Has PCC exceeded its watchdog function?


By Rose de la Cruz


In an age when the Philippines has fully embraced the principles and practice of globalization—by attracting foreign investors and goods to flow freely into the local market—the Philippine Competition Commission seemed to have exceeded its watchdog function in the planned acquisition by SM Retail of Goldilocks Bakeshop Inc, the biggest cakes, bread company cum bakeshop with 600 stores nationwide.


PCC approved last January the planned acquisition by SM Retail of Goldilocks and imposed conditions to prevent the mall chain from discriminating against the Goldilocks competitors in spaces in SM malls and to prevent leaking to Goldilocks the market data of competitors through the point of sales information it gets from its locators.


PCC (whose charter creating it is carbon- copied from that of UK, a very mature and developed country unlike the Philippines) of course has jurisdiction over mergers and acquisitions (M&A) worth P1 billion and above. The SM-Goldilocks deal being so was covered by PCC’s oversight function.


But in the exercise of its oversight function, PCC should not in any way intervene in the business plans of the would-be partners, unless it is in possession of a formal complaint filed by any party within the same business or with interest to any or both partners.


By imposing a condition—for the approval of the M&A deal between these parties—PCC overreached or overstepped its watchdog functions, virtually dictating upon their business plans.


But what if a foreign conglomerate (say Walmart) —using a local dummy—would come in and acquire Goldilocks or any other local conglomerate in response to government’s call to invest in the country, will PCC also overreach its mandate?


Where goes our commitment to globalization?




The buzz word these days is glocal (globalizing the locals) so that they would grow big and strong enough to complete globally—whether or not the field is level out there.


Stepping into the picture just when a local conglomerate like SM wants to buy into a huge bakeshop/food business would run counter to the thrust of going glocal.


SM grew to its current size from hardwork, determination and against all odds, which made many envious of it to a point of calling it Pacman (which eats every profitable business, be they big or small).


A lot more conglomerates (the Ayalas, Concepcions, Tans, Gokongweis, Pangilinans) do not get as much beating as SM does and this is because the SM Group has grown big in whatever area it enters (banking, property, hospitality, education and consumer goods).  Additionally, people are closely watching SM because its businesses are situated practically in the entire country.



The parties are mandated to submit to random inspections to check their compliance to their commitments and to submit periodic reports to the PCC.


The SM Group committed to promptly address violations or deficiencies discovered by the monitoring team during their inspection, otherwise SM will be subjected to fines, additional remedies and other measures once any of the conditions are breached.

The PCC is mandated to review M&As that meet the P1 billion threshold in line with the Philippine Competition Act to ensure that deals do not harm the interest of consumers.

A total of 142 merger filings by local and international companies with a transactional value of P2.171 trillion have been received by PCC to date, including 38 merger filings that involve global deals. 


Aborted deal


SM and Goldilocks jointly decided in early February to abort the deal citing “changes in the business environment.”


Owned by the Yee family, Goldilocks operates a food retailing enterprise with over 600 stores here and abroad. Of the overseas stores, 12 are located in the US, two in Canada and six in Thailand.


Goldilocks president Richard Yee said in a statement “this (halting the deal) was a mutual decision, which was jointly agreed upon after a friendly and productive dialogue. Since we first began talks with SM, so much has happened in the marketplace, and many changes have occurred in our respective business environments. This caused us to re-evaluate our position, and to arrive at a decision that we feel is best for both companies.”


Yee thanked the SM group for the intent to partner with his company. “This is yet another validation of our efforts to strengthen our leadership position. To this end, we remain focused on our plans and strategies, which has allowed us to achieve double-digit growth in the past few years. We now have over 600 stores to serve our customers nationwide, and we will continue this expansion in order to be more accessible to our customers,” he said.


Established in 1966, Goldilocks has grown from a small bakery in Makati City to the country's largest bakeshop with over 600 stores at home and abroad. 


Goldilocks’ main competitor, Red Ribbon has 133 branches in Metro Manila, 12 of which are in SM Malls. Goldilock’s has 36 branches in SM Malls out of its 159 stores in the capital region.


To ensure the SM Group’s compliance with its commitments, the PCC required the group to submit reports to the commission and said it will conduct its own monitoring. “Over a period of five (5) years, the parties will be monitored periodically by a team of experts from PCC. Monitoring will also include random inspections,” it said.


Any breach of the conditions will subject SM to fines, additional remedies, and other measures available to the Commission, the agency added.


Goldilocks has consistently enjoyed a leading position in the bakeshop and restaurant segment of the food service industry. It has 550 stores worldwide compared to 430 branches of Red Ribbon Bakeshop Inc., its closest competitor.


Based on the latest available financial statements at the Securities and Exchange Commission (SEC), Goldilocks grossed P5.7 billion in revenues in 2015 while Red Ribbon sales reached only P5.3 billion. However, Red Ribbon’s revenues has been growing faster, especially after it was acquired by fast-food giant Jollibee Foods Corp. in 2012.



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Thursday, 13 December 2018
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