2020 BAR REVIEW COMMERCIAL LAW

Handout No. 4
PHILIPPINE COMPETITION ACT

Acquisition

Acquisition refers to the purchase of securities or assets, through contract or other means, for
the purpose of obtaining control by:

1) One (1) entity of the whole or part of another;

2) Two (2) or more entities over another; or
3) One (1) or more entities over one (1) or more entities. Sec. 4[a], PCA

Dominant Position

Dominant Position means a position of economic strength that an entity or entities hold which
makes it capable of controlling the relevant market independently from any or a combination of
the following: competitors, customers, suppliers, or consumers. Sec. 4[g], PCA

Merger

Merger refers to the joining of two (2) or more entities into an existing entity or to form a new
entity. Sec. 4[j], PCA

Prohibited Acts

1) Anti-Competitive Agreements
2) Abuse of Dominant Position
3) Prohibited Mergers and Acquisitions

Anti-Competitive Agreements

a) The following agreements, between or among competitors, are per se prohibited:

1) Restricting competition as to price, or components thereof, or other terms of

trade;

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2) Fixing price at an auction or in any form of bidding including cover bidding, bid
suppression, bid rotation and market allocation and other analogous practices of
bid manipulation;

b) The following agreements, between or among competitors which have the object or
effect of substantially preventing, restricting or lessening competition shall be prohibited:

1) Setting, limiting, or controlling production, markets, technical development, or

investment;
2) Dividing or sharing the market, whether by volume of sales or purchases, territory,
type of goods or services, buyers or sellers or any other means;

c) Agreements other than those specified in (a) and (b) of this section which have the object
or effect of substantially preventing, restricting or lessening competition shall also be
prohibited: Provided, Those which contribute to improving the production or distribution
of goods and services or to promoting technical or economic progress, while allowing
consumers a fair share of the resulting benefits, may not necessarily be deemed a
violation of this Act.

An entity that controls, is controlled by, or is under common control with another entity or
entities, have common economic interests, and are not otherwise able to decide or act
independently of each other, shall not be considered competitors for purposes of this section.
Sec. 14, PCA

Abuse of Dominant Position

It shall be prohibited for one or more entities to abuse their dominant position by engaging in
conduct that would substantially prevent, restrict or lessen competition:

a) Selling goods or services below cost with the object of driving competition out of the
relevant market: Provided, That in the Commission’s evaluation of this fact, it shall
consider whether the entity or entities have no such object and the price established was
in good faith to meet or compete with the lower price of a competitor in the same market
selling the same or comparable product or service of like quality;

b) Imposing barriers to entry or committing acts that prevent competitors from growing
within the market in an anti-competitive manner except those that develop in the market
as a result of or arising from a superior product or process, business acumen, or legal
rights or laws;

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PHILIPPINE COMPETITION ACT

c) Making a transaction subject to acceptance by the other parties of other obligations

which, by their nature or according to commercial usage, have no connection with the
transaction;

d) Setting prices or other terms or conditions that discriminate unreasonably between

customers or sellers of the same goods or services, where such customers or sellers are
contemporaneously trading on similar terms and conditions, where the effect may be to
lessen competition substantially: Provided, That the following shall be considered
permissible price differentials:

1) Socialized pricing for the less fortunate sector of the economy;

2) Price differential which reasonably or approximately reflect differences in the cost
of manufacture, sale, or delivery resulting from differing methods, technical
conditions, or quantities in which the goods or services are sold or delivered to
the buyers or sellers;
3) Price differential or terms of sale offered in response to the competitive price of
payments, services or changes in the facilities furnished by a competitor; and
4) Price changes in response to changing market conditions, marketability of goods
or services, or volume;

e) Imposing restrictions on the lease or contract for sale or trade of goods or services
concerning where, to whom, or in what forms goods or services may be sold or traded,
such as fixing prices, giving preferential discounts or rebate upon such price, or imposing
conditions not to deal with competing entities, where the object or effect of the
restriction is to prevent, restrict or lessen competition substantially: Provided, That
nothing contained in this Act shall prohibit or render unlawful:

1) Permissible franchising, licensing, exclusive merchandising or exclusive

distributorship agreements such as those which give each party the right to
unilaterally terminate the agreements; or
2) Agreements protecting the intellectual property rights, confidential information,
or trade secrets;

f) Making supply of particular goods or services dependent upon the purchase of other
goods or services from the supplier which have no direct connection with the main goods
or services to be supplied;

g) Directly or indirectly imposing unfairly low purchase prices for the goods or services of,
among others, marginalized agricultural producers, fisherfolk, micro-, small-, medium-
scale enterprises, and other marginalized service providers and producers;

