Philippines: Merger Control Comparative Guide

1 Legal and enforcement framework

1.1 Which legislative and regulatory provisions govern merger control in your jurisdiction?

The Philippine Competition Act (10667/2015) (PCA) is the primary statute governing competition and merger control in the Philippines, together with the Implementing Rules and Regulations of Republic Act 10667 (PCA-IRR) and other rules and regulations issued by the Philippine Competition Commission (PCC).

The PCA took full effect in 2017 after a two-year transitional period.

1.2 Do any special regimes apply in specific sectors (eg, national security, essential public services)?

No. The pre-notification merger control regime under the PCA and the PCA-IRR applies to covered transactions regardless of sector. However, the PCC has signed partnership agreements with certain government agencies that oversee regulated sectors (eg, banking, insurance and electric power), with the objective of working together towards a harmonised and efficient regulatory approach to the relevant sector.

1.3 Which body is responsible for enforcing the merger control regime? What powers does it have?

The PCC, created by virtue of the PCA, is the independent quasi-judicial body that is tasked with implementing the national competition policy.

The PCC has original and primary jurisdiction over the enforcement and implementation of the PCA. It has the power, among other things, to:

• review proposed mergers and acquisitions;
• set the thresholds for notification;
• specify the requirements and procedures for notification; and
• upon exercising its powers to review, prohibit mergers and acquisitions that will substantially prevent, restrict or lessen competition in the relevant market.

The PCC also has the power to conduct inquiries and investigate, hear and decide on cases involving any violation of the PCA and other competition laws.

2 Definitions and scope of application

2.1 What types of transactions are subject to the merger control regime?

Mergers and acquisitions may be subject to review by the Philippine Competition Commission (PCC).

The PCC Rules on Merger Procedure define an 'acquisition' as the purchase or transfer of securities or assets, by contract or other means, for the purpose of obtaining control by:

• one entity of the whole or part of another entity;
• two or more entities over another entity; or
• one or more entities over one or more other entities.

A 'merger', on the other hand, refers to the joining of two or more entities in an existing entity or to form a new entity. This includes joint ventures, whether incorporated or not.

2.2 How is 'control' defined in the applicable laws and regulations?

The Implementing Rules and Regulations of Republic Act 10667 (PCA-IRR) define 'control' as "the ability to substantially influence or direct the actions or decisions of an entity, whether by contract, agency or otherwise".

The Philippine Competition Act (PCA) and the PCA-IRR provide that control is presumed to exist when the parent owns, directly or indirectly through subsidiaries, more than one-half of the voting power of an entity, unless in exceptional circumstances it can clearly be demonstrated that such ownership does not constitute control.

Control also exists even when an entity owns one-half or less of the voting power of another entity if:

• there is power over more than one-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 exists ownership over, or the right to use all or a significant part of, the assets of the entity; or
• there exist rights or contracts which confer decisive influence on the decisions of the entity.

2.3 Is the acquisition of minority interests covered by the merger control regime, and if so, in what circumstances?

Generally, no – unless the resulting interest exceeds 35% and the transaction meets both the 'size of party' and the 'size of transaction' tests of the PCC.

2.4 Are joint ventures covered by the merger control regime, and if so, in what circumstances?

Yes, provided that they meet the notification existing threshold set by the PCC – that is, the 'size of party' and the 'size of transaction' tests. For joint ventures, these are as follows:

• Size of party: 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 those of all entities that the UPE controls, directly or indirectly, exceeds PHP 7 billion. In the formation of a joint venture (other than in connection with a merger or consolidation), the contributing entities shall be deemed acquiring entities and the joint venture shall be deemed the acquired entity.
• Size of transaction: The value of the transaction exceeds PHP 2.9 billion. Rule 4, Section 3(d) of the PCA-IRR provides that a joint venture is notifiable if either:
• • the aggregate value of the assets that will be combined in the Philippines or contributed into the proposed joint venture exceeds PHP 2.9 billion; or
  • The gross revenues generated in the Philippines by assets to be combined in the Philippines or contributed into the proposed joint venture exceed PHP 2.9 billion.
• In determining the assets of the joint venture, the following are included:
• • all assets which any entity contributing to the formation of the joint venture has agreed to transfer, or for which agreements have been secured for the joint venture to obtain at any time, whether or not such entity is subject to the requirements of the PCA; and
  • any credit or other obligations of the joint venture which any entity contributing to its formation has agreed to extend or guarantee, at any time.

2.5 Are foreign-to-foreign transactions covered by the merger control regime, and if so, in what circumstances?

A transaction is notifiable if it meets both the size of party and the size of transaction thresholds set by the PCC (see question 2.6). Under the PCC Guidelines on the Computation of Merger Notification Thresholds, sales with a Philippine nexus will be included in calculating the value of the gross revenues for the purposes of these tests.

The guidelines provide as follows:

• "The determination on whether the gross revenues from sales are considered to be 'in', 'into' and 'from' the Philippines depends on the location where competition with alternative suppliers occur";
• "Usually, the said sales take place where the characteristic or representative action under the contract in question is to be performed or executed"; and
• "Online transactions for the sale of goods have a Philippine nexus if the goods are to be delivered within the Philippines or the contract of sale is perfected in the Philippines but delivery will take place outside the Philippines."

In cases where the size of party and size of transaction thresholds are exceeded by a transaction with a Philippine nexus, the deal will be considered notifiable notwithstanding the fact that it is a foreign-to-foreign transaction.

