TerraLex Cross-Border Guide to Pre-Merger Notification Guide

Yes, the Philippine Competition Act (“PCA”) provides for a mandatory and suspensory merger notification regime. Parties to a merger or acquisition wherein the value of the transaction meets the prescribed thresholds are prohibited from consummating their transaction until the Philippine Competition Commission (“PCC”) approves the transaction, or until the waiting period lapses and no decision has been made.

Yes, there is a voluntary merger notification mechanism. Section 3.2 of the PCC Rules on Merger Procedure allows parties to a transaction, not subject to the notification requirement under the implementing rules and regulations of the PCA (the “PCA IRR”) or is covered by an effective exemption circular or guideline issued by the PCC, to voluntarily notify the PCC. The PCC may, in its discretion, give due course to the voluntary notification.

A merger or acquisition of assets (whether in the Philippines, outside the Philippines, or inside and outside the Philippines), acquisition of voting shares of a corporation or of an interest in a non-corporate entity, and joint ventures.

The PCA Implementing Rules and Regulations (“PCA IRR”) provides for two tests: the size of person test and the size of transaction test. Based on PCC Memorandum Circular No. 18-001, the monetary thresholds for these tests are automatically adjusted on March 1st of every succeeding year, using as index the Philippine Statistics Authority’s (“PSA”) official estimate of the nominal Gross Domestic Product (“GDP”) growth of the previous calendar year rounded up to the nearest hundred millions.

The size of person test is assessed in reference to the ultimate parent entity, defined as the juridical entity which directly or indirectly controls a party to the transaction, and is not controlled by any other entity. The test requires that the gross annual revenues in, into or from the Philippines, or the value of the assets of the ultimate parent entity of at least one of the acquiring or acquired entities, including that of all entities that the ultimate parent entity controls, directly or indirectly, exceeds ₱7.8 billion.

The size of transaction test depends on the kind of transaction contemplated.

For a proposed merger or acquisition of assets, the reference point is the location of the assets:

• All assets are inside the Philippines – the aggregate value of the assets in the Philippines or gross revenues generated in the Philippines by assets being acquired therein exceed ₱3.2 billion.
• All assets are outside the Philippines – the aggregate value of the assets in the Philippines of the acquiring entity and the gross revenues generated in or into the Philippines by those assets acquired outside the Philippines both exceed ₱3.2 billion.
• Some assets are inside, and others outside the Philippines the aggregate value of the assets in the Philippines of the acquiring entity and the aggregate gross revenues generated in or into the Philippines by the assets acquired in the Philippines and any assets acquired outside the Philippines collectively exceed ₱3.2 billion.

For a proposed acquisition of voting shares of a corporation or of an interest in a non-corporate entity, the reference points are value of the assets/gross revenues from sales in, into, or from the Philippines, and the level of control gained in the subject entity:

• The aggregate value of the assets in the Philippines that are owned by the corporation or non-corporate entity or by entities it controls, other than assets that are shares of any of those corporation, exceeds ₱3.2 billion or the gross revenues from sales in, into, or from the Philippines of the corporation or non-corporate entity or by entities it controls, other than assets that are shares of any of those corporations, exceed ₱3.2 billion; and
• As a result of the proposed acquisition, the acquiring entity, together with their affiliates, would own voting shares that, in the aggregate, carry more than 35% in the subject entity or 50% in the subject entity (if the entity or entities already own more than 35% before the proposed acquisition). In the case of proposed acquisition of an interest in a non-corporate entity, as a result of the proposed acquisition, the entity or entities acquiring the interest, together with their affiliates, would hold an aggregate interest in the non-corporate entity that entitles the entity or entities to receive more than 35% of the profits of the non-corporate entity or assets of that non-corporate entity on its dissolution or 50% in the subject entity (if the entity or entities acquiring the interest are already entitled to receive more than 35% before the proposed acquisition).

For joint venture transactions: In joint ventures, the contributing entities are deemed the acquiring entities, and the joint venture is deemed the acquired entity. An acquiring entity shall notify the PCC if: the aggregate value of the assets to be combined in the Philippines or contributed into proposed joint venture exceeds ₱3.2 billion; or the gross revenues generated in the Philippines by assets to be combined in the Philippines or contributed into the proposed joint venture exceed ₱3.2 billion. Included in determining the assets of the joint venture are all assets which 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, and 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.

The monetary threshold amounts above are effective from 1 March 2024. As of 30 March 2025, the PCC has not issued a circular further adjusting the above threshold amounts.

The PCA IRR defines joint ventures as a business arrangement whereby two or more entities or group of entities contribute capital, services, assets, or a combination of any or all of the foregoing, to undertake an investment activity or a specific project, where each entity shall have the right to direct and govern the polices in connection therewith, with the intention to share both profits and risks and losses subject to agreement by the entities.

