This announcement generated a significant amount of interest as, although there have been a number of phase I reviews, this was the first time that the PCC had conducted a phase II review since the Philippine merger control regime began back in June 2016. As well as the PCC’s stance on merger control in the Philippines generally, the outcome of the review was seen as a test of the PCC’s appetite for developing a competitive non-bank electronic money market in the Philippines (the Electronic Money Market).

On 23 August 2017, the PCC released its decision, which provided that the Transaction did not result in a substantial lessening of competition in the Electronic Money Market. Below, we look at the Transaction in more detail and the implications for both potential and current investors in the Philippines.

Transaction Details

Globe provides fintech solutions to both consumers and corporates and has interests in a micro-payment service (Gcash) and a mobile loan service (Fuse Lending). It is wholly owned by Globe Capital Venture Holdings, Inc. (Globe Venture), which is, in turn, wholly owned by Globe Telecom, Inc. (Globe Telecom), a telecommunications company in the Philippines offering mobile and fixed-line telecommunications services, broadband, data connections, internet and managed services.

Alipay is part of the Ant Financial Services Group (Ant) led by Chinese billionaire Jack Ma. Another reason why the Transaction has attracted a lot of attention is that Ayala is a high-profile group in the Philippines, with interests in Ayala Land, Bank of the Philippine Islands, Globe Telecom and Manila Water. It has a combined market capitalisation of US$40 billion, comprising 20 per cent of the market capitalisation of the Philippine Stock Exchange Composite Index.

Under the terms of the deal, Alipay will acquire 45 per cent, and Ayala 10 per cent, of the issued shared capital of Globe. The remaining 45 per cent of the shareholding will continue to be held by Globe Venture.

Now that the PCC’s decision has been delivered, one would expect the Transaction to move to completion fairly quickly. However, no public announcement has been made.

Phase I and II reviews

All acquisitions in the Philippines which are over PHP 1 billion (approximately US$19.5 million) must be notified to the PCC by the parties to the transaction; the PCC will then decide whether to carry out a phase I review.

The PCC defines an ‘acquisition’ as the purchase of securities or assets, through a contract or other means, for the purpose of obtaining control by: (i) one entity of the whole or part of another; (ii) two or more entities over another; or (iii) one or more entities over one or more other entities. ‘Control’ is defined by the PCC by reference to the concept of decisive influence, similar to that found in European Union legislation. On that analysis, decisive influence arises where a party acquires the ability to determine an undertaking’s commercial strategy. Therefore, using this test, Alipay and Ayala’s combined investment, amounting to 55 per cent of Globe’s issued share capital, will result in them having control over Globe.

Consequently, combined with the fact that Ant is also a provider of digital financial services, there were concerns that the Transaction would lead to a lessening of competition in the Electronic Money Market. With this mind, the PCC undertook a phase I review of the Transaction, commencing on 27 May 2017 and lasting for a period of 30 calendar days. As part of the phase I review, the PCC conducted an inquiry into whether the Transaction was likely to substantially prevent, restrict or lessen competition in the Electronic Money Market and any other related sectors. Typical anti-competitive conduct includes predatory pricing, actions taken by market entities to foreclose competition and the coordination of behaviour by market players to harm competition.

On 27 June 2017, upon completion of its phase I review, the PCC moved the Transaction to a phase II review as it was decided that closer analysis of, and further information on, the Transaction was required. At the time, the PCC pointed out that the referral to phase II did not indicate that it had made a judgment on whether there had been a substantial lessening of competition; it instead meant that a more detailed analysis was required and such analysis would be based on further information, which would be sought from the notifying parties.

The phase II review lasted for a period of 60 calendar days. The PCC does not have the power to extend the period for phase II reviews unless a time extension is requested by one of the parties to the transaction. In this case, a seven-day extension was granted at the request of Alipay.


On 23 August 2017, the PCC issued its decision (Commission Decision No. 21-M-005-2017), in which it concluded that the Transaction did not result in a substantial lessening of competition in the Electronic Money Market on the grounds that there was no evidence that, post-acquisition:

  1. the parties would be better able or have a greater incentive to engage in foreclosure in the relevant market;
  2. the parties would be able or have an incentive to engage in coordinated anti-competitive behaviour; and
  3. other market participants would lose sufficient competitive constraints, (the Decision).

The PCC commented that “electronic money is increasingly becoming a preferred mode of payment for the unbanked consumers and we wanted to protect competition in this niche market. …we have closely looked into the dynamics of the players within the non-bank electronic money market. Since this market is still evolving there is scope for more players to enter the industry, domestic or foreign. Therefore, the competition in this market is expected to remain robust.” Accordingly, the PCC will take no further action with respect to the Transaction.

What does this mean for investors in the Philippines?

The PCC has taken its time to use its powers under the merger control regime to progress a transaction to a phase II review. This protracted approach was seen by some as a reluctance to use its powers; however, its phase II review into the Transaction demonstrates that this is not the case. Ultimately, the PCC appears to be adopting a sensible and controlled approach to merger control and this is an encouraging sign for foreign investors.

The Decision specifically relates to the Electronic Money Market sector; however, it is also an unequivocal sign for investors in the Philippines, across the board, that a robust competition framework is being implemented in the Philippines. The fact that the PCC is not afraid to use its powers, even in respect of transactions which involve large players in the market, such as Ayala, provides a positive indication to investors that investments will be protected from anti-competitive mergers that could lead to market foreclosure or a reduction of competition in certain sectors.

Furthermore, the flip side of this is that the Decision demonstrates that the PCC is taking a pragmatic approach to merger control, which is a welcome sign for foreign investors. It is hoped that such pragmatism will extend beyond the Electronic Money Market sector to merger control in the Philippines generally. Consequently, investors should be able to take comfort in the knowledge that, provided their transactions will not lead to a decline of competition in the market, the PCC will not unduly delay transactions or implement onerous protectionist measures.