The Philippine Competition Commission said Monday it increased the threshold for the evaluation of corporate mergers and acquisitions from P1 billion worth of transaction to P5 billion.
PCC said it made the adjustment after a careful evaluation of the actual notifications and to keep pace with recent developments in the economy.
PCC issued Memorandum Circular No. 18-001 adjusting the new thresholds to P5 billion for the “size of person” and P2 billion for the “size of transaction” as defined in the implementing rules and regulations.
The size of person refers to the value of assets or revenues of the ultimate parent entity of at least one of the parties, while the size of transaction refers to the value of the assets or revenues of the acquired entity.
PCC said this was the first time it adjusted the thresholds since the Philippine Competition Act was enacted with the P1-billion default threshold.
The circular also establishes the automatic adjustment of the threshold every year beginning March 1, 2019 based on the official estimate of the nominal gross domestic product growth of the previous calendar year rounded up to the nearest hundred millions.
“The adjustment stems from various considerations, including the size of actual notifications to date, the country’s economic growth, overall inflation and efficient use of the commission’s limited resources,” said PCC chairman Arsenio Balisacan.
“The annual adjustment based on nominal GDP growth ensures that the thresholds maintain their real value over time and relative to the size of the economy,” he said.
The commission said it would continue to conduct regular monitoring of the M&A notifications and would revisit the threshold level periodically to make sure it was responsive to changes in the markets and the economy. Othel V. Campos
The thresholds are used to determine if a transaction triggers pre-merger reporting requirements to the commission. Based on the IRR, parties to a transaction should notify the commission if they satisfy two tests: size of person and size of transaction.
PCC said it was reasonable to increase the initial threshold provided by the Philippine Competition Act and its implementing rules and regulations.
“Adjusting the thresholds requires a delicate balance to make sure that it’s not too low as to create an undue burden on business, and that it’s not too high that transactions with potential anticompetitive effects in the market evade the scope of antitrust reviews,” Balisacan said.
The new thresholds will become effective 15 days after its publication Monday. The revised thresholds will apply to M&A transactions with definitive agreements executed after the effectivity of the memorandum circular.
PCC said the new circular would not apply to mergers or acquisitions pending review by the commission, notifiable transactions consummated before the effectivity of the memorandum circular and transactions that were already decided upon by the agency.