The PCC did not adopt the definition of a full function joint venture under European Union competition laws. Instead, for a transaction to be a notifiable joint venture, there should be resulting joint control between or among the new and existing joint venture partners. Joint control refers to the ability of the joint venture partners to substantially influence or direct the actions or decisions of the joint venture, whether by contract, agency or otherwise. Such joint control may be positive (i.e. when an entity has the ability to determine the strategic commercial decisions of the joint venture) or negative (i.e. when an entity has the ability to veto such strategic decisions).

In the absence of joint control, parties should determine whether the transaction may still be covered by other notifiable transactions and the applicable threshold tests (e.g. an acquisition of shares).

A joint venture can be formed by incorporating a joint venture company, entering into a contractual joint venture, or by acquiring shares in an existing corporation.

A notifiable merger transaction must be one that meets the requirements of notification under Section 17 of the PCA and Rule 4 of the PCA IRR. Even where the proposed transaction is an act done outside the Philippines, as long as it has direct, substantial, and reasonably foreseeable effects in trade, industry, or commerce in the Republic of the Philippines, then the PCC must be notified of such transaction.

The Notification Form should be able to establish to the satisfaction of the PCC that the notified merger transaction will not substantially prevent, restrict or lessen competition in the relevant market or in the market for goods or services. The form will require information that establishes the details of the proposed transaction, the relevant market, and the market power or dominance of the notifying entities, in order to determine any adverse effects on competition.

The time required to compile such information is on a case-to-case basis, depending on how easily the parties are able to collate the information internally, the complexity of the relevant market involved, and the potential and actual overlaps and vertical relationships identified.

As a general rule, the parties will have to comply with the submission of the required information provided in the Notification Form. However, the parties may schedule a pre-notification consultation with the PCC to seek clarification on the items required under the Notification Form. This may help the parties in determining what information should be included and may be excluded in the Notification Form.

A filing fee in the amount of ₱250,000 for the Phase I review shall be paid by the acquiring party after the Mergers and Acquisitions Office of the PCC determines the sufficiency of the information and documents submitted in the Notification Forms of the parties and issues an order of payment. If the PCC decides to proceed to a Phase II review, there is an additional fee of 1% of 1% of the value of the transaction which shall not be less than ₱1 million nor exceed ₱5 million.

Section 17 of the PCA prohibits the parties who are subject to compulsory notification to consummate the merger or acquisition agreement without notifying the PCC.

Parties to a notifiable transaction that satisfies the thresholds prescribed by the PCC are required to notify the PCC within 30 days from signing of the definitive agreement. Parties to such transaction and their ultimate parent entities which fail to notify the PCC within such period, but has not consummated the transaction, will be subject to a fine in the amount of 5% of 1% of the value of transaction for the first 30 days of delay or fraction thereof. The fine shall be increased by 1% of 1% of the value of the transaction for every additional 30 days of delay or fraction thereof, provided that the total amount of fine to be imposed shall not exceed ₱2,200,000.00.

However, pursuant to the Interim Guidelines during Periods of Community Quarantine released by the PCC, the 30-day notification period is currently waived. Parties may file notification forms at any time after the signing of definitive agreements relating to their transaction, but prior to any acts of consummation. To date, the suspension of the 30-day notification period has still not been lifted by the PCC. As such, the above fine is also not currently being imposed.

Parties may avail of a pre-notification consultation at the earliest opportunity to discuss the contents and timing of their notification with the PCC. However, this is not mandatory.

If the transaction is covered by compulsory notification, the parties will have to wait for (a) confirmation from the PCC that the transaction is not anti-competitive or (b) expiration of the review period, before the transaction may proceed.

Generally, upon submission of the Notification Form, the PCC will have 15 days to determine completeness of the submission (the “Sufficiency Period”). If the PCC finds the submissions deficient, the PCC informs the parties of the deficiencies. The parties shall have a period of 15 days to respond, commencing from the earliest date the letter of deficiency is served on the parties. The issuance of a letter of deficiency suspends the running of the Sufficiency Period. Upon submission of the deficient information, PCC shall review the information and documents within the period remaining from the Sufficiency Period, which shall however be no less than five days. If the submissions are complete, the PCC will issue the corresponding letters of sufficiency to the parties and, upon payment of the filing fee, the 30 day period Phase 1 review shall commence.

During the Phase 1 review, the PCC may (a) approve the transaction even before the expiration of the period; (b) allow the period to lapse, in which case, the transaction will be deemed approved; and (c) request for additional information. Should additional information be requested, an additional 60 days may be added, at most, for the Phase 2 review. During the Phase 2 review, the PCC may (a) approve the transaction even before the expiration of the period; and (b) allow the period to lapse, in which case, the transaction will be deemed approved.

