1) Is a merger control regulation in force?

Yes. The merger control regulation is contained in Chapter 4 (Mergers and Acquisitions) of Republic Act (R.A.) No. 10667 or the Philippine Competition Act (“PCA”).

2) Which authorities enforce the merger control regulation?

The Philippine Competition Commission (“PCC”) enforces the PCA including the merger regulation contained therein. 

The PCC’s decisions may be appealed to the Court of Appeals. 

3) Relevant regulations and guidelines with links:

4) Does general competition regulation apply to mergers or ancillary restrictions?

There is no express precedent on this question. However, the PCC’s practice has so far been that ancillary restrictions in connection with a merger (e.g., non-compete clauses) are examined as part of the general merger review. 

5) May an authority order a split-up of a business irrespective of a merger?

Yes. The PCC can impose remedies addressing anti-competitive conduct or agreements, which include ordering a ”divestiture” or ordering an entity to change its structure by fully or partially disposing of its business, shareholdings, business units, or assets. 

6) Other authorities that also require merger filing or may prohibit transaction
(Note that this may not be an exhaustive list and that industry-specific legislation should always be considered. Furthermore, a merger will often require change of registrations with – but not approval from – the companies register, land register and authorities that have issued permits for the activities of the merging parties.)

The articles of merger or of consolidation of all entities registered with the Securities and Exchange Commission (“SEC”), signed and certified as required by the Revised Corporation Code are required to be submitted to the SEC for its approval. If the SEC is satisfied that the merger of the corporations concerned is consistent with the provisions of the Revised Corporation Code and existing laws (including the merger having been cleared by the PCC if so required), it shall issue a certificate approving the articles and plan of merger, at which time the merger shall be effective (Revised Corporation Code of the Philippines, Section 78)

In addition, in the case of merger of banks or banking institutions, loan associations, trust companies, insurance companies, public utilities, educational institutions, and other special corporations governed by special laws, the favorable recommendation of the appropriate government agency shall also be obtained. A favorable recommendation by a governmental agency with a competition mandate shall give rise to a disputable presumption that the proposed merger or acquisition is not violative of the PCA. (PCA, Section 17)

7) Are any parts of the territory exempted or covered by particular regulation?

No, the PCA is enforceable throughout the Philippine territory.

8) Is merger filing mandatory or voluntary?

Merger filing is mandatory, provided the thresholds are met. 

Should the parties request to have their merger undergo review even if the thresholds are not met, the PCC may, in its discretion, give due course to voluntary notification. 

9) Is there a general definition of transactions subject to merger control?

Yes, the PCC has the power to review mergers and acquisitions. 

A “merger” refers to the joining of two or more entities into an existing entity or to form a new entity,and includes the formation of joint ventures.

Meanwhile an “acquisition” refers to the purchase of securities or assets, through contract or other means, for the purpose of obtaining control by:

1. One entity of the whole or part of another;
2. Two or more entities over another; or
3. One or more entities over one or more entities 

10) Is "change of control" of a business required?

Yes, generally a merger will only be considered to take place if the transaction results in a change of control over an entity. However, a share acquisition where the buyer acquires more than 35% of the outstanding voting shares of the target will trigger the merger filing requirements if the asset and revenue thresholds are met.

11) How is “control” defined?

The PCA states that “control”  refers to the ability to substantially influence or direct the actions or decisions of an entity, whether by contract, agency or otherwise. 

Control is presumed to exist when the parent owns directly or indirectly, through subsidiaries, more than one half  of the voting power of an entity, unless in exceptional circumstances, it can clearly be demonstrated that such ownership does not constitute control. 

Control also exists even when an entity owns one half or less of the voting power of another entity when:

1. There is power over more than one half of the voting rights by virtue of an agreement with investors;
2. There is power to direct or govern the financial and operating policies of the entity under a statute or agreement;
3. There is power to appoint or remove the majority of the members of the board of directors or equivalent governing body;
4. There is power to cast the majority votes at meetings of the board of directors or equivalent governing body;
5. There exists ownership over or the right to use all or a significant part of the assets of the entity;
6. There exist rights or contracts which confer decisive influence on the decisions of the entity. 

