The Philippine Competition Commission said Monday it voided the purchase by Dennis Uy-led Udenna Corp. of KGL Investment B.V., which partly owns logistics and transport firm 2Go Group Inc. for failure to notify the anti-trust body of the deal.
PCC said in a statement both parties were also fined P19.6 million, equivalent to 1 percent of the value of the transaction, for the violation.
The anti-trust body said in an en banc decision released on Feb. 19 that the transaction, worth $120 million, met the P1-billion threshold for review, and as such, the transacting parties should have notified PCC of the acquisition.
“After careful consideration of the facts and evidence on record, the commission hereby rules that respondents consummated the transaction in violation of the notification requirements under Section 17 of the Philippine Competition Act,” PCC said.
“The law is clear: an agreement consummated in violation of the competition law’s compulsory notification requirement shall be fined and is considered void,” it said.
Under Section 17 of the Philippine Competition Act, parties who fail to notify the PCC of a transaction that meets the threshold should be slapped with a fine ranging from 1 percent to 5 percent of the transaction value, and their business deal voided.
Udenna, in a statement, described the decision as unduly harsh and uncalled for, particularly considering the interest of Udenna Group’s many stakeholders and the decision’s effect on business.
“Udenna acted in good faith in consummating the transaction based on its interpretation of the newly-issued rules of the PCC, which in Udenna’s opinion are ambiguous. At the time of completion of the subject transaction, the PCC rules were new, and Udenna had no guidelines, interpretative rulings or precedents to rely on,” Udenna said.
The company said it was reviewing its options which including filing a motion for reconsideration with the PCC, or through a petition to the Court of Appeals. I
Udenna said it also had the option to submit to the PCC decision and file a notification with the anti-trust body.
PCC said it learned about the transaction when it was tipped off by a letter complaint on Dec. 28, 2016.
The agency said that in its investigation, the PCC Mergers and Acquisitions Office found that Udenna bought the entire shareholdings of KGLI-BV through a share purchase agreement dated July 28, 2016, and the deal was consummated as reflected in a deed of transfer dated August 19, 2016.
PCC said Udenna and KGLI initially sought to be excused from notification, claiming that the buyout satisfied the “size of person test,” but not the “size of transaction test” required under the PCA and its implementing rules.
PCC said MAO’s investigation found that the transaction met the threshold based on both tests.
PCC said the aggregate annual gross revenues in, into or from the Philippines, or the value of the assets in the Philippines of Udenna were both above P1 billion at the time of the transaction.
“It’s one thing for transactions to be found as anti-competitive during the review. It’s another thing when businesses evade the legal requirement of notification in the first place,” said PCC.
“This is a reminder for companies to comply with the Philippine Competition Act, including filing a sufficient notification prior to consummation of a merger that meets the thresholds,” it said.