Mergers and the PCC during Covid
By Atty. Johannes R. Bernabe
November 25, 2020


Mergers and acquisitions have slowed down in the last eight months since the country went on lockdown to reduce the risk of spreading Covid-19. With the uncertainty of the extent of decrease in demand for goods and services looming large, most businesses not only have had to shelve any planned expansions but also more likely, struggled to find ways to survive. Bayanihan to Recover as One Act or Bayanihan 2 is meant, among others, to offer a reprieve to businesses through various incentives and accommodations, which ease their cost of doing business amid the public health crisis and beyond. Subsidies are coupled with streamlined regulatory processes to help affected businesses, particularly micro, small and medium-sized enterprises (MSMEs), get through the lockdown and participate in a post-pandemic economic recovery.

Curiously, the Philippine Competition Commission’s mandate to review mergers and acquisitions was included among the governmental measures that were curtailed by Bayanihan 2. For a period of two years from its passage, mergers and acquisitions, including joint ventures, whose value do not exceed P50 billion are exempted from the PCC’s erstwhile mandatory review. This means that only really large transactions north of approximately $1 billion will be subject to review.

On the surface, this provision in Bayanihan 2 seems to make sense. Given the problems encountered by companies, especially MSMEs, in dealing with the effects of the pandemic, many face the prospect of closing shop. For some, the only hope for continued operations is to be acquired or merged with a larger firm. Other affected businesses may wish to consolidate their operations with others to thrive in the harsh business environment. Dealing with the regulatory hurdle of notifying the PCC and obtaining approval for such consolidations can be daunting, particularly if the lawyers advising the companies are not experienced in complying with the requirements.

Upon deeper analysis, however, the proffered rationale does not hold much water. First, the thresholds for notifying mergers under the Philippine Competition Act and its existing rules are such that MSMEs are practically exempted from mandatory review. The largest MSMEs have assets worth less than P100 million; whereas, the PCA only requires notification and reviews transaction if the entity to be acquired has assets or revenues in excess of P2.4 billion. Since 99.5 percent of the roughly one million recorded business enterprises in the country are MSMEs, this leaves only a miniscule fraction of the 5,000 largest business entities susceptible to merger review. Moreover, a survey of the 200-plus transactions notified to the PCC since 2016 shows that only 17 transactions have exceeded the value of P50 billion provided under Bayanihan 2. Most of these were mergers among multinational companies, which did not have significant impact on competition in the Philippines because their operations here comprised but a small portion of their global revenues. In fact, PCC data shows that the transactions that are likely to substantially lessen competition (i.e., were the subject of a “statement of concerns” issued by the PCC’s Mergers and Acquisitions Office or were only cleared conditionally by the Commission) are generally those with a value from P2.5 billion to P10 billion.  Hence, the peg of P50 billion set by Bayanihan 2 does not appear to have a basis, whether in terms of ostensibly shielding MSMEs from the costs of regulatory compliance or genuinely protecting consumers from anti-competitive mergers.

Furthermore, the temporary diminution of PCC’s mandate to review mergers will arguably lead to legal uncertainty at a time when certainty is precisely what is needed by the business community. Insofar as Bayanihan 2 states that the PCC can resume the exercise of its authority to unilaterally review transactions one year after the effectivity of said law, mergers that were provisionally exempted from notification and thus not notified can thereafter be reviewed. If found to be anti-competitive, the transaction can be subjected to conditions or, worse, unwound by the PCC. Rather than encouraging businesses to consolidate to better withstand the lockdown, Bayanihan 2 may instead have a chilling effect on mergers as there will be the uncertainty of not knowing whether a consummated transaction will be subsequently prohibited by the Commission. Of course, a straightforward fix for businesses intent to consolidate is to voluntarily notify the PCC of their proposed merger or acquisition; this way, their deal may be reviewed and cleared by the Commission prior to consummation and hence dispense with any cloud of doubt on possible anti-competitive effects the transaction may have.

What is clear from the foregoing is that five years from the passage of the PCA, many stakeholders, even colleagues in government, still see competition disciplines as mere regulatory red tape. This is unfortunate, as economic history is replete with lessons on why long-term vision, as espoused by our competition law, should not be sacrificed at the altar of short-term exigencies.


A lawyer by profession, Commissioner Johannes Benjamin R. Bernabe served as adviser to the Congress in the drafting of, and deliberations on the Philippine Competition Act. Prior to his appointment at the Philippine Competition Commission, he served as the Philippines’s lead trade negotiator at the World Trade Organization and was a senior fellow at the International Centre for Trade and Sustainable Development—both in Geneva, Switzerland.

(Originally published on Business Mirror’s Competition Matters column on November 25, 2020 here.)