The Philippine Competition Commission (PCC) has added more to its provisions on joint ventures, mergers and acquisitions and voting powers within the approved and final implementing rules and regulations (IRR) of the
The Philippine Competition Commission (PCC) on Friday released the final and approved version of the Implementing Rules and Regulations (IRR) of the Philippine Competition Act (PCA) or Republic Act (RA) 10667.
Compared to the draft IRR, which was first released in May, the PCC indicated some additions to the approved and final IRR, which include definition and provisions on joint ventures and expansion of provisions in mergers and acquisitions.
Since the release of the draft IRR last month, the PCC has consulted businessmen and other stakeholders in Manila, Cebu and Davao.
The final IRR was already approved on May 31, and is expected to be effective 15 days after the date of its publication in at least two newspapers.
The IRR defined a joint venture 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 policies in connection therewith, with the intention to share both profits and risks and losses subject to agreement by the entities.”
In the Rule 4, Section 2 of the IRR, the PCC also indicated that an “ultimate acquiring entity” in mergers and acquisitions (M&A) and joint ventures should “submit a Notification Form and comply with the procedure set forth in Section 5 of this Rule ” detailing the procedure for notification and review.
“The parties shall not consummate the transaction before the expiration date of the relevant periods provided in this rule,” Section 5 added.
Meanwhile, in Rule 4, Section 3 of the IRR, the PCC added provisions for the M&As covered outside of the Philippines.
It said the covered M&As involving entities outside the country should have a) P1 billion worth of assets for the acquiring entity as well as b) P1 billion value of total revenues generated from the assets acquired in the Philippines.
Also in this section, the draft IRR further indicated that parties to M&As should notify the PCC if their proposed acquired voting shares would reach 20 percent, 35 percent or 50 percent of the company’s total ownership. But in the final IRR, 20 percent was removed, therefore requiring parties to notify PCC only if acquisitions go beyond 35 percent or 50 percent of the company shares.
This applies to the PCC coverage of only substantial acquisitions going beyond one third or 35 percent of a company’s shareholdings or more than half or 50 percent of the total firm shares, which will grant majority controlling stake that in turn, will grant substantial powers to the acquiring party.
In addition, in the final IRR’s Rule 4, Section 3, items D and E, the PCC said joint ventures are covered for notification if total contributed value of assets by parties exceeds P1 billion, as well as expected revenues generated in the Philippines through the joint ventures.
The final IRR came amid the strengthening duopoly in the telecommunications industry after two telecom giants PLDT and Globe Telecom Inc. bought 50-50 of San Miguel Corp.’s (SMC) telecommunications business for P69.1 billion.
PCC Chairman Arsenio Balisacan earlier said the commission will immediately assess and examine transactions in the sector, particularly where anti-trust practices and abuse of market dominance are present.
Nicholas Antonio Mapa, associate economist of the Bank of the Philippine Islands, said the immediate release of the IRR has nothing to do with the hot issue in the telecommunications sector, even with its “auspicious” timing.
Under the final IRR, both PLDT and Globe will have to send a Notification Form to the PCC and wait for the commission’s go-signal after its assessment before closing their respective transactions.
The Philippine Competition Act, enacted last year, seeks to promote fair market competition and imposes penalties on unfair market practices, including anti-competitive mergers and acquisitions, abuse of dominant position, cartels and anti-competitive agreements, among others.
Created in February 2016, the PCC is a quasi-judicial body formed by the PCA, which is tasked to ensure an efficient market competition via leveling the playing field among businesses engaged in trade, industry and all commercial economic activities; protect consumer welfare; and advance domestic and international trade and economic developments.
With the signing of the IRR, Sen. Paolo Benigno Aquino 4th also on Friday said he sees lower prices and improved quality of goods and services.
“This will bring prices down while improving quality across goods like agricultural products and services like the Internet,” according to Aquino, co-author and principal sponsor of RA 10667, which was signed into law on July 21, 2015.
With the completion of the IRR, he said, big or small businesses will now be on equal footing as the law penalizes anti-competitive agreements and abuses of dominant players and eliminates cartels.
“This will lead to an efficient market economy and a level playing field for all businesses,” added Aquino, who heads the Senate Committee on Trade, Commerce and Entrepreneurship.