The PCC releases its draft notification form

If you’re closely following the PLDT/Globe - SMC deal and its corresponding fallout, you would know that the notice required by the PCC has become the center of controversy.

In accordance with Memorandum Circular 2016-02, the parties to the deal submitted to the PCC a notice of the transaction. You may recall that, as worded, it would seem that a notice sufficed for the approval of the transaction, thus enabling the parties to go ahead and execute their agreement. The PCC has contested this. It also returned the parties’ respective notices for being deficient in form and substance.

What then is a notice sufficient in form and substance? MC 2016-02 did not really offer a clue as it only laid out the requirements in broad strokes. With the posting of this draft notification form, we finally get an idea of what the PCC considers to be a complete notice.

It looks like the PCC intends to go into the innards not only of the transaction but of the parties themselves. Look at the requirements:

• description of the ownership structure and control both before and after the merger/acquisition/joint venture;
• description of affiliates of the parties with significant assets/sales/revenues in the Philippines;
• description of each line of business in the Philippines, including assets and sales;
• periodic audited financial statements, including for interim periods;
• description of principal categories of products, including the 20 more important customers and suppliers, and peso values of transactions for each; and
• all studies, surveys, analyses or reports for the purpose of evaluating or analyzing the deal, as well as the names of the people who prepared these reports.

This may seem like a lot of documentation but it won’t be like the parties are going to start from scratch since these type of deals usually involve due diligence exercises by both parties anyway. The issue here would be how to make sure that the correct information and documents are submitted. The parties will also have to be prepared to answer questions from the PCC on the details of the documents. I would expect that this would be akin to the clarifications that companies make before the SEC or PSE in line with registration or listing of shares.

The PCC also asks the parties to include a list of the foreign competition or antitrust authorities that have been notified of the transaction and the respective dates of the notices. I think it is a fair expectation that in controversial deals, the PCC may get in touch with their foreign counterparts.

Finally, the PCC also asks the parties to disclose and describe whether they have horizontal or vertical relationships in a market. A horizontal relationship means that the parties are in the same type of business or same level in the supply chain. Smart and Globe are examples of this. On the other hand, a vertical relationship means that the parties may be suppliers or buyers of each other. For instance, one party is a telco and the other party is an ISP selling internet service to a certain community.

I won’t be surprised if the submissions made by PLDT, Globe, and SMC are a far cry from the level of detail required by the PCC. It was reported today that PLDT and Globe complied with the PCC order to resubmit the notice and furnish additional information. I agree that this was the prudent thing to do, if only to maintain to the public the stance that they are cooperating with the PCC. The telcos though have not abandoned their position that the deal is already deemed approved by virtue of MC2016-02. Resubmission does not change this position since the IRR, while already released, is yet to take effect.

This saga gets more interesting by the day. Abangan ang susunod na kabanata, as they say.