2.6 What are the jurisdictional thresholds that trigger the obligation to notify? How are these thresholds calculated?

In order to determine whether a transaction should be notified to the PCC, one should refer to the thresholds under Rule 4 of the PCA-IRR and the latest PCC Memorandum Circular on notification thresholds, considering that the PCA grants the PCC the power to set the thresholds for notification. The PCC provides as follows in relation to the size of party and the size of transaction thresholds:

• The size of party threshold pertains to the computation of the aggregate value of the assets in the Philippines, and revenues from sales in, into or from the Philippines, of the filing UPE, including all entities that it controls, directly or indirectly.
• The size of transaction threshold pertains to the computation of the value of the assets being acquired or/and the gross revenues generated by the assets being acquired, or of the acquired entity and entities it controls, depending on the type of transaction, as provided under Rule 4, Section 3(b) and (d), as amended.

Rule 4, Section 3 of the PCA-IRR provides that the parties to a merger or acquisition must provide when the transaction meets both the size of party and size of transaction thresholds, as follows.

The size of party is met where the aggregate annual gross revenues in, into or from the Philippines, or the value of the assets in the Philippines, of the UPE of at least one of the acquiring or acquired entities, including all entities controlled by the UPE, directly or indirectly, exceeds PHP 7 billion.

The size of transaction threshold is met where the value of the transaction exceeds PHP 2.9 billion and any of the following criteria are satisfied:

• with respect to a proposed merger or acquisition of assets in the Philippines, either:
• • the aggregate value of the assets being acquired in the proposed transaction exceeds PHP 2.9 billion; or
  • the gross revenues generated in the Philippines by assets acquired in the Philippines exceed PHP 2.9 billion;
• with respect to a proposed merger or acquisition of assets outside the Philippines:
• • the aggregate value of the assets in the Philippines of the acquiring entity exceeds PHP 2.9 billion; and
  • the gross revenues generated in the Philippines by those assets exceed PHP 2.9 billion;
• with respect to a proposed merger or acquisition of assets inside and outside the Philippines:
• • the aggregate value of the assets in the Philippines of the acquiring entity exceeds PHP 2.9 billion; and
  • the aggregate gross revenues generated in the Philippines by assets acquired both inside and outside the Philippines collectively exceed PHP 2.9 billion; and
• with respect to a proposed acquisition of voting shares of a corporation or an interest in a non-corporate entity:
• • either 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, exceed PHP 2.9 billion; or
  • the gross revenues from sales in, into or from the Philippines of the corporation or non-corporate entity, or entities it controls, other than assets that are shares of any of those corporations, exceed PHP 2.9 billion; and
  • either, as a result of the proposed acquisition of the voting shares of a corporation, the entity or entities acquiring the shares, together with their affiliates, will own voting shares of the corporation that, in aggregate, carry more than 35% or, where the entity or entities already own more than 35%, 50% of the votes attached to all the corporation's outstanding voting shares; or
  • as a result of the proposed acquisition of an interest in a non-corporate entity, the entity or entities acquiring the interest, together with their affiliates, would hold an aggregate interest in the non-corporate entity that entitles them to receive more than 35% or, where the entity or entities already own more than 35%, 50% of the profits of the non-corporate entity or the assets of that non-corporate entity on its dissolution.
  • Where an entity has already exceeded the 35% threshold for an acquisition of voting shares or the acquisition of an interest in a non-corporate entity, another notification will be required if the same entity will exceed the 50% threshold after making a further acquisition of either voting shares or an interest in a non-corporate entity.

In the case of a notifiable joint venture transaction, an acquiring entity will 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 exceeds PHP 2.9 billion; or
• the gross revenues generated in the Philippines by assets to be combined in the Philippines or contributed to the proposed joint venture exceed PHP 2.9 billion.

In determining the assets of the joint venture, the following shall be included:

• all assets which any entity contributing to the formation of the joint venture has agreed to transfer, or for which agreements have been secured for the joint venture to obtain at any time, whether or not such entity is subject to the requirements of the act; and
• any amount of credit or any obligations of the joint venture which any entity contributing to the formation has agreed to extend or guarantee at any time.

A merger or acquisition consisting of successive transactions, or the acquisition of parts of one or more entities, which will take place within a one-year period between the same parties, or any entity they control or are controlled by, or are under common control with, will be treated as one transaction. If a binding preliminary agreement provides for such successive transactions or acquisitions, the entities must provide notification on the basis of that preliminary agreement. If there is no binding preliminary agreement, notification must be made when the parties execute the agreement relating to the last transaction which, when taken together with the preceding transactions, satisfies the above thresholds.

For the purposes of calculating the notification thresholds:

• the aggregate value of assets in the Philippines will be as stated in the last regularly prepared balance sheet or the most recent audited financial statements in which those assets are accounted for; and
• the gross revenues from sales of an entity will be the amount stated in the last regularly prepared annual statement of income and expense of that entity.

The above threshold amounts were set pursuant to Commission Resolution No. 04-2023 dated 16 February 2023. Further information can be found in the Guidelines on the Computation of Merger Notification Thresholds, available on the PCC's website.

2.7 Are any types of transactions exempt from the merger control regime?

Yes. The following transactions are generally exempt from the compulsory notification requirements:

• internal restructurings within a group of companies, subject to the conditions set out in PCC Clarificatory Note 16-002 dated 16 September 2016;
• merger or acquisition involving several entities controlled by the same natural person(s) is not covered by compulsory notification if there is no change in control post-transaction as set out in PCC Clarificatory Note 18-001 dated 21 September 2018;
• joint ventures of private entities formed for unsolicited public-private partnership (PPP) projects pursuant to the Build-Operate-Transfer (BOT) Law, subject to the conditions and procedures set forth in PCC Memorandum Circular 20-002 dated 2 July 2019; and
• joint ventures of private entities formed for solicited public-private partnership projects pursuant to the BOT Law and its implementing rules and regulations, subject to the conditions and procedures set forth in PCC Memorandum Circular 19-001 dated 16 June 2020.