12) Acquisition of a minority interest

Assuming the asset and revenue thresholds are met, acquisition of a minority interest is subject to merger control if:

1. the acquisition results in the acquirer owning more than 35% of the outstanding voting shares of the target ; or
2. the acquirer acquires joint control (together with the other shareholders) over the target. 

13) Joint ventures/joint control – which transactions constitute mergers?

All types of joint ventures are notifiable if the asset and revenue thresholds. Current regulations do not distinguish between full function and non-full function joint ventures.

14) Which thresholds decide whether a merger notification must be filed?
(Unless explicitly stated otherwise, the thresholds described under one threshold category are not cumulative with those described under another category. Thus for instance if there is a market share threshold and a turnover threshold, it is sufficient to meet one of these, unless stated otherwise.)

a) Turnover thresholds

There are generally two thresholds that both must be met to trigger the obligation to file a merger notification in the Philippines. These thresholds, as set by the Commission in 2020, are as follows: 

Size of Party Test: this refers to the aggregate value of assets and revenues in, into or from the Philippines of the pre-acquisition ultimate parent entity of either the acquirer or of the target, and all entities such ultimate parent entity controls (directly or indirectly). Note that even if seller does not retain control in the target after the transaction, if the seller is also the ultimate parent entity of the target, the seller’s group turnover (including target) and not just target’s turnover must be taken into account. Currently, the threshold for Size of Party Test is PHP 5,600,000,000, and

Size of Transaction Test:  the size of the transaction pertains to the computation of the value of the assets being acquired and/or gross revenues generated by the assets being acquired, or of the acquired entity and entities it controls, depending on the type of transaction. Currently, the threshold for the Size of the Transaction Test would depend on whether the transaction involved is an asset acquisition, a share acquisition, or a joint venture transaction. Thus:

(a) Asset Acquisition

In case of asset acquisitions, which involve assets in the Philippines, the threshold is: 

1. the aggregate value of the assets being acquired in the proposed transaction exceeds PHP 2,200,000,000.00, or
2. the gross revenues generated in the Philippines by the assets exceed PHP 2,200,000,000.00. 

In case of acquisitions of assets outside of the Philippines, the following are the thresholds: 

1. the aggregate value of the assets in the Philippines of the acquiring entity exceeds PHP 2,200,000,000.00, and
2. the gross revenues generated in or into the Philippines by those assets acquired outside of the Philippines exceed PHP 2,200,000,000.00.

In case of acquisitions of assets inside and outside of the Philippines, the following are the thresholds: 

1. the aggregate value of the assets in the Philippines of the acquiring entity exceeds PHP 2,200,000,000.00, and
2. the aggregate gross revenues generated in or into the Philippines by assets acquired in the Philippines and any assets acquired outside the Philippines collectively exceed PHP 2,200,000,000.00. 

(b) Share Acquisition

In case of share acquisition, the threshold is if the entity or entities acquiring the shares, together with their affiliates, would own voting shares of the corporation that, in the aggregate, carry more than the following percentages of the votes attached to all the corporation’s outstanding voting shares: 

1. 35%, or
2. 50%, if the entity or entities already own more than 35% before the proposed acquisition. 

(c) Formation of Joint Venture

In a formation of the joint venture, the following are the thresholds: 

1. the aggregate value of the assets that will be combined in the Philippines or contributed into the proposed joint venture exceeds PHP 2,200,000,000.00, or
2. the gross revenues generated in the Philippines by assets to be combined in the Philippines or contributed into the proposed joint venture exceed PHP 2,200,000,000.00.

In the case of a formation of a joint venture through acquisition of shares in an existing corporation or joint venture company, the assets to be combined or contributed through such acquisition will include assets or gross revenues generated by such assets of the existing corporation or joint venture company.

