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Author Atty. Erika B. Paulino, Atty. Melissa Jean G. Hipolito

On October 5, 2020, the Philippine Competition Commission (PCC) issued the Rules for the Implementation of Section 4 (eee) of Republic Act No. 11494, otherwise known as the “Bayanihan to Recover As One Act”, Relating to the Review of Mergers and Acquisitions (PCC Rules).

To recall, on September 11, 2020, the Philippine President signed into law Republic Act No. 11494, otherwise known as the “Bayanihan to Recover as One Act” (Bayanihan 2), which became effective on September 15, 2020. Section 4 (eee) of Bayanihan 2 exempts all mergers and acquisitions with transaction values below Php 50 Billion from compulsory notification to the PCC, if entered into within two years from effectivity of Bayanihan 2 on September 15, 2020.

The recently-issued PCC Rules defined “transaction values” as used under Bayanihan 2 (eee), and provided clarity that “transaction values” refer to both the Size of Person and the Size of Transaction. Thus, a merger or acquisition entered into within two years from effectivity of Bayanihan 2 will still be subject to compulsory notification if the transaction meets the following thresholds:

(A) (Size of Person) The aggregate annual gross revenues in, into or from the Philippines, or 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, is Php 50 Billion or more;

and

(B) (Size of Transaction) The value of the transaction is Php 50 Billion or more, as may be determined by:

(1) the aggregate value of the assets in the Philippines being acquired in the proposed transaction or the gross revenues generated in the Philippines by assets acquired in the Philippines, in case of proposed M&As of assets in the Philippines;

(2) by the aggregate value of the assets in the Philippines of the acquiring entity, or the gross revenues generated in or into the Philippines by assets acquired outside the Philippines, in case of proposed M&As of assets outside the Philippines;

(3) by the aggregate value of the assets in the Philippines of the acquiring entity, or the gross revenues generated in or into the Philippines by assets acquired in the Philippines and any assets acquired outside the Philippines, in case of proposed M&As of assets inside and outside the Philippines; or

(4) by the aggregate value of the assets in the Philippines that are owned by the corporation (or non-corporate entity) or by entities it controls, other than assets that are shares of any of those corporations, or the gross revenues from sales in, into, or from the Philippines of the corporation (or non-corporate entity) or by entities it controls, other than assets that are shares of any of those corporations, in case of a proposed acquisition of voting shares (or interest) of more than 35% (or more than 50% if the acquirer already owns more than 35% before the proposed acquisition) of a corporation (or non-corporate entity).

An acquiring entity in a notifiable joint venture transaction shall also be subject to the notification requirements if either the aggregate value of the assets that will be combined in the Philippines or contributed into the proposed joint venture is Php 50 Billion or more or the gross revenues generated in the Philippines by assets to be combined in the Philippines or contributed into the proposed joint venture is Php 50 Billion or more.

Parties to transactions valued below the compulsory notification thresholds are not precluded to voluntary notify the PCC. A voluntary notification shall, however, constitute a waiver to the exemption from review provided under Bayanihan 2.

In addition to the exemption from compulsory notification, M&As exceeding the Php 50 Billion threshold and entered into within two years from effectivity of Bayanihan 2 on September 15, 2020 are also exempted from the PCC’s power to review M&As motu proprio for a period of one year from September 15, 2020. The PCC, however, declared that M&As entered into during the effectivity of Bayanihan 2, especially those that are likely to substantially lessen competition, may be reviewed by the PCC motu proprio after 1 year from the effectivity of Bayanihan 2.

The PCC Rules also clarified that transactions entered into prior to the effectivity of Bayanihan 2 and exceeding the thresholds applicable as of the date the definitive agreement to the transaction was executed shall still be subject to compulsory notification. Prior to Bayanihan 2, the compulsory notification thresholds are Php 6 Billion (Size of Person) and Php 2.4 Billion (Size of Transaction), where the threshold for Size of Transaction is also applied to joint venture transactions.

With regard to the PCC’s exercise of motu proprio review, the following M&As are not covered by the exemption under Bayanihan 2: (a) transactions entered into prior to the effectivity of Bayanihan 2 which have not yet been subject of PCC review; or (b) transactions pending review by the PCC prior to the effectivity of Bayanihan 2.