3 Notification

3.1 Is notification voluntary or mandatory? If mandatory, are there any exceptions where notification is not required?

Section 17 of the Philippine Competition Act (PCA) provides for a mandatory pre-notification regime or notification prior to the consummation of covered transactions. The parties to a transaction that meets the thresholds set out in Section 3 of Rule 4 of the Implementing Rules and Regulations of Republic Act 10667 (PCA-IRR) must notify the Philippine Competition Commission (PCC) within 30 days of signing of the definitive agreement for the transaction.

If deemed necessary, the PCC may likewise investigate transactions on its own initiative.

The PCC has issued a number of circulars providing for certain exempt transactions, as follows:

• internal restructurings within a group of companies, subject to the conditions set out in PCC Clarification Note 16-002 dated 16 September 2016;
• merger or acquisition involving several entities controlled by the same natural person(s) is not covered by compulsory notification if there is no change in control post-transaction as set out in PCC Clarificatory Note 18-001 dated 21 September 2018;
• joint ventures of private entities formed for unsolicited public-private partnership (PPP) projects pursuant to the Build-Operate-Transfer (BOT) Law, subject to the conditions and procedures set forth in PCC Memorandum Circular 20-002 dated 2 July 2019;
• joint ventures of private entities formed for solicited public-private partnership projects pursuant to the BOT Law and its implementing rules and regulations, subject to the conditions and procedures set forth in PCC Memorandum Circular 19-001 dated 16 June 2020.

3.2 Is there an opportunity or requirement to discuss a planned transaction with the authority, informally and in confidence, in advance of formal notification?

Yes, the parties may request a pre-notification consultation with the Mergers and Acquisitions Office of the PCC.

Under the PCC Merger Rules, the parties must submit the following information when requesting a pre-notification consultation:

• the names and business contact information of the entities concerned;
• the type of transaction; and
• the markets covered or lines of businesses by the proposed transaction.

The parties may also submit a draft notification form.

During the consultation, to facilitate their assessment on whether a potential merger is notifiable, the parties may:

• seek clarification on the information required under the form;
• inquire as to any additional information that may be required for the review;
• discuss the identified markets; and
• seek guidance on the thresholds set out in Rule 4 of the PCA-IRR.

The parties are then given non-binding advice by the PCC on the specific information that is required in the form. However, the PCC will not give an opinion on whether the transaction is likely to lead to a substantial lessening of competition.

3.3 Who is responsible for filing the notification?

The pre-acquisition ultimate parent entities (UPEs) of each party to a transaction are responsible for filing the notifications to the PCC. The UPEs may also authorise another entity to file the notification form on their behalf.

The PCA-IRR defines a 'UPE' as the legal entity that directly or indirectly controls a party to the transaction and is not controlled by any other entity.

3.4 Are there any filing fees, and if so, what are they?

Yes. The filing fees for notification and review of mergers and acquisitions pursuant to PCC Memorandum Circular 17-002 dated 15 June 2017 are as follows:

• Notification filing and Phase I review: PHP 250,000; and
• Phase II review: 1% of 1% of the value of transaction, which may not be less than PHP 1 million or exceed PHP 5 million.

All fees that are set out in the circular must be paid by the acquiring entity.

3.5 What information must be provided in the notification? What supporting documents must be provided?

The notifying parties must file a sworn notification form with the PCC, using the most recent version available on its website.

The notification form sets out the required information and appendices which must be submitted, including the following:

• general information on the acquiring and acquired entities;
• contact persons and details, including external counsel;
• the parties to the transaction and their UPEs, including:
• • the name and address of each entity directly or indirectly controlled by the filing UPE;
  • a description of the domestic and international operations of the notifying group; and
  • a diagram or chart showing the entire notifying group before and after the transaction;
• information on the proposed transaction, including:
• • the size of party, or the gross revenues from sales in, into or from the Philippines, of the UPE's entire notifying group/aggregate value of assets in the Philippines owned by the UPE's entire notifying group;
  • for mergers or acquisitions of assets in the Philippines, the aggregate value of assets in the Philippines to be acquired/gross revenues generated in the Philippines by assets to be acquired in the Philippines;
  • for acquisitions of shares, the aggregate value of assets in the Philippines owned by the acquired entity and entities it controls, or the gross revenues from sales in, into or from the Philippines of the acquired entity and entities it controls, and the total percentage of voting shares currently held and to be held as a result of the acquisition;
  • for joint ventures, the aggregate value of assets to be combined in or contributed to the proposed joint venture by the filing acquiring or acquired entity;
• a summary of the transaction, including:
• • the assets, shares or other interests being acquired, and whether they are being purchased, combined or otherwise transferred;
  • the consideration to be given and received by each party (eg, cash, assets, shares, interest), and how this was determined or calculated (including the basis the calculation and a copy of the document/s used to calculate the consideration);
  • the intended structure of ownership and control after completion of the transaction;
  • the business objectives that the parties intend to achieve through the proposed transaction;
  • the major events required to bring about the completion of the transaction; and
  • if the proposed transaction is an acquisition of assets or shares, all general classes of the assets to be acquired or assets of the acquired entity and entities it controls, respectively (eg, cash, land, intellectual property, merchandising inventory, manufacturing plants, distribution facilities, retail stores);
• a description of how the operations of the filing notifying group would proceed absent the proposed transaction;
• if the transaction is to be a joint venture:
• • the name and business address of the joint venture;
  • a description of the business the joint venture will engage in;
  • a description of the principal assets of the joint venture and their location;
  • the contributions that each entity forming the joint venture has agreed to make, including a description of the assets and the value of each (including the basis on which this valuation was calculated); and
  • the products or services to be supplied by the joint venture and the geographic areas in which it will supply these goods and services;
• each country or jurisdiction in which a notification of the proposed transaction has been or, to the best of the knowledge of the notifying party, will be filed; and where applicable, the date on which each country or jurisdiction was notified and the status as of the date of submission of the notification;
• the operations of the notifying parties in the Philippines, including all domestic and foreign entities within the notifying group that have assets in the Philippines or generate revenues from sales in, from or into the Philippines. For each entity, the following should be provided:
• • its business address;
  • a brief description of the nature of the business; and
  • each entity that holds at least 10% of the outstanding voting shares or non-corporate interest of the entities listed herein. For limited partnerships, only the general partner(s), regardless of percentage held, should be listed;
  • the lines of business that it operated in the most recent year (identify the year);
  • the revenues derived in each line of business in the Philippines in the most recent year (specify the business unit that generated the reported revenues;
  • a list of the principal categories of product(s) and/or service(s) in each line of business (including product or service brochures if available; and
  • the provinces or cities in the Philippines where the entity supplies its products and/or services;
• horizontal relationships – a list of entities within the acquiring entity's notifying group that operated in the same line of business (or in the case of a joint venture, will operate in the same line of business) as the acquired entity and the entities it controls (directly or indirectly), in any part of the Philippines, in the most recent year. For each overlapping line of business, the following should be provided:
• • a list of all products and services provided by each party, segregated by sales channel (including variations and size formats of the product where applicable);
  • monthly sales (volume and revenues) for each product and service for the last three years;
  • the price (wholesale and/or retail) of each product or service and the corresponding unit cost (or profit margin if unit cost is not available) for the last three years, and an explanation of how these variables were computed;
  • the proposed candidate market(s) that may be affected by the proposed transaction, taking into account the product and geographic dimensions;
  • the estimated market share(s) of each party to the transaction in each proposed candidate market;
  • the competitors in each proposed candidate market and the estimated market share of each;
  • a diagram(s) of the supply chain(s) of the filing notifying group for each candidate relevant market, accounting for how the product and/or service reaches the consumer;
  • marketing and strategic plan(s) for the previous three years and the following three years, for each candidate relevant market;
  • studies, surveys, analyses and reports obtained or procured by the notifying group for the purpose of researching, evaluating or analysing the market(s) identified; and
  • the provinces or cities in the Philippines where the products or services are supplied;
• for every proposed candidate market in which horizontal relationships have been identified, the top 10 customers and top 10 suppliers of each such entity, separately by sales and volume, in, into or from, the Philippines (for the most recent year), including:
• • the customer or supplier's name and address;
  • a contact person at the company;
  • the telephone number of the contact person; and
  • the annual volume and the value of sales to each customer in the most recent year, or the annual volume and the value of purchases from each supplier in the most recent year;
• vertical relationships – the entities within the notifying group that are or will be in a vertical relationship with any entity in the notifying group of the other party to the transaction in a market in any part of the Philippines in the most recent year. For each vertical relationship, the market(s) in which the relationship exists should be identified and the following information provided:
• • a list of all products and services provided by each party, segregated by sales channel, including variations and size formats of the product where applicable;
  • monthly sales (volume and revenues) for each product and service for the last three years;
  • the price (wholesale and/or retail) of each product and service and the corresponding unit cost (or profit margin if unit cost is not available) for the last three years, including an explanation of how these variables were computed;
  • the estimated market share of each entity within the notifying group that has a vertical relationship with the notifying group of the other party to the transaction (if a supplier);
  • other economic participants, the market(s) in which they operate and the estimated market share(s) of each such economic participant in the market(s) identified (if a supplier);
  • a diagram(s) of the supply chain(s) of the notifying group for every market in which the vertical relationship exists, accounting for how the product/service reaches the consumer;
  • marketing and strategic plan(s) of the notifying group for the previous three years and the following three years for each market in which the vertical relationship exists;
  • studies, surveys, analyses and reports obtained or procured by the notifying group for the purpose of researching, evaluating or analysing the market(s) identified; and
  • the provinces or cities in the Philippines in which the products or services are supplied;
• if any entity within the notifying group is a buyer or seller in one or more markets in which a vertical relationship exists, for each such market, the top 10 suppliers (if a buyer) or the top 10 customers (if a seller) of each such entity, separately by sales and volume, in, into or from, the Philippines (for the most recent year), including:
• • the customer or supplier's name and address;
  • a contact person at the company;
  • the telephone number for the contact person; and
  • the annual volume and the value of sales to each customer in the most recent year, or the annual volume and the value of purchases from each supplier in the most recent year;
  • prior, contemporaneous or related acquisitions of the notifying group over the past five years, including:
  • the name of the acquired entity (ie, the entity whose voting shares, non-corporate interests or assets were or are being acquired);
  • the office address of the acquired entity prior to the acquisition;
  • a description of how the voting shares, non-corporate interests or assets were or are to be acquired;
  • the consummation date of the acquisition; and
  • the lines of business of the acquired entity;
• a copy of the signed binding preliminary agreement or definitive agreement, or if no signed definitive agreement is available as of the date of filing, a copy of the most recent draft of the definitive agreement;
• copies of all non-compete agreements;
• the articles of incorporation, bylaws and general information sheet or equivalent document of the filing UPE and the acquiring or acquired entity;
• a secretary's certificate that the proposed transaction has been approved by the (majority) shareholders of the acquired/acquiring entity, as applicable;
• studies, surveys, analyses and reports that were prepared or received by an officer or director of any of the entities in the notifying group – or in the case of an unincorporated entity, an individual who serves in a similar capacity – for the purpose of evaluating or analysing the proposed transaction with respect to market shares, competition, competitors, markets, potential for sales growth or expansion into new products/services or geographic regions;
• confidential information memoranda, bankers' books and other third-party consultant materials and synergy documents related to the sale of the target or assets, including the date on which each document was prepared;
• ordinary course documents (eg, board presentations, memorandum to the board or key officers, email correspondence and other similar documents) relating to or discussing market position, competition, competitors, potential for sales or revenue growth or expansion, in the identified horizontal and vertical markets, in the most recent year;
• a copy of the most recent annual report for the filing UPE, the acquired or acquiring entity (if different from the UPE), and each entity in relation to which there is a horizontal relationship (or, if the annual report is not available or if the financial statements are different from those contained in the report, audited financial statements relating to the principal businesses of the entity for its most recently completed fiscal year);
• an original copy of an affidavit attesting to the fact that a binding preliminary agreement or definitive agreement has been signed, and that the filing UPE and the acquiring or acquired entity have a good-faith intention of completing the proposed transaction;
• an original copy of the authorisation in favour of the person signing the notification form, who must be a general partner of a partnership, an officer or director of a corporation, or a natural person (or such natural person's legal representative);
• an electronic storage device which contains electronic copies of the form and its appendices; and
• for the acquiring group only, an abstract of the proposed transaction, with a description of the parties. The abstract will be posted on the PCC's website upon the parties' receipt of the PCC's decision in Phase I.

