PCC blocks URC-RHI deal over monopoly concerns.
PCC blocks URC-RHI deal over monopoly concerns !-- -- Louella Desiderio (The Philippine Star) - February 15, 2019 - 12:00am MANILA, Philippines The Philippine Competition Commission (PCC) has blocked the planned acquisition by Universal Robina Corp. (URC) of the refining and milling assets of Central Azucarera Don Pedro Inc.
(CADPI) and land owned by Roxas Holdings Inc. (RHI), citing the deal would lead to a monopoly in sugarcane milling services in Southern Luzon.
In a commission decision issued on Tuesday, the PCC said URC's buyout of its only competitor in the sugarcane milling services market leads to a monopoly in the region. Earlier, the PCC raised competition concerns on URC's proposed acquisition of CADPI and RHI's assets.
Following the competition concerns raised by the antitrust body, the parties voluntarily submitted commitments. PCC, however, rejected the voluntary commitments offered by the parties as such were deemed insufficient to address the competition concerns raised.
"The prohibition prevents this deal from creating a monopoly in the relevant market that could harm the welfare of the sugar cane planters. It is the duty of the commission to prevent the creation of monopolies when applying the merger control powers conferred on it by the Philippine Competition Act," PCC chairman Arsenio Balisacan said.
URC's sugar mill is located in Balayan in Batangas, while CADPI-RHI's milling facilities are in Nasugbu in the same province. While both mill operators are in Batangas, the monopoly to be created by the merger would substantially reduce competition even in other provinces such as Cavite, Laguna and Quezon.
In addition, the PCC said that while the transaction mainly affects sugarcane farmers in Southern Luzon, the sugar processed from the facilities cater to consumers nationwide, including those in Metro Manila. PCC's market investigation showed farmers stand to lose the benefits of competition in terms of planters' cut in sharing agreements, sugar recovery rates, and incentives.
URC is engaged in the production of food and beverage, sugar, agro-industrial products, and bioethanol. Apart from Batangas, it has mills in Iloilo, Negros Oriental, Negros Occidental, and Cagayan which produce raw sugar, refined sugar and molasses used by other URC business segments and third parties.
Meanwhile, RHI owns 100 percent of the shares of CADPI, which operates an integrated sugar cane milling and refining plant in Batangas. RHI is also in the business of trading raw and refined sugar, and molasses.
"A merger-to-monopoly deal is among the most detrimental types of business transactions. The URC takeover removes its only competitor, erodes the benefits of competition for the sugarcane planters, and leaves market power at the hands of a single provider in an area," Balisacan said.