Guidelines on Merger Remedies (Philippines)

Key points of the Guidelines

1) Basic considerations for choice and design of merger remedies

The Guidelines stipulate that the proposed merger remedies must be directed and tailored to address competitive harm identified during the merger review. It must be effective and proportionate, and in evaluating the proposed remedies, the PCC will take into consideration the particular facts of the case and examine parameters such as: (a) acceptable risk profile (i.e., likelihood of achieving the objective of addressing the SLC and corresponding adverse effects), (b) practicality in implementation, monitoring and enforcement, and (c) duration and timing (i.e., whether it immediately and decisively resolves the SLC).

2) Principal types of merger remedies

The Guidelines identify and distinguish the two broad types of merger remedies that may be proposed by parties, which are (a) structural remedies, and (b) behavioral remedies.

Structural remedies are described as those which affect the market structure by either creating, restoring or maintaining an entity that will compete independently. An example of a structural remedy under the Guidelines is the divestiture (sale) of appropriate business units or assets of the merged entity to a new or existing market participant. The Guidelines recognize that structural remedies have the advantage of being self-policing (not requiring active monitoring) and provide direct and lasting effects in the market by addressing the root cause of competitive harm.

On the other hand, behavioral remedies address the SLC by regulating the post-transaction conduct of parties, such as by restricting the conduct of the merged entity (e.g., not to exercise its enhanced market power post-transaction to foreclose rivals). In proposing behavioral remedies, the Guidelines state among others that:

Parties are also encouraged to include ancillary measures to ensure the effectiveness of their proposed remedies (e.g., steps to be complied with before, during or after the implementation of the remedies).

Nevertheless, it should be noted that the Guidelines are not intended to be exhaustive and acknowledges that each transaction should be assessed individually to determine the appropriate remedies. Overall, greater preference will be given by the PCC to remedy packages that preserve competition and merger-specific efficiencies that will benefit consumers.

3) Remedies in digital markets

Considering the unique dynamics and characteristics of the digital market, the Guidelines recognize other types of remedies available to address potential SLC in the digital market, such as:

4) Timing and evaluation of merger remedies

Before the PCC reaches a decision in the merger review process, the parties are encouraged and may submit voluntary commitments to address the SLC and corresponding harms arising from the merger. Submission of the proposed commitments will result in the merger review periods being suspended for a period of 60 days (which may be shortened or extended) subject to compliance with formalities.※1

The PCC will evaluate the proposed commitments and thereafter discuss and negotiate with the parties on the most suitable merger remedy.※2 The PCC may resort to market testing (e.g., consultation with various stakeholders, subject to protection of confidential information) to gather data and insights on the viability of the proposed remedies. Should the PCC decide that changes need to be made to the commitment based on responses from stakeholders, then it will discuss the material changes with the parties.※3

Note that for multijurisdictional mergers and acquisitions, the Guidelines state that the PCC will cooperate with competition and regulatory agencies outside the Philippines to avoid inconsistencies and conflicts and may exchange non-confidential information with such competition and regulatory agencies in the process.

Notwithstanding the proposals from parties※4, the PCC also has the discretion to consider and impose alternative remedies and if the PCC is unable to conclude that the proposed remedies are sufficient to address the SLC, the merger review process will resume.

5) Implementation and monitoring of merger remedies

The parties are primarily responsible for implementing merger remedies approved by the PCC. However, the PCC may also appoint an impartial third-party monitoring trustee (at the expense of parties) to independently monitor the parties’ compliance with its commitments.

Parties may file a written application to vary, substitute or release them from the commitments in accordance with the PCC Rules on Merger Procedure, for reasons such as factual or legal circumstances beyond their control, or occurrence of significant or permanent changes in market conditions which diminish the initial competition concerns.

Conclusion

By preparing such Guidelines, the PCC provides insight and transparency on how it will evaluate the appropriateness and sufficiency of proposed merger remedies, which will in turn assist parties in considering options to mitigate or prevent the SLC and other negative effects to competition which may have otherwise prevented the PCC from approving their transaction. Hence, for parties to a merger which may result in SLC, they should familiarize themselves with the Guidelines so they can be guided in formulating and designing suitable and effective merger remedies that will address the PCC’s concerns.