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Watchdog ups M&A reporting trigger

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By Janina C. Lim, Reporter

THE PHILIPPINE Competition Commission will raise next month the threshold values for required notification of mergers and acquisitions (M&As), according to a resolution posted on Thursday on the watchdog’s Web site.

PCC Advisory 2019-001 raises the thresholds to P5.6 billion from P5 billion for “size of persons” (SoP) and to P2.2 billion from P2 billion for the size of transactions (SoT).

The SoP is defined as the aggregate annual gross revenues or value of assets of “the ultimate parent entity of at least one of the acquiring or acquired entities” while SoT pertains to the value of assets or revenues of the acquired entity. When both are met, entities are mandated to notify the PCC of their transactions.




TO PREVENT CONFUSION
The adjustment was in accordance with last year’s PCC Memorandum Circular No. 18-001 which established a system of automatic annual adjustment of these thresholds based on the nominal gross domestic product (GDP) growth of the previous year rounded up to the nearest hundred millions. GDP grew by 6.2% last year, based on constant 2000 prices, and by 10.2% in nominal terms.

“The Commission deemed it more prudent to issue the resolution even though the memorandum circular mandates automatic adjustment of notification thresholds to prevent any confusion as to the determination of the adjusted thresholds based on the formula given under the memorandum circular,” the PCC’s Mergers and Acquisition Office said in a statement sent by mobile phone message.

PCC Chairman Arsenio M. Balisacan said recalibrating the threshold in line with the economy “ensures that the thresholds maintain their real value over time and relative to the size of the economy.”

“The PCC observes that the appetite for mergers and acquisitions within a rapidly growing economy remains high,” the anti-trust chief said in a statement yesterday.

“A well-designed threshold must be reflective of the country’s economic condition, such that the scope of merger control remains faithful to the intent of the law. The rationale for setting a notification threshold is to ensure that M&As that are more likely to substantially lessen competition are subject to compulsory notification and review, and to exclude those that are less likely to pose competition concerns,” Mr. Balisacan explained.

The adjustment marks the second such move since Republic Act No. 10667, or the Philippine Competition Act (PCA), was enacted in 2015 when thresholds started off at P1 billion for both SoP and SoT.

The first adjustment was made in March last year.

The law noted factors to consider when determining the need for an adjustment: structure of the relevant market, degree of integration, access to end-users, technology and financial resources, and other factors affecting the control of a market as provided by the law.

The new thresholds will apply to M&As with definitive agreements executed on or after March 1.

Under the law, the PCC is mandated to review mergers and acquisitions to ensure that these deals will not substantially prevent, restrict or lessen competition in the relevant market.

The country’s antitrust body has reviewed 177 transactions with a combined value of P2.83 trillion to date.

Of this, 161 or 91% have been approved.

Most of these transactions are from manufacturing, finance and insurance, real estate, electricity and gas, transportation and storage sectors.