However, as part of the economic recovery measures, Bayanihan 2, among other things, temporarily exempts from the compulsory notification requirement under Section 17 of the Philippine Competition Act all mergers and acquisitions with transaction values below PHP 50 billion if entered into within two years from Bayanihan 2’s effectivity. The PHP 50 billion threshold applies to both size of party and size of transaction tests. This effectively raises the thresholds for compulsory notification to PHP 50 billion for a period of two years. Note that after one year from Bayanihan 2’s effectivity, the PCC may review transactions that are exempt from notification because their transaction values are below PHP 50 billion.

Bayanihan 2 became effective on September 15, 2020.

b) Market share thresholds

N/A

c) Value of transaction thresholds

See discussion above under the turnover threshold on the Size of Transaction test, which would depend on whether the transaction involved is an asset acquisition, a share acquisition, or a joint venture transaction.

d) Assets requirements

See discussion above under the turnover threshold on the Size of Party and Size of Transaction tests.

e) Other

See discussion above under the turnover threshold on the Size of Transaction tests with respect to the acquisition of voting shares of a corporation, or of an interest in a non-corporate entity, which provides for other thresholds, i.e., the percentage of voting shares or percentage of interest in a non-corporate entity being acquired.

15) Special thresholds for particular businesses

N/A

16) Rules on calculation and geographical allocation of turnover

The rules on calculation and geographical allocation of turnover are contained in the IRR of the PCA. 

For purposes of calculating notification thresholds, the aggregate value of assets in the Philippines shall be as stated on the last regularly prepared balance sheet or the most recent audited financial statements in which those assets are accounted for, while the gross revenues from sales of an entity shall be the amount stated on the last regularly prepared annual statement of income and expense of that entity. (IRR, Section 3(f))

Is the seller/seller's group turnover relevant in a standard acquisition of sole control?: 

Yes, it is relevant if the seller/seller group is also the “ultimate parent entity” of the target. One of the two tests that must be satisfied to trigger compulsory notifiability is the size of party test. The size of party test is met if the gross value of Philippine assets, or the gross revenues arising in, into or from the Philippines, of the pre-acquisition “ultimate parent entity” (UPE) and all entities directly and indirectly controlled by such UPE, of either the buyer or of the target is met. Thus, if the seller is the ultimate parent entity of the target, its Philippine assets and revenues – including that of the seller’s group (i.e., including the sellers’ UPE and all entities directly and indirectly controlled by such UPE) becomes relevant in determining if the size of party threshold is met.

17) Special rules on calculation of turnover for particular businesses

N/A

18) Series of transactions that must be treated as one transaction

A merger or acquisition consisting of successive transactions, or acquisition of parts of one or more entities, which shall take place within a one-year period between the same parties, or any entity they control or are controlled by or are under common control with another entity or entities, is treated as one transaction.

If a binding preliminary agreement provides for such successive transactions or acquisition of parts, the entities must provide notification on the basis of such preliminary agreement. If there is no binding preliminary agreement, notification must be made when the parties execute the agreement relating to the last transaction which, when taken together with the preceding transactions, satisfies the notification thresholds. (IRR, Section 3(e))

19) Temporary change of control

There is no such exemption under Philippine competition laws and regulations.

20) Special industries, owners or types of transactions

Public-private partnerships:

A government agency or instrumentality which undertakes a solicited project pursuant to the Build-Operate-and-Transfer Law in partnership with a private institution may (regardless of the type of industry or transaction) apply for a Certificate of Project Exemption from compulsory notification on behalf of their project’s prospective bidders. The PCC will review their application in terms of: 1) the nature and scope of the project; 2) the bidding design and process; and 3) competition concerns that may arise from the nature and/or composition of prospective bidders and the winning Project Proponent. 

21) Transactions involving only foreign businesses (foreign-to-foreign)

There is no such exemption under Philippine competition laws and regulations, but an expedited notification form may be used for the transactions described in topic 33.

22) No overlap of activities of the parties

N/A

23) Other exemptions from notification duty even if thresholds ARE met?

N/A

24) May a merging party file voluntarily even if the thresholds are not exceeded?

