Client Alert: MOA Between DOJ and SEC Requires a Review of

Corporate & Commercial
Manila
Client Alert
October 2014
For further information please
contact:
Maria Christina J. Macasaet-Acaban
Partner
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T + 63 2 217 8680
M + 63 917 819 4947
M + 63 998 962 7522
Christina.Macasaet-Acaban
@quisumbingtorres.com
Alain Charles J. Veloso
Senior Associate
T: +63 2 819 4954
T: +63 2 577 8351
M: +63 917 819 4954
M: + 63 998 962 7558
Charles.Veloso
@quisumbingtorres.com
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MOA Between DOJ and SEC Requires a Review
of Proposed Mergers and Consolidations from the
Perspective of Laws on Antitrust and Competition
Recent developments
On 23 July 2014, the Department of Justice (DOJ) and the
Securities and Exchange Commission (SEC) entered into a
Memorandum of Agreement (MOA) that requires the SEC to notify
the DOJ of applications for mergers and consolidations of
corporations that are filed with the SEC. In turn, the DOJ shall
review the impact of the proposed merger or consolidation on
competition, and report its findings and recommendation to the
SEC. The MOA took effect on 7 August 2014. The DOJ is drafting
the guidelines that will apply to its assessment of whether a
proposed merger or consolidation will violate existing laws on
competition, monopolies, or combinations in restraint of trade
("Guidelines").
Implications for corporations applying for merger or
consolidation
The results of the assessment by the DOJ will determine whether
an application for merger or consolidation will be approved by the
SEC. A finding by the DOJ that a proposed merger or consolidation
will result in a violation of existing laws on competition, monopolies,
or combinations in restraint of trade may lead the SEC to either
disapprove the application or require applicant corporations to
comply with specified conditions within a prescribed period.
What the MOA says
Notification, assessment and evaluation
The SEC, through its Company Registration and Monitoring
Department (CRMD), shall immediately notify the DOJ through its
Office for Competition (OFC) of applications for mergers or
consolidations received by the SEC. The SEC shall also provide the
OFC with copies of documents submitted to it in relation to such
proposed mergers or consolidations.
Within 30 days from receipt of the notice and complete set of
documents from the SEC, the OFC shall assess and evaluate
whether the proposed merger or consolidation violates existing laws
on competition, monopolies, and combinations in restraint of trade.
The OFC may request for additional information or documents from
the concerned corporations, through the SEC, within the same
30-day period.
The DOJ is drafting the Guidelines that will cover the specific
process, requirements and standards that will apply to its
assessment of an application. The Guidelines will be published for
public comments and is expected to come out in a few weeks.
Pending the issuance of the Guidelines, the OFC will assess
proposed mergers or consolidations on the basis of existing laws
and jurisprudence on competition, monopolies, and combinations in
restraint of trade.
OFC report and SEC action on the proposed merger or
consolidation
The OFC shall endorse a report to the SEC on the proposed merger
or consolidation. The report shall state whether the proposed
merger or consolidation is inconsistent with any existing laws on
competition, and will unreasonably restrict trade, or lead to
monopolization.
If the OFC report states that the proposed merger or consolidation
will not be anticompetitive, unreasonably restrict trade, or lead to
monopolization, the SEC shall treat the report compliant with
Section 79 of the Corporation Code, which requires the favorable
endorsement of the relevant government agency for an application
for merger or consolidation. In the event applicant corporations are
subject to special laws, the favorable recommendation of the
appropriate government agency will still need to be obtained in
addition to the OFC's report.
If the OFC report states that the proposed merger or consolidation
will violate competition laws or will be anticompetitive, unreasonably
restrict trade or lead to monopolization, the SEC may either:
a) give the applicant corporations the opportunity to be heard
and thereafter approve or disapprove the application; or
b) conditionally approve the application, provided the
application corporations comply with conditions or
requirements set by the OFC in its report within the period
prescribed by the SEC.
As the MOA provides for the process that the SEC and DOJ will
take in respect of applications for mergers and consolidations that
are filed with the SEC, it does not appear that the same will cover
transactions that do not currently require SEC approval (e.g., share
acquisition or asset acquisitions that will not involve applications
requiring SEC approval). Notwithstanding that the MOA does not
appear to cover certain types of acquisitions, the OFC appears to
take the position that it continues to have a general power to review
such transactions from an antitrust perspective, based on existing
laws that prohibit cartels and combinations in restraint of trade.
Actions to consider
Currently, mergers and consolidations between domestic
corporations require SEC approval. The following are some actions
to be considered by domestic corporations and foreign corporations
with entities in the Philippines:
•
•
•
Transactions that will involve domestic corporations in the
Philippines should consider the impact of the process under
the MOA in structuring the transaction.
A review of the feasibility or implementation of a merger and
consolidation in the Philippines should now consider the
antitrust implications or consequences of such a
transaction.
The timeline to complete the process under the MOA will
need to be taken into account in determining the overall
timeline for the covered transactions.
Conclusion
The MOA is a step towards implementing merger control in the
Philippines. It also reflects recent trends in the Philippines, which
indicate more vigilant action of the OFC in regulating competition in
the Philippines. There is a possibility that pending legislation on
antitrust and competition will be passed in the Philippines in 2015,
in keeping with the country’s undertaking to introduce a national
competition policy by 2015 as part of the ASEAN ECONOMIC
COMMUNITY.
About Quisumbing Torres
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