Congress snuck a provision in the new Bayanihan law to keep the Philippine Competition Commission from going after problematic mergers and acquisitions — a provision that was neither consulted with the PCC nor included in the original approved versions of the bill.
For two years, companies will not be legally required to notify the PCC about their M&A, unless the deal is priced beyond P50 billion, according to the Bayanihan to Recover As One Act, or Bayanihan II, which President Rodrigo Duterte signed earlier this month.
The same law also bars the PCC from launching its own investigations of questionable M&As that cost below P50 billion, even if it had a reason to suspect the deal might harm consumers and other market players. This will last for a year.
This caught many stakeholders off guard. Neither the original approved versions of the Bayanihan 2 under the House of Representatives and the Senate had this provision in the first place.
The lawmakers in the bicameral committee, however, inserted this provision, without consulting the antitrust body. The Inquirer learned that the PCC only got wind of this a few days before the bill got ratified back in August.
In effect, the lawmakers have mandated the PCC to look away at a time when close scrutiny is more needed than ever, since the pandemic and the lockdown put smaller businesses and consumers at their most vulnerable.
Why is this a cause for concern, other than the fact that the PCC was not consulted?
The problematic deals flagged by the PCC in the past were actually all priced below P50 billion, not above it.
The problematic deals flagged by the PCC in the past were actually all priced below P50 billion, not above it.
Out of more than 200 M&As that the PCC reviewed in the past four years, only 14 were priced above P50 billion. Moreover, none of these 14 deals were considered harmful, or anticompetitive in competition jargon.
They were not considered anticompetitive because these were deals of this size were usually global transactions that had little impact in the Philippines, and were only reviewed here because the business had some operations or assets in the country, a competition expert said.
On the contrary, the problematic deals that the PCC flagged, corrected, and even blocked were M&As by local players that cost billions of pesos, sometimes as much as P10 billion, but certainly not more than P50 billion.
Interestingly, a similar provision could be found in another economic stimulus bill that got passed in the House, but not in the Senate.
How did this skip the House and Senate versions of Bayanihan 2, and still find itself in the bicam version?
newsinfo.inquirer.net/1336225/bicame…
How did this skip the House and Senate versions of Bayanihan 2, and still find itself in the bicam version?
newsinfo.inquirer.net/1336225/bicame…
What’s the possible benefit from this?
A competition expert tells us that maybe this will fast-track M&As so that those who are barely surviving the pandemic won’t have to close shop.
“They’ll have a white knight that will save their operations,” the expert said.
A competition expert tells us that maybe this will fast-track M&As so that those who are barely surviving the pandemic won’t have to close shop.
“They’ll have a white knight that will save their operations,” the expert said.
However, white knights can save who they want to even under the Philippine Competition Act.
A blocked M&A can be exempted from that block if the firm was "faced with actual or imminent financial failure,” and if the deal was the only and least harmful way to save the company.
A blocked M&A can be exempted from that block if the firm was "faced with actual or imminent financial failure,” and if the deal was the only and least harmful way to save the company.
Even if the Bayanihan II provision would only last for two years, lawmakers failed to see the harmful consequences might last longer than that, and be more difficult to correct.
By the time the PCC can act again, these companies that ate up its competitors through unscrutinized M&As would already have a bigger slice of the market. Then, they would be in a stronger position to dictate prices, or make the environment difficult for new competitors to enter.
Smaller businesses might also be harmed in the long term under the Bayanihan II provision. For example, the expert cited the previous proposal of Universal Robina Corp. (URC) to buy the sugar milling business of Roxas Holdings, Inc. (RHI) in Batangas.
The PCC blocked that deal last year after reviewing it.
Had URC bought its competitor, sugar cane planters would have no choice but to sell their harvests to URC and accept whatever price the monopoly would set, as opposed to choosing the best possible price, according to PCC
Had URC bought its competitor, sugar cane planters would have no choice but to sell their harvests to URC and accept whatever price the monopoly would set, as opposed to choosing the best possible price, according to PCC
In a world without a mandated PCC review, the source said the sugar cane farmers would have been on the losing end of the deal.
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