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Pre-merger information exchange restricted

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BUSINESSES moving towards merger or acquisition should not exchange confidential business information until their deal has been approved, the Philippine Competition Commission (PCC) said in an April 11 guidance posted recently on its Web site.

In that guidance, PCC’s Mergers and Acquisitions Office said that “[p]rior to the commission’s approval of a transaction, it is crucial for the notifying parties to remain independent firms in the market and refrain from, among others, exchange of confidential business information.”

“A pre-merger exchange of confidential business information between notifying parties may constitute premature consummation of the transaction punishable under Section 17” of Republic Act No. 10667, or the Philippine Competition Act.

“Such pre-merger exchanges can… be regarded as an anti-competitive agreement prohibited under this Act.”

Under that law, a transaction that meets the thresholds and does not comply with notification requirements will be considered void and parties concerned subject to an administrative fine of 1-5% of the value of the deal.

PCC prescribed six measures “to prevent inappropriate dissemination of confidential business information, to ensure that competition is protected during the review process and to safeguard competition in case the merger or acquisition does not take place, is delayed or modified…”




The commission said it “strongly discouraged” notifying parties from consulting or employing the same counsel regarding a transaction, including preparation of notification forms and any other submissions to the PCC.

Authorized representatives and contact persons designated by a notifying party in its notification form must be different and independent from those designated by the other notifying party, it added.

In addition, information necessary for due diligence must be “narrowly tailored and reasonably” related to a specific due diligence or pre-merger integration planning issue.

In cases where confidential business information must be exchanged for due diligence and pre-merger integration planning, parties should employ third-party consultants that limit dissemination and use of such information within the parties’ businesses. “The group of individuals who will assemble, review, and analyze sensitive and other confidential data under certain protocols and prior to regulatory approval or consummation of the deal should not include any personnel responsible for competitive planning, pricing, or strategy,” the guidance added.

Those who will be given access to confidential business information must be properly identified and strictly monitored.

If the counsel discovers sharing of confidential business information not in accordance with these guidelines during the waiting period, such counsel should instruct the parties to stop the information exchange immediately and inform the PCC on how the information was used, and the extent of information exchanged.

As of May 27, the PCC had received 184 merger transactions by local and international companies cumulatively worth P2.86 trillion, approved 171 of them and blocked one deemed anti-competitive. — Janina C. Lim

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