Yes. Even if the thresholds are not met, if the parties request to have their merger undergo review, the PCC may, in its discretion, give due course to voluntary notification. 

25) May the competition authority request a merger notification or oppose a transaction even if thresholds are not met?

Yes. The PCC has the power to review mergers and acquisitions even without notification if the merger or acquisition has a direct, substantial and reasonably foreseeable effect on trade, industry or commerce in the country.  

26) Referral within the jurisdiction

While not expressly provided for, there is nothing that prohibits the PCC from reviewing a merger and acquisition motu proprioon the basis of a referral from another government agency if the PCC believes that transaction may result in a substantial lessening of competition.

27) Referral from another jurisdiction

N/A

28) Referral to another jurisdiction

N/A

29) May the merging parties request or oppose a referral decision?

N/A

30) Stage of transaction when notification must be filed

A merger notification must be filed within 30 calendar days after the signing of definitive agreements relating to the merger but prior to any acts of consummation. 

However, in light of the COVID-19 pandemic, if the definitive agreement was signed while the local government unit where the offices of the PCC are located (specifically, Quezon City) is under quarantine (referred to in Philippine regulations as “general community quarantine” or “modified general community quarantine”), the 30-day period to file is suspended and the parties may file at any time provided the transaction is not closed or consummated prior to filing with, and clearance from, the PCC.

31) Pre-notification consultations

The PCC encourages pre-notification consultations before filing a notification. During the pre-notification consultation, parties may seek clarification on the information required under the notification form, inquire what other additional information may be required for the review, and discuss their identified markets. The parties are given non-binding advice on the specific information that is required in the notification form.

32) Special rules on timing of notification in case of public takeover bids and acquisitions on stock exchanges

N/A

33) Forms available for completing a notification

There are two forms available: one for expedited notification (available here) and one for full notification (available here). 

Expedited notification is possible for the following types of mergers (PCC Rules of Expedited Merger Review, Rule 1.5):

1. There are no actual or potential horizontal or vertical (including complementary) relationship in the Philippines between the acquiring entity and the acquired entity and the entities it controls;
2. The merger is a global transaction where the acquiring and acquired entities identified in the definitive agreement are foreign entities, and their subsidiaries in the Philippines act merely as manufacturers or assemblers of products with at least 95% of such products exported to the foreign parents, subsidiaries, affiliates, or third parties located outside the Philippines, and the remaining 5% product sales in a market in the Philippines is minimal in relation to the entirety of such Philippine product market.
3. The relevant geographic market of the merger is global and the acquiring and acquired entities have negligible or limited presence in the Philippines.
4. Joint ventures, whether incorporated or not, formed purely for the construction and development of a residential and/or commercial real estate development project.

Even if a merger may be qualified for expedited review, the parties have the option to file a notification form under the usual rules. 

The notification form (whether expedited or full) must be signed by a general partner of a partnership, an officer or director of a corporation, or in the case of a natural person, the natural person or his/her legal representative, and certified that the contents of the form are true and accurate of their own personal knowledge and/or based on authentic records. In all cases, the certifying individual must possess actual authority to make the certification on behalf of the entity filing the notification. It must also be notarized. 

However, in light of the COVID-19 pandemic, the PCC has suspended acceptance of expedited merger review form. This suspension is effective while the offices of the PCC are located (specifically, Quezon City) is under quarantine (referred to in Philippine regulations as “general community quarantine” or “modified general community quarantine”).

34) Languages that may be applied in notifications and communication

English.

