PCC outlines notification requirements for JV deals

THE Philippine Competition Commission (PCC) has approved final guidelines for notification requirements covering future joint ventures (JVs).

According to the guidelines posted on its website, parties forming joint ventures are required to notify the PCC when the revenue or assets of one of the parties to the JV exceeds P5 billion.

Alternatively, mandatory notification is also required if the value of the assets to be combined in the JV exceeds P2 billion.

JV partners are required to notify the PCC 30 days after they agree to transfer assets.

In a mobile message on Monday, PCC Chairman Arsenio M. Balisacan said the guidelines provide “ample” and up-to-date guidance in assessing their transactions.

“It demonstrates how PCC is attuned to the realities of how corporations are run - in particular, when control of a company is shared between two or more shareholders,” he added, noting the terms will take effect immediately.

“While recognizing that joint ventures can result in business efficiencies, the Commission is mindful that such agreements may pose competition concerns when they may result in a substantial lessening of competition in the relevant market,” the guidelines read.

The guidelines define a JV as “a business arrangement whereby an entity or group of entities contribute capital, services, assets, or a combination of any or all of the foregoing, to undertake an investment activity or a specific project, where each entity shall have the right to direct and govern the polices in connection therewith, with the intention to share both profits and risks and losses subject to Agreement by the entities.”

To help the PCC determine the effects of a JV in a market, each party involved should submit to the PCC, prior to the completion of the deal, information on the deal’s business objectives or purposes, terms, degree of participation and management roles of each JV partner, and respective rights and powers in the management of the JV.

Parties subject to the notification requirements should also provide details of their proposed combination or contribution of assets; the division of profits, risks, and losses; a dispute mechanism to avoid deadlocks or litigation; termination or liquidation and/or relevant buy-out provisions; terms of confidentiality; and indemnification mechanisms.

The PCC added that a JV can be subject to merger review.

The PCC’s standard for determining whether a deal constitutes a JV is a finding of joint control , defined as the ability of the partners to substantially influence or direct the actions or decisions of the joint venture, whether by contract, agency or otherwise.

“Forms of joint control may be seen in the equality of voting rights or appointment to decision-making bodies, veto rights, joint exercise of voting rights, or in similar or analogous cases,” it said. —