For further clarifications, parties may refer to the Instructions to the PCC Notification Form (as of 9 July 2019), available on the PCC's website.

3.6 Is there a deadline for filing the notification?

Yes, the parties must notify the PCC within 30 days of signing the definitive agreements.

3.7 Can a transaction be notified prior to signing a definitive agreement?

Yes. The PCA-IRR states that: "The parties may notify, on the basis of a binding preliminary agreement in any form, such as a memorandum of agreement, term sheet, or letter of intent. Each of the acquired and acquiring entities must submit an affidavit with their Forms, attesting to the fact that a binding preliminary agreement has been executed and that each party has an intention of completing the proposed transaction in good faith."

Further, the notification form requires the parties to submit a copy of the most recent draft of the definitive agreement as an appendix to the form. This must be accompanied by an undertaking to submit the signed definitive agreement within two days of signing, identifying any changes to the draft agreement that were implemented in the signed agreement.

3.8 Are the parties required to delay closing of the transaction until clearance is granted?

Yes. If the transaction is notifiable, the parties must delay closing of the transaction until either:

• express clearance has been issued; or
• the waiting periods or the relevant periods for merger review have expired.

3.9 Will the notification be publicly announced by the authority? If so, how will commercially sensitive information be protected?

The PCC will publicly announce the notification upon the notifying parties' receipt of the PCC decision in the Phase I review. The abstract of the transaction (submitted by the parties) will be posted on the PCC's website.

Under the PCA-IRR, if additional information or documents are requested by the PCC for the purpose of a Phase II review, the PCC will publish on its website the following information relating to the notification on the basis of the form submitted by the parties:

• the names of the involved entities;
• the type of transaction;
• the markets covered or lines of businesses by the proposed merger or acquisition; and
• the date on which the complete notification was received.

The PCA-IRR further provides that: "When publishing this information, the Commission shall take into account the legitimate interest of the entities regarding the protection of their trade secrets and other confidential information." Prior to posting, the PCC generally gives parties the opportunity to request the confidentiality of certain information in accordance with the PCC Rules of Procedure.

However, the PCC may contact third parties – such as customers, suppliers or competitors – by issuing market calls or inquiry 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 and centres for information, among others. For this purpose, the PCC may disclose to such third parties the fact of notification of the proposed transaction.

Under Section 9.5 of the PCC Merger Rules, the following information is 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 disclosure would cause harm to the business;
• information that reflects the merging parties' views of how the competitive effects of the merger could be analysed; and
• information that is general knowledge within the industry or is likely to be verified by any diligent market participant or trade, finance or economic expert.

4 Review process

4.1 What is the review process and what is the timetable for that process?

Section 17 of the Philippine Competition Act (PCA) provides that the parties to covered transactions are prohibited from consummating their agreement until 30 days after providing notification to the Philippine Competition Commission (PCC). Should the PCC deem this necessary, it may request further information before the expiration of this 30-day period, in which case the period within which the agreement may not be consummated will be extended for an additional 60 days.

Rule 4 of the Implementing Rules and Regulations of Republic Act 10667 (PCA-IRR) implements the waiting periods under Section 17 of the PCA. Before proceeding with merger review, the PCC, within 15 days of notification, will determine whether the form has been completed in accordance with its rules. If the form is found to be sufficient for the purpose of proceeding with the Phase I review, the PCC will inform the parties through a notice of sufficiency. Otherwise, the PCC will issue a notice of deficiency and give the parties 15 days to submit the deficient information. The PCC will then review the submission until the form, based on its determination, is sufficient.

The merger review phases are as follows:

• Phase I review: Upon the issuance of a notice of sufficiency and payment of the filing fee, the Phase I review commences and runs for a maximum period of 30 days. Before this period ends, the PCC will inform the parties if a more comprehensive and detailed analysis of the transaction is required under Phase II, and request other information and/or documents from parties.
• Phase II review: The extended merger review under Phase II runs for a maximum period of 60 days. The additional period begins on the day after service of the Phase 2 Notice.

If the parties fail to provide information requested by the PCC within 15 days of receipt of this request, the notification will be deemed expired and the parties must refile their notification. If the parties wish to submit the requested information beyond this 15-day period, they may request an extension of time using the model request and waiver available on the PCC's website. The period for review will thus be extended accordingly.

If the above periods have expired and no decision has been issued for whatever reason, the merger or acquisition will be deemed approved and the parties may proceed to implement or consummate it.