35) Documents that must be supplied with notification

The following documents and information should always be supplied with a merger notification whether expedited or full:

1. Description or summary of the proposed transaction, parties to the transaction, and consideration for the transaction 
2. Original affidavit attesting to the fact that a definitive agreement has been signed and that each party has an intention of consummating the transaction.
3. Proof of authorization from the Ultimate Parent Entity (“UPE”)
4. Name and address of each entity directly or indirectly controlled by the filing UPE or the “Notifying Group”
5. Description of the domestic and international operations of the Notifying Group 
6. Description of assets, shares or other interests being acquired
7. The amount of total sales of the Notifying Group in the most recent year 
8. Diagram or chart showing the structure of ownership and control of the Notifying Group before the transaction and after the implementation of the transaction 
9. Explanation on how the transaction shall be implemented and the expected date of any major events designed to bring about the completion of the transaction
10. Country or jurisdiction in which a notification of the proposed transaction has been or, to the best of the knowledge of the party supplying this notice, will be filed; and when applicable, the date on which each country or jurisdiction was notified and the status as of date
11. Electronic version of the completed form in a searchable PDF/Word/spreadsheet format contained in a secure USB

For full notification, a range of further documents and other information may be relevant, including analyses, reports, minutes of board meetings and similar documents related to the merger. 

36) Filing fees

The filing fee for expedited notifications is PHP 150,000.00. 

For full a notification, the filing fee is PHP 250,000.00. 

If there is a Phase 2 review, the fee is 1% of 1% of the value of the transaction, provided that the filing fee shall not be less than PHP 1,000,000.00 but not more than PHP 5,000,000.00. 

37) Is implementation of the merger before approval prohibited?

Yes. The merging businesses must be run separately and independently until the merger has been approved.

38) May the parties get permission to implement before approval?

There are no statutory or regulatory provisions that expressly allow or disallow the parties applying for such permission.

39) Due diligence and other preparatory steps

Due diligence must be conducted in a way that prevents sensitive market information from being used for purposes other than assessing the viability of the merger.

An explicit exemption is not required for standard due diligence and other preparation measures without effect on the market.

The PCC has set out guidelines on preparatory measures and due diligence before the approval of a merger:

Notifying parties are strongly discouraged from consulting or employing the same counsel regarding a transaction, including the preparation of the notification forms and any other submissions to the PCC.

1. Authorized representatives and contact persons designated by a notifying party in its notification form must be different and independent from those designated by the other notifying party.
2. Information necessary for due diligence must be narrowly tailored and reasonably related to a specific due diligence or pre-merger integration planning issue.
3. If confidential business information must be exchanged for due diligence and pre-merger integration planning, parties are advised to employ third-party consultants that limit the dissemination and use of that information within the parties’ businesses. 
4. The group of individuals (“clean team”) who shall assemble, review, and analyze sensitive and other confidential data under certain protocols and prior to regulatory approval or consummation of the deal should not include any personnel responsible for competitive planning, pricing, or strategy.
5. Personnel who will be granted access to confidential business information must be properly identified and strictly monitored.
6. Should counsel discover sharing of confidential business information not in accordance with these guidelines during the waiting period, said counsel should instruct the parties to stop the information exchange immediately and inform the PCC on how the information was used, and the extent of the information exchanged.

40) Veto rights before closing and "Ordinary course of business" clauses

An "ordinary course of business" clause that prevents the target company from taking decisions outside the course of its ordinary business until the closing date is generally considered acceptable.

However, it must be assessed on a case-by-case basis to what extent the parties may discuss – or provide each other with veto rights concerning – any decisions in their respective businesses.

41) Implementation outside the jurisdiction before approval – "Carve out"

There are no specific rules on “carve out” of the Philippine part of a transaction to avoid delaying implementation in the rest of the world pending approval in the Philippines. 

42) Consequences of implementing without approval/permission

The transaction is considered void and the parties may be fined if the merger is implemented before approval is obtained. The amount of the administrative fine is 1 to 5% of the value of the transaction. 

43) Phases and deadlines

44) Tests or criteria applied when a merger is assessed

The test or criterion applied by the PCC when a merger is assessed is whether the merger will “substantially prevent, restrict or lessen competition in the relevant market…as may be determined by the [PCC]”. 

A range of factors may be taken into consideration, including efficiencies that may be gained from the merger, the competitive conditions that would likely result from the transaction relative to the conditions that would likely have prevailed without the transaction, and a broad range of factual contexts and specific competitive effects that may arise in different transactions. 

45) May any non-competition issues be considered?

