With higher threshold, PCC expects number of M&A notifications to drop

THE Philippine Competition Commission (PCC) expects the number of notifications it receives for merger and acquisition deals (M&A) to drop by a third, after it raised the threshold for mandatory reporting.

In 2017, the PCC reviewed 44 M&A deals, 15 of which were found to have a transaction size lower than P2 billion and party size of below P5 billion. Under the revised guidelines, similarly sized deals would no longer have to go through the PCC.

“These transactions tend to be those that are, by nature, less likely to raise competition concerns, such that there are hardly any horizontal or vertical overlaps, they operate within relevant markets that are global, or they would have relatively small market shares after the merger or acquisition,” PCC Chairman Arsenio M. Balisacan said during a press briefing in Pasig City on Wednesday.

The antitrust body released revised guidelines for the mandatory notification of M&A deals on Monday, raising the threshold for the size of person to P5 billion and the size of transaction to P2 billion. The new guidelines will be implemented on March 20.

The PCC chief noted 15 transactions were cleared during the first phase of review. In contrast, those that entered the second phase review had transaction sizes within the P2 to P8- billion range, indicating that deals with higher values are more likely to cause potential harm to the market.

The commission said the higher threshold will help weed out transactions that are less likely to hamper competition, which would then allow the PCC to divert its resources to possibly more problematic deals.

“Should the new thresholds result in a better filter of notifiable transactions, fewer notified M&As would also allow the Commission to engage in other equally important elements of a merger control regime,” Mr. Balisacan said.

On the other hand, the PCC said it can still exercise its motu propio powers — or to initiate reviews even without notification from other parties — for deals that will no longer fall under the mandatory notification rule but could potentially harm competition in the market.

“We remain watchful of the developments and shifts in the market. The commission remains sharply aware of and will continue to examine other equally effective predictors of harm to market competition,” Mr. Balisacan said.

Asked whether the commission will release specific thresholds for different industries, Mr. Balisacan answered in the negative.

“Not at this time, because the number of cases we have in a particular sector are still thin. We still don’t have enough data to inform us of this... when we have more information,” Mr. Balisacan said.

Data from the PCC showed that the most number of M&A deals were from the manufacturing sector, with a total transaction value of P1.22 trillion, followed by financial and insurance activities with a transaction size of P279.27 billion. Other sectors include electricity, gas, steam, and air-conditioning supply, real estate activities, and transportation and storage.