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PHILIPPINE COMPETITION ACT

h) Directly or indirectly imposing unfair purchase or selling price on their competitors,

customers, suppliers or consumers, provided that prices that develop in the market as a
result of or due to a superior product or process, business acumen or legal rights or laws
shall not be considered unfair prices; and

i) Limiting production, markets or technical development to the prejudice of consumers,

provided that limitations that develop in the market as a result of or due to a superior
product or process, business acumen or legal rights or laws shall not be a violation of this
Act:

Provided, That nothing in this Act shall be construed or interpreted as a prohibition on having a
dominant position in a relevant market or on acquiring, maintaining and increasing market share
through legitimate means that do not substantially prevent, restrict or lessen competition:

Provided, further, That any conduct which contributes to improving production or distribution of
goods or services within the relevant market, or promoting technical and economic progress
while allowing consumers a fair share of the resulting benefit may not necessarily be considered
an abuse of dominant position:

Provided, finally, That the foregoing shall not constrain the Commission or the relevant regulator
from pursuing measures that would promote fair competition or more competition as provided
in this Act. Sec. 15, PCA

Review of Mergers and Acquisitions

The Commission shall have the power to review mergers and acquisitions based on factors
deemed relevant by the Commission. Sec. 16, PCA

Compulsory Notification Thresholds

Please refer to the attached copy of PHILIPPINE COMPETITION COMMISSION RESOLUTION NO.
02-2020: ADJUSTING THE MERGER NOTIFICATION THRESHOLDS PURSUANT TO
MEMORANDUM CIRCULAR NO. 18-001

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PHILIPPINE COMPETITION ACT

Prohibited Mergers and Acquisitions

Mergers or acquisition agreements that substantially prevent, restrict or lessen competition in

the relevant market or in the market for goods or services as may be determined by the
Commission shall be prohibited. Sec. 20, PCA

The proposed transaction is the acquisition by Lotte Chilsung Beverage Co. Ltd. of up to
2,134,381,838 common shares of Pepsi-Cola Products Philippines, Inc. equivalent to 57.78% of
the total issued and outstanding capital stock of Pepsi-Cola Products Philippines, Inc. through
a tender offer to all shareholders of Pepsi-Cola Products Philippines, Inc. other than Lotte
Corporation and the members of the Board of Directors with respect to their qualifying common
shares and the officers of Pepsi-Cola Products Philippines, Inc. (the “Excluded Shareholders”).

Upon review of the findings and recommendation of the Mergers and Acquisitions Office and the
Parties’ submissions, the Commission finds that the proposed acquisition by Lotte Chilsung of
shares in Pepsi Philippines (the “Transaction”) will not likely result in substantial lessening of
competition. This is because Post-Transaction, sufficient competitive constraints remain from
other participants in the market for the supply of carbonated soft drinks, non-carbonated
beverages, and bottled water within the Philippines. Moreover, the Transaction will not likely
give the Parties an increased ability or incentive to engage in input and customer foreclosure in
the global market for supply of Polyethylene Terephtalate (PET) resins and the national market
for distribution of non-alcoholic beverages. PCC Decision No. 09-M-006/2020: In the matter of
the Proposed Acqui Acquisition by Lotte Chilsung Beverage Co. Ltd. of Shares in Pepsi-Cola
Products Philippines, Inc., 26 March 2020

The proposed transaction involves an acquisition by AC Energy Philippines, Inc. (ACEPH) of 100%
of the shares of Macquarie Infrastructure Holdings (Philippines) Pte. Limited, Langoer
Investments Holding B.V., and Government Service Insurance System in Negros Island Solar
Power Inc. (ISLASOL). ACEPH, a Philippine integrated power solutions company, was founded
and incorporated in 1969 and with AC Energy, Inc. acquiring a controlling stake in the company
in June 2019. It is the energy platform of Ayala Group. On the other hand, ISLASOL is primarily
engaged in the generation of power using renewable energy sources, in particular, solar
energy. ISLASOL currently owns and operates an operational, stand-alone solar farm with a
total capacity of 80MW. The solar farm supplies daytime peak power to the local grid
throughout the entire year. ISLASOL currently owns and operates solar farms which are located
on the island of Negros with a total capacity of 80MW.

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PHILIPPINE COMPETITION ACT

The Commission found that this transaction will not likely result in substantial lessening of
competition. This is because (1) post transaction, competitive constraints remain from other
players in the markets for sale of electricity through bilateral contracts with Retail Electricity
Supplier units and the sale of electricity through bilateral contracts with distribution utilities in
Luzon and Visayas; and (2) the transaction does not significanty strengthen the ability or initiative
of the merged firm to engage in customer or input foreclosure. PCC Decision No. 07-M-003/2020:
In the Matter of the Proposed Acquisition by AC Energy Philippines, Inc. of Shares in Negros
Island Solar Power, Inc.