Assuming that the parties submit complete information and the waiting periods are fully availed of by the PCC, it will take about 105 days from the submission of the Notification Form to clear the transaction with the PCC.

In practice, the length of time to clear a transaction may be longer, depending on the volume of additional documents and information that the PCC may request before it issues a sufficiency notice. The sufficiency notice is necessary in order for the Phase 1 review to commence. The additional documents and information required for Phase 2 review are more extensive.

A transaction that meets the thresholds and does not comply with the notification requirement and the waiting periods set out in the PCA and the PCA IRR shall be considered void and will subject the parties to an administrative fine of 1% to 5% of the value of the transaction. The value of transaction shall be: (a) the aggregate value of the assets in the Philippines subject of the proposed transaction or owned by the acquired corporation, including entities it controls; or (b) the gross revenues generated by assets subject of the proposed transaction or from sales in, into, or from the Philippines of the acquired corporation, including entities it controls, whichever is higher.

The basic fine shall be 3% of the value of the transaction, but may be increased or decreased, on a case-to-case basis taking into account the relevant aggravating and mitigating circumstances, if any.

Yes, if there is fraud or false material information in the notification.

Yes, provided that the parties make truthful and accurate disclosure of information.

The PCC has very strong powers, as granted by the PCA. As the administrative agency with original and primary jurisdiction over the enforcement and implementation of the provisions of the PCA and its implementing rules and regulations, it is a regulatory body granted with investigative and quasi-judicial powers.

Section 12(b) of the PCA provides the PCC with the power to review proposed mergers and acquisitions, determine thresholds for notification, determine the requirements and procedures for notification, and upon exercise of its powers to review, prohibit mergers and acquisitions that will substantially prevent, restrict, or lessen competition in the relevant market.

The PCC has the power to nullify transactions which violate the compulsory notification requirements under the PCA and the PCA IRR. The PCC may also impose an administrative fine of 1% to 5% of the value of the transaction for non-compliance.

The PCC also has the power to nullify prohibited merger transactions that are not brought to it for review under compulsory notification. The PCC may exercise this power in an administrative investigation undertaken by it motu proprio.

Under Section 17 of the PCA, all notices, documents and information provided to or emanating from the PCC is confidential information, except when the release of the information contained therein is:

• with the consent of the notifying entity;
• mandatorily required to be disclosed by law or by a valid order of a court of competent jurisdiction, or of a government or regulatory agency, including an exchange.

Such confidential information shall not, in any manner, be directly or indirectly disclosed, published, transferred, copied, or disseminated. Otherwise, a violation may be imposed a fine of not less than ₱1 million but not more than ₱5 million.

The more oligopolistic or highly concentrated the relevant market, the higher the risk of challenge.

It is advised that the rules on compulsory notification under Rule 4 of the PCA IRR be observed, considering that the PCC may nullify non-compliant transactions. Further, the PCC may impose considerable administrative penalties under Section 17 of the PCA which amount to 1% to 5% of the value of the transaction.

Parties may also avail of a pre-notification consultation with the PCC (under Rule 4, Section 4 of the PCA IRR and Section 4 of the Rules on Merger Procedure) and seek non-binding advice on the specific information that is required to be in the notification.

While the PCC is the administrative agency vested with original and primary jurisdiction to enforce the PCA, other administrative agencies are also provided mandate in their respective charters on the promotion of competition in specified industries, such as the Energy Regulatory Commission in the electric power industry, the Bangko Sentral ng Pilipinas (“BSP”) in the banking industry, etc. The PCC has entered into several memoranda of agreement with various government agencies, such as the Department of Justice, Department of Trade and Industry, Public-Private Partnership Center, Insurance Commission, and the BSP.

The purchase of foreign currency in the banking system of the Philippines is regulated by the BSP. In order to be able to source foreign currency requirements for repayment of such investments from the Philippine banking system, these foreign investments must be first registered with the BSP.

The Foreign Investment Act of 1991 (“FIA”), as amended, mandates the formulation of a regular foreign investment negative list (“FINL”), covering investment areas or activities which are open to foreign investors and/or reserved to Philippine nationals or to entities that meet a minimum percentage of ownership by Philippine nationals.

The FINL is composed of two lists – List A enumerates the areas of activities reserved to Philippine nationals by mandate of the Constitution and specific laws, while List B contain the areas of activities and enterprises regulated pursuant to law: (a) which are defense-related activities, requiring prior clearance and authorization from the Department of National Defense (“DND”) to engage in such activity, (b) which have implications on public health and morals, and (c) which is for the protection of micro and small domestic enterprises.

Amendments to List A may be made at any time to reflect changes instituted in specific laws, while amendments to List B shall not be made more often than once every 2 years.

The current version of the FINL is the Twelfth FINL under Executive Order No. 175, series of 2022.