The PCA-IRR provides that the PCC at its discretion may terminate a waiting period prior to its expiration.

4.2 Are there any formal or informal ways of accelerating the timetable for review? Can the authority suspend the timetable for review?

The PCC Merger Rules allows the parties to propose commitments to remedy, mitigate or prevent any competition concerns identified by the PCC. After review and consideration, the PCC will adopt a commitment decision once it has decided to accept the commitments, which will terminate the waiting periods. The parties can then proceed to consummate the transaction.

The proposed commitments may be submitted at any stage of the Phase I or II review. Upon submission of a proposed commitment, the review periods will be suspended for 60 days. However, the PCC may shorten this period or extend it for up to 30 days.

In addition, the Merger Rules encourage parties to submit the following documents and information in addition to those required under the notification form:

• a list of all products that are manufactured, marketed or sold and products in development;
• the prices of all products that are manufactured, marketed or sold;
• a list of the types of reports the company prepares on a regular basis;
• an organisation chart to help the review team identify potential document custodians or candidates for interviews;
• strategic and marketing plans from before the three-year period required under the notification form, to capture pivotal business developments or historic events;
• a data map to identify the types of data that the organisation generates and stores and the relationships between the organisation's different data sets;
• internal reports and communications relating to the merger and/or products or services being acquired; and
• all other information that could assist PCC in assessing the proposed merger and the markets involved.

In accordance with the Merger Rules, the waiting periods will be suspended in the following instances:

• The issue of a notice of deficiency upon filing of the notification form will suspend the 15-day sufficiency period or the period in which the PCC determines the sufficiency of the submitted notification; and
• The submission of a merger party of a waiver of 30 and 90-day periods of review, in connection with any request for an extension to submit the requested information beyond the period specified by the PCC and other requests as provided in the Merger Rules.

See question 4.3 for details of the PCC's expedited merger review process.

4.3 Is there a simplified review process? If so, in what circumstances will it apply?

Yes. On 28 May 2019, the PCC approved and adopted the PCC Rules on Expedited Merger Review. These rules provide for a simplified notification and review of certain types of transactions which, based on the PCC's experience, are less likely to substantially prevent, restrict or lessen competition in their relevant markets.

Transactions that meet the following criteria qualify for expedited review:

• There are no actual or potential horizontal or vertical relationship in the Philippines between the acquiring and the acquired entity notifying groups;
• The merger is a global transaction where the acquiring and the acquired entities identified in the definitive agreement are foreign entities (foreign parents), and their subsidiaries in the Philippines act merely as manufacturers or assemblers of products, with at least 95% of such products exported to the foreign parents, subsidiaries, affiliates or third parties located outside the country, provided that the remaining 5% product sales in a market in the Philippines are minimal in relation to the entirety of that market;
• The relevant geographic market of the merger is global and the acquiring and acquired entities have a negligible or limited presence in the Philippines; or
• The transaction involves a joint venture, whether incorporated or not, that is formed purely for the construction and development of a residential and/or commercial real estate development project.

The parties are strongly encouraged to have a pre-notification consultation with the PCC prior to notification under expedited review.

4.4 To what extent will the authority cooperate with its counterparts in other jurisdictions during the review process?

Neither the PCA, the PCA-IRR nor the Merger Procedure Rules contain a cooperation provision involving the PCC and its counterparts in other jurisdictions. We have yet to see the PCC reach out to foreign antitrust bodies in the process of its merger review.

4.5 What information-gathering powers does the authority have during the review process?

At any time during the review, the PCC may require the parties to provide additional data, information or documents to those submitted upon notification.

If the PCC deems it necessary, it may also conduct site visits or inspections of the business premises of the parties, their customers and/or their competitors, in order to better understand issues such as:

• how products are manufactured, distributed or sold;
• how services are rendered; or
• the nature of competition in the market.

Additionally, the PCC may contact third parties – such as customers, suppliers or competitors – by issuing market calls or inquiry 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.

Finally, the PCC has the power to require a party to provide information or documents, or to testify, through the issuance of subpoena duces tecum and/or subpoena ad testificandum.

4.6 Is there an opportunity for third parties to participate in the review process?

The PCC may contact third parties – such as customers, suppliers or competitors – by issuing market calls or inquiry 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.

4.7 In cross-border transactions, is a local carve-out possible to avoid delaying closing while the review is ongoing?

While not explicit in the rules of the PCC, local carve-outs should be possible, as a Philippine nexus is essential in applying the size of party and size of transaction tests for purposes of determining whether a transaction is notifiable.

4.8 What substantive test will the authority apply in reviewing the transaction? Does this test vary depending on sector?

In 2018, the PCC released its Merger Review Guidelines, which outline the principal analytical techniques, practices and enforcement policies of the PCC with respect to mergers and acquisitions that may have a direct, substantial and reasonably foreseeable effect on trade, industry or commerce in the Philippines. According to the guidelines, such techniques, practices and enforcement policies are modelled on the International Competition Network (ICN) Recommended Practices for Merger Analysis, which in turn are derived from the ICN Merger Guidelines Workbook, and on common practices across member jurisdictions, tailored to apply to Philippine commercial and legal practices and made consistent with the PCA and the PCA-IRR.

The guidelines apply uniformly across all sectors. However, the PCC has signed partnership agreements with other government agencies overseeing regulated sectors (eg, banking, insurance and electric power), with the objective of working together towards a harmonised and efficient regulatory approach concerning the specific regulated sector.

4.9 Does a different substantive test apply to joint ventures?

No.

4.10 What theories of harm will the authority consider when reviewing the transaction? Will the authority consider any non-competition related issues (eg, labour or social issues)?

As a general guiding principle, the PCC is empowered to prohibit transactions that will "substantially prevent, restrict, or lessen competition in the relevant market" (SLC).

