PCC warns MSME pandemic ‘attrition’ may lead to anti-competitive outcome

The Philippine Competition Commission (PCC) on Monday warned the shutdown of micro, small and medium enterprises (MSMES) may diminish the number of players in the market and leave consumers with lesser choices in sourcing their essentials.

PCC Chairman Arsenio M. Balisacan expects an increase in mergers and acquisitions this year, as small firms try to survive the health crisis by selling their assets to corporations. He said his agency is monitoring this situation that may shrink the number of players in specific industries to the detriment of consumers.

“We are closely monitoring the market to make sure we understand what’s happening in there,” Balisacan said in a news briefing.

“In the past experiences of crises, especially of economic crises, many firms—small and medium enterprises—are finding it difficult to survive and would have no options but to sell their assets or firms. We would likely see this kind of thing happening during this crisis,” he added.

For Balisacan, the government is taking the right direction in its move to beef up fiscal resources to assist MSMES make it through the Covid-19 pandemic.

He warned the demise of MSMES will allow selected players to enlarge their market share and operate with less competition or without at all. Balisacan explained a situation wherein markets are concentrated to a few firms would pose problems to consumers in the future.

Last year the PCC received 26 filings for mergers and acquisitions, amounting to a total of P909 billion, of which 20 notifications were approved, one was recalled, two were returned and three are under review.

Based on the PCC’S annual report, most of the transactions submitted last year came from the industries of electricity and gas, and transportation and storage. Likewise, the PCC received at least three mergers in the manufacturing sector, as well as in finance and insurance and in real estate.

The PCC observed an increase in merger activities at the height of the pandemic, as firms try to consolidate their assets to survive the financial losses.

Against the agency’s recommendation, legislators included in the second Bayanihan to Recover as One Act a provision that exempts mergers and acquisitions valued below P50 billion from the mandatory review of the PCC for at least two years. The law also suspended the PCC’S power to conduct motu proprio reviews on such transactions for one year.

The competition body, for its part, has called on merging parties to submit to its review to avoid any complications once the PCC regains its authority to scrutinize transactions when the second Bayanihan law expires.

In January the PCC raised the fines by 10 percent to be imposed on violators of the competition law. With the adjustment, the maximum penalty for cartels, abuses of dominance and prohibited mergers was increased to P110 million, from P100 million, while for belated merger notification, to P2.2 million, from P2 million.