Joint Ventures under the Philippine Competition Act

The following legislative deliberations during the drafting of the now Philippine Competition Act
were reviewed:

1. 10 March 2014 Congressional Record

2. 27 August 2014 Congressional Record
3. 27 January 2015 Congressional Record
4. 9 February 2015 Congressional Record
5. 24 February 2015 Congressional Record
6. 3 March 2015 Congressional Record
7. 10 March 2015 Congressional Record
8. 2 June 2015 deliberations by the Bicameral Conference Committee on the Disagreeing
Provisions of HB No. 5286 and SB No. 2282
9. 4 June 2015 deliberations by the Bicameral Conference Committee on the Disagreeing
Provisions of HB No. 5286 and SB No. 2282
10. 5 June 2015 deliberations by the Bicameral Conference Committee on the Disagreeing
Provisions of HB No. 5286 and SB No. 2282
11. 8 June 2015 deliberations by the Bicameral Conference Committee on the Disagreeing
Provisions of HB No. 5286 and SB No. 2282

Summary of findings

1. The term “joint ventures” does not appear in the Philippine Competition Act (“PCA”). It
only appears in the definition of “merger” in the Implementing Rules and Regulations of
the PCA, as well as the PCC Rules on Merger Procedure. Based on the legislative
deliberations, the intention of the lawmakers was to make the definition of merger as
broad as possible. As such, mergers, technical in nature or de facto, are contemplated
under the law.

There was no discussion as to whether or not the formation of a joint venture per se is
contemplated under the definition of merger in the PCA. During the deliberations of the
Committee on Trade and Industry, joint with the Committee on Economic Affairs (during
the First Regular Session of the 16th Congress), however, Ms. Teresita Herbosa said, “That
there are other forms of combinations which do not amount to what you would call a
formal merger and these informal mergers would expect would be covered by the
Competition Law that we’re coming up with. There are also more danger or some danger,
perhaps, arrangements like inter-locking directorships, maybe in some joint ventures, so
all these we think should be under the jurisdiction of the body that would enforce our
Competition Law.” Hence, there may be some basis to conclude that the lawmakers
intended to include joint ventures under the contemplation of mergers regulated under
the PCA.

2. The lawmakers also intended to make the definition of the word “entity” broad enough
to contemplate partnerships and combinations of any form. The legislators also
discussed that the Philippine competition law will not adopt the exempted organizations
under US competition laws. Hence, it may be concluded that joint ventures (which is a
form of partnership as held in Philippine case law), incorporated or not (since the
definition includes the phrase “in any form”), are entities under the contemplation of the
PCA. Using this definition, the unincorporated joint venture between Primewater and
Meycauayan Water District is an entity covered by the PCA.
3. Notably, however, it also appears that the lawmakers intended to adopt the meaning of
merger under the Corporation Code, i.e., when two or more corporations merge into a
single corporation which shall be one of the constituent corporations. Given this line of
reasoning, it may be argued that the formation of the unincorporated joint venture
between Primewater and Meycauayan Water District is not considered as a merger that
is regulated under the PCA.

An excerpt of the legislative deliberations on this matter is as follows:

Chairperson Aquino: xxx Okay, Chapter III – Mergers & Acquisition. The only
issue here xxx is, well, we are proposing the Senate version if that’s okay.
Acting Chairperson Cua: Well…
Chairperson Aquino: xxx. We have defined the mergers already in the
definition of terms and we have accepted that already.
Acting Chairperson Cua: Mr. Chairman, can we put on the screen that …
Chairperson Aquino: The definition?
Acting Chairperson Cua: … definition of mergers in the definition of terms just
to compare with the House version.
Chairperson Aquino: Yes. Secretariat can we please put the definition of
mergers so we can compare. Mr. Chairman, it is more or less the same, ‘no.
xxx
Rep. Tinio: Instead of transactions to use the term mergers so that… it’s clear
that it refers to the terms defined, di ba? So in other words pag ginamit mo
yung “merger” automatically magrerefer iyan doon sa definition of terms.
Chairperson Aquino: Yeah, we need to have mergers in this.
xxx
Chairperson Aquino: So Congressman Tinio how will that go?
Rep. Tinio: In the definition of terms, Mergers and Acquisition is defined as one
together or separately…
Chairperson Aquino: This is mergers actually, ‘no…
Rep. Tinio: Definition ng “acquisitions”.
Chairperson Aquino: No, it’s under the definition of mergers already. So maybe
we should even take up all and acquisitions, ‘no, because we don’t refer to …
can we check Secretariat if we refer to acquisitions anywhere else? When we
define “merger” mayroon kasing one entity takes control of the whole or part
of another. So in the definition of merger there is already an acquisition.
Sen. Pimentel: Mr. Chairman, the other way around. Can there be an
acquisition which is not a merger? A merger is an acquisition but is there an
acquisition which is not a merger? And we want an acquisition which is not a
merger still reviewable by the Commission, some, at least some. So
importante.
Acting Chairperson Cua: I think kasi these are both legal terms eh. So perhaps
the solution would be to change the definition to mergers and acquisitions
since in the definition text, it already contains acquisition. So ilagay na lang
natin doon sa definition ng mergers and acquisitions.
Rep. Tinio: Acquisitions instead of merger.
xxx
Acting Chairperson Cua: Senator Pimentel asked if all mergers are acquisitions
and if all acquisitions are mergers. So it seems that there is a subset..
Chairperson Aquino: Technically not, technically not.
Acting Chairperson Cua: … that is not covered. So the proposed amendment is
to amend as well the definition.
Chairperson Aquino: To split it?
Acting Chairperson Cua … since the text already contains acquisition so just
defining the title as definition of mergers and acquisitions.
Chairperson Aquino: Alright, okay.
Acting Chairperson Cua: So the whole text applies as mergers and acquisitions.
Chairperson Aquino: And then we make sure in the text it’s always “mergers
and acquisitions” as a phrase.
Acting Chairperson Cua: So it is not omnibus…
Chairperson Aquino: Yes.
Acting Chairperson Cua: amendment.
Chairperson Aquino: We direct the Secretariat to make sure that “mergers and
acquisitions” are always together in a phrase, that we don’t refer to merger
solely or acquisition solely. It’s always “mergers and acquisitions”. Then we
change the definition of mergers in the Chapter II to Mergers and Acquisitions.
Is that taken by the Secretariat?
Sen. Pimentel: That is correct, Mr. Chairman, but we have to add the definition
of acquisition.
Chairperson Aquino: It’s already in the definition of mergers right now.
xxx
Chairperson Aquino: Senator it’s in the enumeration. “one entity takes control
of the whole or part of another” it’s an acquisition actually.
Acting Chairperson Cua: So the definition of mergers just to clarify further, the
mergers now refers to both “mergers and acquisitions” and if we don’t amend
the definition portion to “mergers and acquisition” then maintain…
Acting Chairperson Cua (continuing) maintain mergers, then we can just keep
everything as mergers and delete acquisitions in the text.
xxx
Acting Chairperson Cua: No. No. Because M&A is accepted terminology
already.
Acting Chairperson Cua: But is it consistent with the SEC definition?
Chairperson Aquino: I think so. Corporation Code, I think, Mr. Chairman.
Acting Chairperson Cua: Okay.
Chairperson Aquino: And then we make sure that mergers and acquisitions are
never seen separately. Always as the phrase mergers and acquisitions. Kay.
Acting Chairperson Cua: I … we accept.