The PCC Merger Review Guidelines discuss two theories that provide the framework for assessing the effects of a transaction and determining whether it could lead to an SLC. Section 7 discusses 'unilateral effects' and 'coordinated effects' as the two primary theories of harm which describe possible changes in the market arising from the transaction, any impact on competition and expected harm to consumers, as compared with the situation likely to arise without the transaction.

Further, according to the guidelines, the PCC generally adopts the prevailing conditions of competition or the pre-merger situation as the counterfactual against which to assess the impact of the merger. Arrangements and agreements entered into by the parties which restrict their freedom of action in the market, as well as efficiencies, will be included in the PCC's merger analysis.

The status of a failing firm as a merger party and how failing firms may be exempted from prohibition are considered in Section 10 of the Merger Review Guidelines.

5 Remedies

5.1 Can the parties negotiate remedies to address any competition concerns identified? If so, what types of remedies may be accepted?

Yes. The Philippine Competition Commission (PCC) Merger Rules allow parties to propose commitments that will remedy, mitigate or prevent competition concerns identified by the PCC. As per the PCC Merger Review Guidelines, commitments can be either structural or behavioural.

The Merger Review Guidelines discuss possible remedies as follows:

• Structural remedies are measures that directly alter market structure and address issues that give rise to competition problems. Basic forms include:
• • divestitures (the forced sale of business units or assets, either in full or in part);
  • licensing (compulsory licensing of legal rights, usually IP rights);
  • rescission (undoing a completed transaction); and
  • dissolution (closing down a legal entity).
• Behavioural remedies are measures that directly alter the behaviour of an entity. The PCC may also impose behavioural remedies to prevent a merged entity from behaving anti-competitively.
• Structural remedies may also be supported by behavioural remedies. For instance, in order to ensure that a partial divestment remedy will lead to a situation where a viable and effective competitor will emerge, the merged entity may be prohibited in the interim from communicating with former clients of the divested business.

5.2 What are the procedural steps for negotiating and submitting remedies? Can remedies be proposed at any time throughout the review process?

Proposed commitments may be submitted at any stage of the Phase I or II review. Proposals for commitments once the PCC has rendered a decision are not allowed.

Upon submission of a proposed commitment, the review periods will be suspended for a period of 60 days. However, the PCC may shorten this commitment review period or extend it for a maximum of 30 days. If the commitment review period expires without the PCC's acceptance of the proposed commitments, the Phase I or II review shall resume.

The general steps in proposing voluntary commitments, as outlined in the PCC Merger Rules, are as follows:

• The PCC will confer with the parties to discuss the proposed commitments.
• Where the PCC considers that the proposed commitments are a suitable remedy, it may decide to consult stakeholders or the public and issue an invitation to comment on its website. It may also approach and interview third parties.
• If the PCC decides that changes to the commitments are needed in light of the responses to the consultation, it will discuss those changes with the parties. Minor changes do not require further consultation.
• The PCC may consider and impose alternative remedies, notwithstanding the parties' proposals.
• The PCC will adopt a commitment decision once it has decided to accept the commitments of the parties.

Once the PCC has issued a commitment decision, the party that provided the commitment may apply to the PCC to vary, substitute or release it from the commitment in accordance with the following rules:

• The written application must contain the following:
• • a description of the terms of the proposed new commitment;
  • an explanation of the impact which it will have on the competition concerns;
  • for applications for release, an explanation of whether the competition concerns sought to be addressed by the commitment from which the party is seeking release still exist; and
  • the full contact details of the main competitors, customers and clients of the party that is subject to the commitment.
• All explanations should be accompanied by relevant supporting documents and certified under oath by an authorised representative of the party.

5.3 To what extent have remedies been imposed in foreign-to-foreign transactions?

As far as we are aware, the PCC has thus far imposed remedies only involving the local nexus of foreign-to-foreign transactions.

6 Appeal

6.1 Can the parties appeal the authority's decision? If so, which decisions of the authority can be appealed (eg, all decisions or just the final decision) and what sort of appeal will the reviewing court or tribunal conduct (eg, will it be limited to errors of law or will it conduct a full review of all facts and evidence)?

Yes. The parties may file a motion for reconsideration of a decision, order or resolution of the Philippine Competition Commission (PCC) within 15 days of receipt thereof, based on 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 pending motion for reconsideration will generally stay the order, ruling or decision sought to be reconsidered.

Final orders and decisions of the PCC may be appealed to the Court of Appeals in accordance with the Rules of Court. The appeal, in which the PCC will be included as a party respondent, will not generally stay the final order or decision sought to be reviewed, unless the Court of Appeals directs otherwise (upon the motion of a party and/or under such terms and conditions it may deem just).

6.2 Can third parties appeal the authority's decision, and if so, in what circumstances?

No. Only the parties to the transaction can appeal the PCC's decision.

7 Penalties and sanctions

7.1 If notification is mandatory, what sanctions may be imposed for failure to notify? In practice, does the relevant authority frequently impose sanctions for failure to notify?

Under the Philippine Competition Act (PCA), the Philippine Competition Commission (PCC) may impose a fine of between 1% and 5% of the value of the transaction for failure to notify the PCC. The PCC Merger Rules provide that the basic amount of the fine for this violation is 3% of the value of the transaction, which the PCC may adjust upwards or downwards if warranted by aggravating or mitigating circumstances respectively.

For this purpose, the value of the transaction will be based on the following, whichever is higher:

• the aggregate value of the assets in the Philippines that are the subject of the proposed transaction or owned by the acquired corporation, including entities it controls; or
• the gross revenues generated by assets that are the subject of the proposed transaction or from sales in, into or from the Philippines of the acquired corporation, including entities it controls.

