PHILIPPINE COMPETITION ACT
JOHANNES R BERNABE
PHILIPPINE COMPETITION COMMISSION
What the law seeks to discipline (I)
• Anti-competitive agreements
• Horizontal agreements (i.e., between or among
competitors) which engage in –
• Cartels, price-fixing
• Bid-rigging
• Output limitation
• Market allocations
are criminalized
• Other types of agreements which substantially prevent,
lessen or restrict competition
What the law seeks to discipline (II)
• Abuse of dominant position
◦ NOT against bigness
◦ Market dominance vs. abuse of market dominance
e.g.:
• Predatory pricing
• Imposing barriers to entry
• Tying arrangements
• Anti-competitive mergers and acquisitions
◦ M&As not prohibited per se, prevented only if ◦ promotes collusion
◦ Prevents, lessens or restricts competition
Considerations in application
No precise application
◦ Apart from per se in Sec. 14(a)
◦ Contextual analysis in determining the ‘object’ of
an agreement
◦ Rule of Reason analysis in assessing the ‘effects’
of an act or
◦ Weighing of social benefits vs. social costs
◦ Test: substantially prevent, restrict or lessen
competition
A few exceptions
General rule – of general application,
applies to all sectors (no block exemptions)
Exceptions:
◦Trade associations
◦Agreements for collective bargaining in
employment
Mergers & Acquisitions (I)
Not prohibited per se, but the Commission has the power to
review
Scope of mandatory review: all M&A transactions > PhP1 Billion
◦ other criteria in the IRR which establish nexus with PH jurisdiction
◦ Exempt from mandatory notification: internal re-structuring where
acquiring and acquired entities belong to one and the same UPE
and re-structuring does not result in change of control (CN 16-002)
Period for review: 30 days from notification by the parties,
extendible for maximum of another 60 days, but in no case to
exceed a total of 90 days
M&As (II)
Additional thresholds for notification under IRR
• Size of person + size of transaction tests
1. (a) Aggregate annual gross revenues in, into or from
PH; or
(b) value of assets in PH
of the UPE of at least one of the acquiring or acquired
entities, including that of all entities the UPE controls,
exceeds P1B
AND
2. The value of transaction exceeds P1B
M&As (III)
• In acquisition of voting shares:
1. If the aggregate value of the assets in PH owned by
the corporation or by entities it controls, other than
assets that are shares of any of those corporations,
exceed P1B; OR
2. The gross revenues from sales in, into, or from PH
of the corporation by entities it controls, other than
assets that are shares of any of those corporations,
exceed P1B
AND . . .
M&As (IV)
Control test:
◦ as a result of the proposed acquisition, the entity or
entities acquiring the shares, together with their
affiliates, would own voting shares of the corporation in
excess of:
◦ Thirty-five percent (35%), or
◦ Fifty percent (50%), if the entity or entities already
own more than the percentage set out above before
the proposed acquisition;
M&As (V)
• Failure by the Commission to decide or complete
its analysis within 30/90 days – M&A deemed
approved
• Effect of failure by parties to an M&A to notify –
transaction deemed void and subject parties to an
administrative penalty of 1-5% of the value of the
transaction
M&As (VI)
•If transaction will substantially prevent,
restrict or lessen competition in the
relevant market, the Commission can • prohibit the implementation of the M&A
agreement
• prohibit the implementation of the M&A unless
and until it is modified, or the parties enter into
legally enforceable agreements specified by the
Commission
M&As (VII)
Possible exemptions:
(a) The increased market concentration brings or will
bring efficiency gains greater than the effects of any
limitation on competition
(b) A party to M&A is faced with actual or imminent
financial failure, and the agreement represents the
least anti-competitive arrangement
M&As (VIII)
Reiteration of General Principles
Prior M&As are grandfathered
Acquiring or maintaining market share through legitimate means
such as use of intellectual property rights without substantially
lessening, preventing or restricting competition is not prohibited
Stock acquisition solely for investment and –
◦ without using the shares for voting or exercising control; and
◦ not to otherwise bring about, or attempt to bring about the
prevention, restriction, or lessening of competition in the
relevant market
is not prohibited.
* Please note that the characterizations and views expressed in the presentation are
solely those of Mr. Bernabe and do not reflect the position of the Philippine
Competition Commission or the other Commissioners.
This presentation is not intended for circulation nor for use other than the forum of 8
November 2016.
Thank you
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