The proposed transaction involves the formation of a joint venture between Mitsubishi
Corporation (“Mitsubishi”) and Filinvest Alabang, Inc. (“Filinvest Alabang”), through the
acquisition by Mitsubishi of 40% of the issued and outstanding shares of stock of a wholly-
owned subsidiary of Filinvest Alabang, which was incorporated specifically for developing,
constructing, owning and leasing out mixed-use developments including an office and/or retail
building with office, retail, and other components agreed between the parties, on the 16,928-
square-meters parcels of land located in Filinvest City, Alabang, Muntinlupa City.

Filinvest Alabang is a subsidiary of Filinvest Development Corporation (“Filinvest Development

Corp.”), focusing on mixed-use urban developments in Metro Manila. Filinvest Alabang was
incorporated on August 25, 1993 for the development of the 244-hectare Filinvest City, a joint
venture project with the Philippine government. Filinvest Alabang is 80% owned by Filinvest
Development Corp. and 20% owned by Filinvest Land Inc.

The Mitsubishi Corporation Group is a global integrated business enterprise that develops and
operates businesses across various industries, including automotive and mobility, natural gas,
industrial materials, petroleum and chemicals, mineral resources, industrial infrastructure, food
industry, consumer industry, power solution and urban development. Mitsubishi’s current
activities have expanded to include project development, production and manufacturing
operations, with different international partners.

The Commission found that this transaction will not likely result in substantial lessening of
competition. This is because post transaction, sufficient competitive constraints remain from
other market participants within and outside of Alabang, Muntinlupa City. PCC Commission
Decision No. 35-M-027/2019: In the Matter of the Proposed Joint Venture Between Filinvest
Alabang, Inc. and Mitsubishi Corporation

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PHILIPPINE COMPETITION ACT

The City Government of Pasay, a highly urbanized city in Metro Manila, entered into a
contractual Joint Venture Agreement (JVA) with Pasay Harbor City Corporation (Pasay Harbor
City), a Special Purpose Corporation, to engage in land reclamation in the municipal waters of
Pasay for an area covering 265 hectares. The JVA was executed between the City Government
of Pasay and Pasay Harbor City. The Parties intend to pursue the project with the City
Government of Pasay contributing the rights to reclaim on its municipal waters, while Pasay
Harbor City will fully finance all raw land reclamation works and expenses. Pasay Harbor City
Corporation is a partnership composed of Udenna Development Corp. (UDEVCO), Ulticon
Builders, Inc. and China Harbour Engineering Company. It submitted its venture as an
unsolicited proposal to develop a part of Manila Bay facing Pasay City waters.

The Commission found that this transaction will not likely result in substantial lessening of
competition. This is because the transaction will create a new market for commercial and
residential real estate for the City of Pasay. PCC Commission Decision No. 30-M-024/2019: In the
Matter of the Proposed Joint Venture between Pasay Harbor City Corporation and the City
Government of Pasay

The proposed transaction is the acquisition by Mikuni Toyo Co., Ltd. of 100% of the issued shares
belonging to Hitachi Omron Terminal Solutions (HOTS) in Hitachi Terminals Mechatronics
Philippines Corporation (HTMP). Mikuni Toyo Co., Ltd., the acquiring entity, is a company
incorporated in Japan engaged in the business of production/manufacturing and assembly of
electronic equipment such as but not limited to: Electronic board for air conditioning systems;
Electronic board for infrastructures such as elevators; Auto equipment such as remote key
starter; LCD Portable Machine Type; Drive Recorder; and Air cell cushion for wheel chairs.

Hitachi Omron Terminal Solutions (HOTS), is a company incorporated in Japan, is the owner of
One Hundred (100%) Percent of the issued shares in Hitachi Terminals Mechatronics Philippines
Corporation, the acquired party in the said transaction. Hitachi Terminals Mechatronics
Philippines Corporation (HTMP), the acquired party, is a corporation organized under Philippine
law. Under its Articles of Incorporation, its primary purpose is to manufacture, develop, process,
fabricate, assemble, install, buy, sell on whole sale, export, import, market, distribute and
otherwise trade or deal in and with products, goods, commodities, materials, articles, wares and
merchandise relating to electronic and mechanical equipment and goods of similar nature, to
develop systems incorporating such equipment; and to provide other related services.

The Commission finds that the proposed acquisition by Mikuni Toyo of all the shares in Hitachi
(the "Transaction") will not likely result in substantial lessening of competition. This is because
(1) based on the Notification Forms and other information submitted by the parties, there are no
horizontal or vertical overlaps between Mikuni Toyo and Hitachi in the Philippines; and (2) Parties

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PHILIPPINE COMPETITION ACT

operate merely as manufacturers or assemblers of Printed Circuit Boards for automotive remote
engine starters (Mikuni), and ATM modules (Hitachi), which are all exported to their foreign
parent entities and third parties outside of the Philippines. PCC Commission Decision No. 34-M-
028/2019: In the Matter of the Proposed Acquisition by Mikuni Toyo Co., Ltd. Of All Shares in
Hitachi Terminals Mechatronics Philippines Corporation

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