Europe-PH News

The Philippine Competition Commission (PCC) is planning to raise the P1 billion compulsory notification threshold incorporate mergers and acquisitions, but at the same time exercise flexibility or forebear itself from imposing the provisions of the competition law on an entity or group of entities or sectors that have met stringent and specific conditions. This was announced by PCC Chair Arsenio Balisacan in a keynote speech at the European Chamber of Commerce of the Philippines­ EU Philippines Business Network Competition Forum 2018 that a technical working group is drafting the rules and guidelines on three other critical components of the PCA's enforcement framework. These are the rules on leniency program, forbearance, and inspection order. For 2018, the PCC is looking to establish several guidelines under mergers and acquisitions. By the end of the second quarter this year, the PCC hopes to publish guidelines both for the review of joint ventures and for the exemption from compulsory notification. According to Baliscan, the draft for the adjustment of the P1 billion notification threshold is expected to be proposed to the Commission by the 1st half of the year.Gian Camacho, head of legal of the PCC, explained the that the adjustment of the P1 billion notification threshold because of requests from companies and Congress as they believe that the amount was beyond too below, especially for other jurisdictions where crossborder mergers involve lots of companies that the value of transactions go into several billions. There are two tests to determine the value of transactions in mergers and acquisitions ­ size of persons (number of parties) and size of transaction (revenue derived). There are also subtests under these two main tests, such as value of the acquired company, the aggregate value of the acquiring assets, the value of controlled companies. "When you think about it, it's reflective of the worth of deal," he said. In addition, Balisacan said that the rules on forbearance are targeted to be drafted by July. Under this practice, theCommis sion may forbear from applying the provisions of the PCA, for a limited time, on an entity or group of entities,determined by the Commission to havemet stringent and specific conditions.Camacho explained that forbearance will allow the Commission not to enforce provisions in the Philippine Competition Act if certain requirements in the law like policy objectives of the law, does not impede competition, and economic jurisdictions ­ have been met already. Basically, he said, forbearance is regulatory flexibility where an entity or a group of companies or sectors can be exempted from the provisions of the law because competition is already effectively functioning. This means PCC may restrain itself from imposing certain regulations because it recognizes that some sectors, some groups or sectors will suffer from overregulation, which is not healthy. "Over competition could be bad also as it could also ruin the competition," he said. As such, there are instances when the regulator or the PCC to take a back seat as part of its regulatory prerogatives and let natural market forces to work. This is also one policy tool on enforcement cases. Meantime, the draft on leniency program is expected to completed inApril to bolster the capability to combat cartels. This rules will allow the Commission to grant to an entity immunity from suit or reduction of fine which would otherwise be imposed on a participant in anti­ competitive agreements in exchange for the voluntary disclosure of information.The rules on inspection orders will hopefully be drafted by May to be presented to the Supreme Court for its consideration and adoption. This will allow the PCC, upon order of the court, to undertake dawn raids or inspections of business property where it reasonably suspects that records or documents related to investigations are kept. The guidelines for this component,allowing us to significantly bolster our enforcement efforts, PCC, which is just relatively young agency having operated on its second year only, is trying to flex its muscle as the country's anti­ trust authority. "We recognize, however, that as a young agency we must first flex our regulatory muscles and prove our ability to implement the law and punish violators," said Balisacan. "There is little incentive for entities to comply with the law, much less for erring entities to self­ report their breach, if they do not believe that the PCC carries a sufficiently big stick, "he said. Just recently, it voided the transaction between Udenna Corp., the holding company of Davao­ based businessman Dennis Uy and KGLI Investment Cooperatief UA's shares in KGL Investment BV for failing to notify the commission of the acquisition deal.