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OPINION: Guess who now fights for Big Business in the Senate

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Jose Galang — Your Business

By his own declaration, Senator Juan Miguel Zubiri says Big Business now has a representative in the Senate — himself.The senator made the statement during the recent public hearing on his own legislative proposal raising the value of a corporate merger or acquisition that can be scrutinized by the government. The mandatory scrutiny is aimed at probing such business deals for any potential anti-competition results that in turn can hurt consumers such as unreasonable price increases or supply manipulation.Senator Zubiri’s surprise pet bill proposes to exempt corporate mergers or takeovers worth less than P10 billion from seeking prior approval from the Philippine Competition Commission (PCC). In other words, the PCC can only require businesses to submit for examination and clearance planned mergers or acquisitions if the value of the deal is P10 billion or more.The threshold is now P2 billion in terms of the “size of transaction” which is the value of assets or revenues of the acquired company, or P5 billion in terms of the “size of party or person” or the value of assets or revenues of the ultimate parent entity that emerges from the deal.It is not clear what prompted Senator Zubiri to file the legislative proposal. The senator from Bukidnon is chairman of the Senate committee on trade, commerce and entrepreneurship, and for the hearing, he also involved the committee on economic affairs headed by Senator Sherwin Gatchalian.<div>Protecting big businessmen</div>Zubiri said during the hearing that he “represents big businessmen who may be affected” by the policy contained in the Philippine Competition Act of 2015, according to individuals who were present at the consultation.Protecting the interest of the greater number of citizens has always been the role of members of either chambers of Congress. Why has Big Business suddenly required a champion in the Senate when this sector obviously has ample resources to take care of itself?Zubiri’s proposal for the steep increase in the threshold is problematic. First of all, the PCC can by itself make adjustments in the threshold values. Secondly, the proposed P10 billion is significantly higher than equivalent thresholds followed by the anti-trust watchdog in the United States—P4.2 billion for size of transaction and P8.5 billion for size of party.Besides, the PCC had adjusted its threshold amounts only last March 20, after its own studies on the volume of notifications it has received for corporate takeovers, the impact of higher inflation on value of business deals, economic growth, and a need for more efficient use of the agency’s “limited resources”. Future threshold amounts will be adjusted based on previous-year GDP growth rate.<ul class="op-related-articles">	<li><a href="http://news.abs-cbn.com/business/08/08/17/how-to-spot-report-market-bullies-under-competition-law">How to spot, report market &#x27;bullies&#x27; under competition law</a></li></ul>The PCC is a new government agency. The law that created the commission was approved only in July 2015 and its top officers assumed office six months later. It completed its transitory period and formally commenced its competition enforcement tasks last August 9, 2017.Its mandate is to pursue a national competition policy prohibiting anti-competitive agreements, abuse of dominant positions and anti-competitive corporate mergers and acquisitions. These tasks are intended to protect the well-being of consumers and preserve the efficiency of competition in the marketplace. The PCC deserves all the support it can get as it comes of age.<ul class="op-related-articles">	<li><a href="http://news.abs-cbn.com/business/08/02/17/cartel-price-fixing-fight-gets-boost-as-anti-trust-law-takes-effect">Cartel, price-fixing fight gets boost as anti-trust law takes effect</a></li></ul>PCC’s assessments of proposed corporate mergers in 2017 involving amounts below the revised threshold levels indicate that such transactions tend to be less likely to raise competition concerns. The parties to these transactions either had no horizontal or vertical overlaps, operated within relevant markets that are global, or would have relatively small market shares even after the merger.On the other hand, the PCC noted potentials for “harm to the market” in the case of mergers and takeovers involving transactions values of P2 billion to P8 billion. In PCC’s analysis, a threshold higher than P2 billion on the value of merger transactions could put beyond its reach business deals with potentially harmful effects on competition.Public hearingAt the public hearing or in the weeks preceding it, Senator Zubiri did not present any study that could support the bill’s proposal. But what he did, according to people who attended the hearing, was to call on a representative from one company—Udenna Corp.