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Prohibited Acts: Anti-Competitive Mergers & Acquisitions

/ Prohibited Acts: Anti-Competitive Mergers & Acquisitions

Bar Exam Notes: Competition Law 101

PROHIBITED ACTS: ANTI-COMPETITIVE MERGERS & ACQUISITIONS

WHAT ARE PROHIBITED MERGERS AND ACQUISITIONS?

Anti-competitive mergers and acquisitions (M&As) refer to transactions that substantially lessen, restrict, or prevent competition in the relevant market as determined by the PCC in the exercise of its power to review such transactions.

Illustrative case:

The PCC blocked the merger of two sugar millers in Southern Luzon—Universal Robina Corporation (URC) and Central Azucarera Don Pedro, Inc. (CADPI)-Roxas Holdings, Inc. (RHI). In a Commission decision issued in January 2019, the PCC found that URC’s buyout of its only competitor in the sugarcane milling services market leads to a monopoly in Southern Luzon. The PCC’s Mergers and Acquisitions Office earlier raised competition concerns on URC’s proposed acquisition of CADPI and RHI assets. In response, the merging parties submitted their proposed voluntary commitments, but failed to sufficiently address competition concerns raised by PCC. URC’s sugar mill is in Balayan while CADPI-RHI’s milling facilities are in Nasugbu. While both mill operators are in Batangas, the monopoly to be created by the merger will substantially lessen competition in the sugar milling services market not only in Batangas, but also in Cavite, Laguna, and Quezon. The PCC’s market investigation earlier showed that farmers stand to lose the benefits of competition due to the merger, especially in terms of planters’ cut in sharing agreements, sugar recovery rates, and incentives. -- need to edit url

WHAT ARE THE EXCEPTIONS TO THE PROHIBITION OF ANTI-COMPETITIVE M&AS?

M&A agreements which substantially prevent, restrict, or lessen competition may be allowed if the parties are able to prove that (a) the concentration has brought about or is likely to bring about gains in efficiencies that are greater than the effects of any limitation on competition that result or are likely to result from the merger or acquisition agreement; or (b) a party is faced with actual or imminent financial failure and the agreement represents the least anti-competitive arrangement among the known alternative uses of its assets.

For more information, see 

PCA Chapter 4, Section 21-22.

Illustrative case:

In 2017, Alipay Singapore Holding Pte. (Alipay) proposed to acquire Globe Fintech Innovations, Inc. (Mynt). After its Phase 1 review, the PCC flagged a potential competition concern in the non-bank electronic money market. However, following a Phase 2 review, Mynt was found to have no incentive to block entry or expansion of other players in the market. Also, other payment options (e.g., cash) limit the market power which Mynt may exercise. Alipay is owned by Ant Financial Group, which provides a digital platform for financial services. Mynt operates G-Xchange Inc., which handles the “G-cash,” a micropayment service making the mobile phone into a virtual wallet; and Fuse Lending Inc, which is a tech-based lending company. -- need to edit url

For a copy of the Philippine Competition Act and its Implementing Rules and Regulations, click 

here

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