Yes. While the PCC’s primary jurisdiction is to enforce and regulate all competition-related issues, the PCA provides that the PCC may consider both competition and non-competition issues but the concerned sector regulator must be consulted by the PCC on their opinion and recommendation on the matter before the PCC makes any decision. Protection of consumer welfare is also part of the PCC’s mandate.

46) Special tests or criteria applicable for joint ventures

The assessment for joint ventures is generally the same as mergers and acquisitions. 

47) Decisions and remedies/commitments available

A merger may be approved, prohibited with conditions/commitments, or prohibited. If there is no decision upon the lapse of the periods of review, the merger is deemed approved.

If the PCC finds that a merger is likely to substantially prevent, restrict, or lessen competition, or where the parties propose commitments to competition concerns identified by the PCC, the PCC may impose remedies to address the potential negative effect of the merger.

The PCC may accept remedies proposed by the parties concerned, issue conditions, require parties to modify the terms of their agreement, or to desist from a particular conduct or practice, as a requirement to the approval of their merger. 

At any stage of the Phase I or II review, merger parties may propose commitments that will remedy, mitigate, or prevent the competition concerns identified by the PCC as arising from the merger. However, proposals for commitments after PCC has rendered a decision will not be allowed. Upon submission of a proposed commitment, the review periods shall be suspended for a period of 60 working days.

Commitments can be structural or behavioral.

48) How and when will details about the merger be published?

The fact of a merger filing having been made is not published by the PCC.

For transactions that are filed under the Expedited Review Rules, an abstract of the transaction together with a call for comments must be published by the PCC within one working day from the PCC’s acceptance of the notification forms.

In a Phase 2 review, following the submission by the parties of their responses to the Phase 2 request for information, the PCC will publish the statement on the opening of a Phase 2 review in its website. The statement contains the following information: (1) the name of the involved entities; (2) the type of the transaction; (3) the markets covered or lines of businesses by the proposed merger or acquisition; and (4) the date when the complete notification was received.

Also in a Phase 2 review, if the MAO decides to issue an SOC, the PCC may, if it believes appropriate, publish a non-confidential version of the SOC on its website, with a request for third party comments on the same.

In the case of short-form clearances (which are unconditional clearances issued after Phase 1 review), the full text of the clearance is uploaded into the PCC’s website and is available to the public.

In the case of long-form decisions (which are decisions issued after a Phase 2 review, a non-confidential version of the decision is uploaded into the PCC’s website and is available to the public. Full-copies of the decision are given in advance to the parties to give them an opportunity to request the redaction of information they consider to be confidential.

49) Access to the file for the merging parties and third parties

The merging parties:

In certain circumstances (i.e., when there is a Statement of Concern after phase 2 review and the parties choose to contest the Statement of Concerns instead of offering voluntary commitments), the merging parties upon request may be granted access to the file, which includes correspondence with third parties that the PCC may have had, including market survey questionnaires as well as an overview of all documents/correspondence in the file. However, the PCC may redact third parties’ confidential information, often including the identity of such third parties. 

There is no right of access to the PCC’s internal documents and correspondence. 

Third parties:

Third parties do not have access to the file, but the PCC may decide to provide third parties with a non-confidential version of the notification and other documents in connection with its market surveys. 

50) Who can appeal and what may be appealed?

Merger or acquisition agreements that have received a favorable ruling from the PCC, except when such ruling was obtained on the basis of fraud or false material information, may not be challenged. 

Parties to a merger may file a motion for reconsideration of a decision, order or resolution of the PCC within 15 days from receipt thereof. A pending motion for reconsideration shall stay the order, ruling or decision sought to be reconsidered. 

Decisions of the PCC may be the subject of a motion for reconsideration. Ad adverse ruling on a motion for reconsideration may be appealed by the parties to the Court of Appeals through a Petition under Rule 43 of the Rules of Court, which must be filed within 15 days from receipt of the adverse decision. Any appeal of the decision will not stay the order, ruling or decision of the PCC, unless the Court of Appeals otherwise directs.