In calculating the value of the above, the PCC may determine the value of assets or gross revenues on the basis of the partial figures it has obtained and any other information which it regards as relevant and appropriate, including:

• the most recent audited financial statements; or
• the last regularly prepared balance sheet or annual statement of income and expense.

The PCC may also impose a fine for failure to notify within the notification period in the amount of between 1% and 5% of the value of the transaction for the first 30 days of delay or fraction thereof. The fine will be increased by 1% of 1% of the value of the transaction for every additional 30 days of delay or fraction thereof, provided that the total amount of fine to be imposed does not exceed PHP 2.2 million (PCC Rules of Procedure as amended by PCC Memorandum Circular 21-001 dated 19 January 2021).

The PCC has already declared void and penalised certain transactions for failure to notify, and recently also imposed fines for failure to notify within the notification period.

7.2 If there is a suspensory obligation, what sanctions may be imposed if the transaction closes while the review is ongoing?

Under the PCA, the PCC may impose a fine of between 1% and 5% of the value of the transaction for violating the waiting periods pending merger review. The PCC Merger Rules provide that the basic amount of the fine for this violation is 3% of the value of the transaction, which the PCC may adjust upwards or downwards if warranted by aggravating or mitigating circumstances respectively.

7.3 How is compliance with conditions of approval and sanctions monitored? What sanctions may be imposed for failure to comply?

The PCC is empowered to adopt effective monitoring mechanisms, including the appointment of compliance monitors, trustees and external experts.

Under the PCC Rules of Procedure, where a compliance report must be filed, the entity concerned must file with the PCC, within the period specified in the decision or order, a verified written report setting forth in detail the manner and form of its compliance with the decision or order. The entity must thereafter file with the PCC such written compliance reports as may be further required. The PCC may, at its discretion, publish the compliance reports on its website.

If an entity is proven, after due notice and hearing, to have failed to comply with a decision or order of the PCC, it will be liable to the imposition of:

• administrative fines, without prejudice to any other administrative, civil or criminal liability arising from such non-compliance; and
• new measures or conditions for compliance monitoring.

An entity that fails or refuses to comply with a ruling, order or decision issued by the PCC within the period specified, after due notice and hearing, may be liable to the imposition of an administrative fine of between PHP 55,000 and PHP 2.2 million for each violation. The same penalty shall accrue for each day of non-compliance beginning 45 days from the date on which the ruling, order or decision was served until the party fully complies (PCC Rules of Procedure as amended by PCC Memorandum Circular 21-001 dated 19 January 2021).

8 Trends and predictions

8.1 How would you describe the current merger control landscape and prevailing trends in your jurisdiction? Are any new developments anticipated in the next 12 months, including any proposed legislative reforms?

With the lapse of the two-year period under Republic Act 11494 – otherwise known as the 'Bayanihan to Recover as One Act' (BARO) – providing for a higher notification thresholds, the PCC has provisionally set new thresholds for merger review, just slightly higher than the thresholds pre-pandemic.

Notwithstanding this, the M&A market in the Philippines continues to be vigorous, with consolidation still a necessity to most industry players amid the pandemic. Another driver would be the long-awaited government initiatives to attract foreign investments, including recently enacted Republic Act No. 11647 known as an 'Act Promoting Foreign Investments' which introduced amendments to the Foreign Investments Act of 1991, easing restrictions, reducing capital requirements and allowing 100% foreign ownership in start-ups.

Most importantly, Republic Act No. 11659 or 'An Act Amending Commonwealth Act No. 146 otherwise known as the Public Service Act' as amended was finally signed into law on 21 March 2022. These amendments make a distinction between a public utility, limited by the Philippine Constitution to 40%-foreign ownership, and a public service. Now, "public utility", unless subsequently provided by law, only pertains to distribution of electricity; transmission of electricity; petroleum and petroleum products pipeline transmission systems; water pipeline distribution systems and wastewater pipeline systems, including sewerage pipeline systems; seaports; and public utility vehicles. This game-changing legislation therefore allows 100% foreign ownership in capital-intensive and hi-tech dependent industries such as airlines, railways and telecommunications, previously considered public utilities.

On the regulatory side, the Philippine Competition Commission issued on January 2021 a memorandum circular entitled "Adjusting the Schedule of Fines for Violations of the Philippine Competition Act of the 2017 Rules of Procedure of the Philippine Competition Commission and the Rules of Merger Procedure". However, the fines for failure to notify were not increased as provided for in the PCA. The circular of the PCC did increase some other fines, which reflects its policy of utilising the powers granted to it by law to ensure that the private sector complies with the merger control regulations.

9 Tips and traps

9.1 What are your top tips for smooth merger clearance and what potential sticking points would you highlight?

• Contrary to common misconceptions, the size of transaction threshold is determined based not only on the actual transaction value or purchase price of the merger or acquisition, but also on the asset size and revenue generated in the Philippines by the acquired entity or parties to the merger.
• Understand the business lines of the parties and their clients. The parties and their legal counsel should identify actual and potential overlaps, and areas of no overlap, early on, so that the notification forms capture them. Counsel should familiarise themselves with clients' businesses and different lines. Overlaps can exist not only in the direct businesses of the parties to the notifiable transaction, but also in the businesses of affiliates, subsidiaries and affiliates of those affiliates.
• Even prior to signing to a transaction, the parties must be able to identify scenarios in deal structures or agreed arrangements that would negate the possible finding of a substantial lessening of competition (SLC) post-transaction; and should make an educated assessment of whether these considerations would suffice to address possible SLC concerns.
• As soon as the Philippine Competition Commission flags concerns or interests regarding specific business lines, begin considering remedies and explore the possibility of proposing voluntary commitments to expedite the review process.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.