—to do the explaining for the bill. The only other private sector representative present at the hearing was an official of the think- tank Integrated Development Studies Institute. (The small turnout at the Zubiri committee public hearing pales in comparison to the big number of participants at the PCC’s own hearing last August on its procedures for merger review and control.)Udenna is the holding company of the fast-growing business group of Davao-based Dennis Uy. The group grew from Phoenix Petroleum’s activities in trading and storage of petroleum products following the oil industry liberalization in the late 1990s. It is now into logistics, shipping, real estate and education. Phoenix Petroleum is the first Davao-based company to get listed on the Philippine Stock Exchange.Late last year, Udenna announced its purchase of Dutch firm KGL Investment BV’s shares of stock in logistics firm 2GO Group. The Dutch investment firm also has beneficial ownership of 60 percent of Negros Navigation Co. (Nenaco), which in turn owns 88.3 percent of 2GO.The shares transaction was opposed by holding company Negros Holdings Management Corp., majority owner of Nenaco through a 60.3 percent interest in KGLI-NM. Udenna filed a case in a Manila court, which eventually ordered the parties to proceed to an arbitration court in Singapore.Meanwhile, in February, after receiving relevant data, the competition commission declared the Udenna-KGLI deal void. It also imposed a fine of P19.6 million on the two companies for failing to report the transaction for an anti-competitive test as required by law. The fine represents the lowest amount the PCC can impose on erring companies: 1.0 percent of the value of the faulted transaction.<ul class="op-related-articles">	<li><a href="http://news.abs-cbn.com/business/02/19/18/antitrust-body-voids-dennis-uy-acquisition-of-shipping-holding-firm">Antitrust body voids Dennis Uy acquisition of shipping holding firm</a></li></ul>The PCC released its decision on the Udenna-KGLI deal last February 19. Neither business entity filed an appeal with the PCC, but Udenna has signified plans to file a notification of the acquisition. On February 19 Zubiri filed his bill in the Senate calling for the hike in threshold amounts. Then, on March 6, Zubiri’s committee called a public hearing on the bill, which was held six days later.ImpactIf the threshold size of transaction test is increased to P10 billion, the Udenna-KGLI deal would not fall under PCC jurisdiction. The transaction is estimated to be worth about P6.25 billion, which is well within the current (and the old) PCC marker for potential anti-competition results.The Udenna-KGLI resistance to the PCC ruling was a first. The commission evaluated 46 merger notifications in 2017. It cleared all but five of these transactions, which submitted themselves to a second-stage test. The size of these five transactions ranged between P2 billion and P8 billion.More recently, when the PCC set a number of conditions attached to its approval of SM Investments Corp.’s plan to take over Goldilocks Bakeshop Inc., the two groups opted not to pursue their merger plan. The PCC conditions were premised on the possibility of SM using information it gathers from other food retailers in its malls for the benefit of Goldilocks.It will be interesting to see how the PCC will view the coming merger of two technology-propelled transport groups Uber and Grab. In Singapore, the competition body there has just issued restrictions on the deal while it continues its investigation on its possible effects. Singapore ordered Uber and Grab not to integrate their operations, maintain separate pricing schemes and not to share information on costings or customer and driver details.<ul class="op-related-articles">	<li><a href="http://news.abs-cbn.com/business/03/30/18/singapore-says-uber-grab-deal-may-flout-competition-rules">Singapore says Uber-Grab deal may flout competition rules</a></li></ul>Competition can be expected to help avert unfair business practices on pricing and supply stability. It also stimulates innovation, now seen as an important element in boosting the economy’s efficiency and potential. The Zubiri bill threatens this goal.Clipping the PCC’s wings will effectively will keep many business transactions from PCC tests and adjustments. That can only bring the Philippines back to the 1970s era of inefficient monopolies and oligopolies controlled by relatives and cronies of then dictator Ferdinand Marcos that pulled the economy behind its now more prosperous neighbors.

By his own declaration, Senator Juan Miguel Zubiri says Big Business now has a representative in the Senate — himself.

By his own declaration, Senator Juan Miguel Zubiri says Big Business now has a representative in the Senate — himself.