Legal basis and what it amends
- PCC Memorandum Circular No. 18-001 is issued pursuant to the Commission’s authority under Republic Act No. 10667 (Philippine Competition Act) to set notification thresholds and to adopt and publish implementing regulations.
- The memorandum circular amends Rule 4, Section 3 (a), (b), and (d) of the Implementing Rules and Regulations of Republic Act No. 10667 (the IRR).
- It revises the notification thresholds for compulsory notification in merger and acquisition transactions covered by Section 17 of Republic Act No. 10667.
Policy rationale for notification thresholds
- Notification is required for mergers or acquisitions that are more likely to substantially lessen competition in relevant markets for goods and services.
- Notification thresholds are intended to exclude transactions that are less likely to pose competition concerns.
- Threshold levels are adjusted to reflect inflation and economic growth and to ensure the efficient use of the Commission’s limited resources.
- The Commission increases the initial threshold based on the reasonableness of actual notification patterns to date.
Compulsory notification thresholds amended
- Rule 4, Section 3 of the IRR establishes that parties to a merger or acquisition are required to provide notification when the applicable threshold conditions are met.
- Section 1 amends Rule 4, Section 3 (a), (b), and (d) to set the revised thresholds.
Revised threshold for parties’ size (Rule 4, Sec. 3(a))
- Notification is required when the aggregate annual gross revenues in, into, or from the Philippines or the value of the assets in the Philippines of the ultimate parent entity of at least one of the acquiring or acquired entities—including the aggregate of all entities that the ultimate parent entity controls, directly or indirectly—exceeds Five Billion Pesos (PHP5,000,000,000.00) (Rule 4, Section 3(a) as amended).
- The ultimate-parent revenue/assets test uses in, into, or from the Philippines concepts for revenues and value of assets in the Philippines for assets (Rule 4, Section 3(a) as amended).
Revised threshold for transaction value (Rule 4, Sec. 3(b))
- Notification is required when the value of the transaction exceeds Two Billion Pesos (PHP2,000,000,000.00) (Rule 4, Section 3(b) as amended).
- The transaction value is determined under the specific measurement rules in subsections (1), (2), (3), or (4) of Rule 4, Section 3(b) as amended.
Asset/revenue measurement rules for transaction value
- For a proposed merger or acquisition of assets in the Philippines, notification is required if either:
- (i) the aggregate value of the assets in the Philippines being acquired exceeds PHP2,000,000,000.00; or
- (ii) the gross revenues generated in the Philippines by assets acquired in the Philippines exceed PHP2,000,000,000.00 (Rule 4, Section 3(b)(1) as amended).
- For a proposed merger or acquisition of assets outside the Philippines, notification is required if:
- (i) the aggregate value of the assets in the Philippines of the acquiring entity exceeds PHP2,000,000,000.00; and
- (ii) the gross revenues generated in or into the Philippines by those assets acquired outside the Philippines exceed PHP2,000,000,000.00 (Rule 4, Section 3(b)(2) as amended).
- For a proposed merger or acquisition of assets inside and outside the Philippines, notification is required if:
- (i) the aggregate value of the assets in the Philippines of the acquiring entity exceeds PHP2,000,000,000.00; and
- (ii) 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 PHP2,000,000,000.00 (Rule 4, Section 3(b)(3) as amended).
- For a proposed acquisition of voting shares of a corporation or an interest in a non-corporate entity, notification is required if:
- (i) the aggregate value of the assets in the Philippines owned by the corporation or non-corporate entity or by entities it controls, other than assets that are shares of any of those corporations, exceeds PHP2,000,000,000.00; or
- (ii) the gross revenues from sales in, into, or from the Philippines of the corporation or non-corporate entity or by entities it controls exceed PHP2,000,000,000.00; and
- (iii) the voting-share or profit/asset-accrual threshold in subparagraphs (A) or (B) is met (Rule 4, Section 3(b)(4) as amended).
- For acquisitions of voting shares, notification is required if, as a result of the acquisition, the acquiring entity and its affiliates would own, in the aggregate, voting shares carrying more than:
- Thirty-five percent (35%), or
- Fifty percent (50%) if the entity or entities already own more than the percentage set out in the 35% tier before the proposed acquisition (Rule 4, Section 3(b)(4)(iii)(A) as amended).
- For acquisitions of interests in a non-corporate entity, notification is required if, as a result of the acquisition, the acquiring entity and its affiliates would hold an aggregate interest entitling them to receive more than:
- Thirty-five percent (35%) of the profits or assets on dissolution, or
- Fifty percent (50%) if the acquiring entity or entities are already entitled to receive more than the 35% tier before the proposed acquisition (Rule 4, Section 3(b)(4)(iii)(B) as amended).
Joint venture notification threshold rule (Rule 4, Sec. 3(d))
- In a notifiable joint venture transaction, the acquiring entity is subject to the notification requirements if either:
- (i) the aggregate value of the assets that will be combined in the Philippines or contributed into the proposed joint venture exceeds PHP2,000,000,000.00, or
- (ii) the gross revenues generated in the Philippines by assets to be combined in the Philippines or contributed into the proposed joint venture exceed PHP2,000,000,000.00 (Rule 4, Section 3(d) as amended).
- When determining the assets of the joint venture, the following are included:
- (1) all assets that any entity contributing to the formation of the joint venture has agreed to transfer, or for which agreements have been secured for the joint venture to obtain at any time, whether or not the contributing entity is subject to Republic Act No. 10667; and
- (2) any amount of credit or any obligations of the joint venture which any entity contributing to the formation has agreed to extend or guarantee, at any time (Rule 4, Section 3(d) as amended).
Effective date, applicability, and transition rules
- The revised thresholds apply to mergers or acquisitions where the definitive agreements are executed after the effectivity of PCC Memorandum Circular No. 18-001 (Section 2).
- The revised thresholds do not apply to mergers or acquisitions:
- pending review by the Commission,
- notifiable transactions consummated before the effectivity of the memorandum circular, and
- transactions already subject of a decision by the Commission (Section 2).
- Unless otherwise modified or repealed by the Commission, the amended thresholds automatically adjust annually as provided in Section 3.
Automatic annual adjustment of thresholds
- The thresholds in Rule 4, Section 3 (a), (b), and (d) as amended automatically adjust starting March 1, 2019 and on March 1 of every succeeding year (Section 3).
- The adjustment uses the Philippine Statistics Authority’s official estimate of nominal Gross Domestic Product growth of the previous calendar year, rounded up to the nearest hundred millions (e.g., PhP 2.14 B is rounded up to PhP 2.2B) (Section 3).
- All mergers or acquisitions with definitive agreements executed prior to the annual adjustment are subject to the thresholds for notification applicable before that annual adjustment (Section 3).
Commission modification and severability
- The Commission may modify, amend, supplement, or repeal PCC Memorandum Circular No. 18-001 as deemed necessary and proper (Section 4).
- If any part or provision of PCC Memorandum Circular No. 18-001 is declared unconstitutional or illegal, the other parts or provisions remain valid (Section 5).