non-Horizontal Merger Review Guidelines were issued on 18 May 2023 and outline the factors the PCC takes into account in assessing the effects of non-horizontal mergers on market competition, the legal standards used for its analysis and review, and the framework to be used in determining the impact, effect and potential harm to competition that may arise from non-horizontal mergers.

The Guidelines for the Motu Proprio Review of Mergers and Acquisitions in Digital Markets were issued on 23 October 2023 and aim to provide greater clarity on how the PCC applies the Philippine Competition Act in the context of digital market transactions. They are intended to facilitate discussions and consultations between the PCC and digital market operators to make a preliminary assessment of the competitive effects of a potential transaction in the digital sector.

In its 2022 year-end report, the PCC disclosed that the Competition Enforcement Office completed eight preliminary inquiries in the telecommunications, pharmaceuticals and transportation sectors, four of which became verified complaints that were processed and investigated promptly. These complaints led to investigations into potential cartels and abuses of dominance in those sectors.

The Competition Enforcement Office also focused its enforcement actions on sectors that were crucial during the pandemic, such as e-commerce, energy, health, construction and public utilities. In line with this objective, the Competition Enforcement Office filed two Statements of Objections in the agriculture and food sectors. It also instituted non-adversarial proceedings and gathered three proposals to address conduct in the telecommunications sector.

With respect to M&A transactions, the PCC received seven notifications in 2022, with an aggregate transaction value of PHP320 billion. Three of these transactions were approved. The sectors involved were finance and insurance, information and communication, manufacturing, and transportation and storage. From 2016 to 2022, the PCC received a total of 260 transactions, with an aggregate transaction value of PHP5.16 trillion, most frequently from the manufacturing, financial and insurance activities, real estate, and electricity, gas, steam and air-conditioning supply sectors.

The PCC announced that it will prioritise investigating anti-competitive agreements, emphasising effective detection, prosecution and deterrence. The enforcement efforts of the PCC will focus on key sectors such as food and agriculture, water, energy, electricity, health and pharmaceuticals, telecommunications and e-commerce, with special attention being paid to bid rigging in public procurement. To adapt to the digital economy, the PCC has also introduced new enforcement tools, including a digital forensics lab and an online screening tool for detecting bid rigging. These tools enhance the use of electronic evidence and data analysis to improve case-building and increase cartel prosecutions.