On 16 March 2020, the Philippine Competition Commission (PCC) issued PCC Commission Resolution No. 007-2020 (Resolution) which suspended certain merger processes and timelines from 16 March to 14 April 2020 (Community Quarantine Period).
What the Resolution says
Generally, the pre-acquisition ultimate parent entities of each of the buyer and target companies in a transaction which satisfies the mandatory notification thresholds of the Philippine Competition Act (PCA) and PCA Implementing Rules and Regulations, as amended (PCA-IRR), are required to submit their respective notification forms (and its annexes) within 30 calendar days from signing of the definitive agreement relating to the merger or acquisition (Notification Period).
On the other hand, parties to transactions which fall below the compulsory notification thresholds, or which meet the criteria for exemption from compulsory notification under the various clarificatory notes of the PCC, may apply for the issuance of a letter of non-coverage from compulsory notification (LNC).
Under the Resolution, the PCC suspended the following merger processes and timelines during the Community Quarantine Period, or until such time the quarantine order is lifted:
- Acceptance of new merger notifications and applications for issuance of LNCs;
- Evaluation of sufficiency of merger notifications and applications for issuance of LNCs already submitted to the PCC;
- Running of the 30-day Notification Period under the PCA and PCA-IRR.
Implications to Transaction Parties
The 30-day Notification Period for parties who have already executed their definitive agreements prior to the Community Quarantine Period shall be suspended beginning 16 Mach 2020. Once the PCC resumes accepting merger clearance applications, said parties will have the remaining balance of the Notification Period within which to submit their respective notifications forms.
In contrast, parties to a notifiable merger or acquisition who intend to execute their definitive agreements during the Community Quarantine Period will have a fresh 30 days, which shall start to run from when the Community Quarantine Period lapses, to notify the PCC of their transaction.
Review of transactions under Phase I and Phase II shall continue during the Community Quarantine Period.
Actions to consider
Parties to mergers and acquisitions which satisfy the compulsory notification thresholds are reminded that the Resolution only operates to suspend the timelines for notification during the Community Quarantine Period, and does not dispense with the notification and merger clearance requirements under the PCA and PCA-IRR.
Parties must still file their respective notifications forms within the remaining balance of their 30-day Notification Period or the fresh 30-day period, as the case may be, once the Community Quarantine Period ends. Further, parties to a notifiable merger or acquisition are still prohibited from consummating their transactions until they have secured clearance from the PCC, or after filing their notifications, upon lapse of the relevant waiting periods under the PCA without the PCC rendering a decision.
A transaction that meets the notification thresholds but which was consummated without prior clearance from the PCC (gun-jumping) shall be considered void and will subject the parties to an administrative fine of one percent (1%) to five percent (5%) of the size of the transaction. On the other hand, parties to a notifiable transaction that was not notified to the PCC within the prescribed Notification Period, but which has not been consummated, will be fined in the amount of ½ of 1% of 1% of the size of the transaction, not exceeding PHP 2 Million.