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Group 4

Members:
Valz Demreeve Salma
Ram Santos
Marvilie Serna
Myra Velarde
Lorence Valencia
George Yap
FACTS:
Lami-Cola is a Filipino company duly registered with
the SEC involved in the beverage industry currently
ranked no. 3 with 20% market share.
The competitor, Kooks Bottling Inc., also a Filipino
company, also duly registered with the SEC, involved
in the merger is ranked no. 1 with 35% in current
market shares. The Book Value of your shares is 100.
The Book Value of the competitor is 200.
SURVEY OF RELATED LITERATURE
 MERGERS and ACQUISITIONS according to the CORPORATION
CODE OF THE PHILIPPINES [Batas Pambansa Bilang 68]
 Sec. 76 Plan of Merger or Consolidation (Corporation Code) –
two or more corporations may merge into a single corporation
 You need the approval by majority of both boards to come up
with a plan of merger which contains:
 Names of the corporations proposing to merge
 The terms of the merger and the mode of carrying the same into
effect
 A statement of the changes, if any, of the articles of
incorporation of the surviving corporation in case of merger
 Other provisions with respect to the proposed merger
Sec. 77 – you need the
stockholder’s approval also
through:
Notice to the stockholders
2/3 affirmative vote of the
stockholders representing the
outstanding capital stock of
each corporation
Sec. 78 Articles of Merger – should be
executed by each of the constituent
corporations signed by president, vice-
president and certified by the secretary
of each corporation setting forth:
The plan of merger
The number of shares outstanding
As to each corporation the number of
shares
Sec. 79 Effectivity of Merger– the
articles of merger signed and
certified submitted to the SEC in
quadruplicate for approval
COMPETITION LAW
Quisimbing Torres “there are bills pending in Congress relating to anti-
trust and monopoly activities but, as of the current time, the
Philippines does not have a comprehensive and developed legislation
with respect to such activities. “
THE CONSTITUTION
(Article XII, Section 19), the
state is mandated to regulate or
prohibit monopolies,
combinations in restraint of
trade and other unfair
competition practices for the
sake of public interest.
CRIMINAL LAW
Article 186 defines and penalizes monopolies and combinations in
restraint of trade while Article 187 provides penalties.
Combinations in restraint of trade are defined as:

 Any agreement, whether in the form of a contract or


conspiracy or combination in the form of trust or
otherwise, resulting in the restraint of trade or commerce
 Preventing by artificial means free competition in the
market
 Any manner of combination, conspiracy, or agreement
between or among manufacturers, producers, processors,
or importers of any merchandise or object of commerce,
or with any other persons, for the purpose of making
transactions prejudicial to lawful commerce, or increasing
the market price of such merchandise or object of
commerce or of any other article in the manufacture,
production, or processing, or importation of which such
merchandise or object of commerce is used. [Emphasize
supplied].
Illegal monopolies are defined as:

* Monopolizing any merchandise or object of trade or commerce


* Combining with any other person or persons to monopolize any merchandise
or object of trade or commerce, in order to alter the price thereof by spreading
false rumors or making use of any other artifice to restrain free competition in
the market. [Emphasize supplied].
CIVIL LAW
The Civil Code allows the collection of damages arising from unfair
competition (Article 28)
It also allows the collection of damages arising from abuse in the
exercise of rights and in the performance of duties (Article 19), e.g.,
abuse of a dominant market position by a monopolist.
SPECIAL LAWS
1. R.A. No. 9136 (2001), otherwise known as the Electric Power
Industry Reforms Act of 2001
2. R.A. No. 8752 (1999), otherwise known as the Anti-Dumping Act of
1999
3. R.A. No. 8479 (1998), otherwise known as the Downstream Oil
Industry Deregulation Act of 1998
4. R.A. No. 8293 (1997), otherwise known as the Intellectual Property
Code of the Philippines
5. Batas Pambansa Blg. 68 (1980), otherwise known as the
Corporation Code of the Philippines This Batas Pambansa Big. 178
(1982) as amended, otherwise known as the Revised Securities Act
6. R.A. 7581 (1991), otherwise known as the Price Act, and R.A. 7394
(1932), otherwise known as the Consumer Act of the Philippines

7. Under the Foreign Investments Act


8. Commonwealth Act No. 108
9. The passage of the Securities Regulation Code (“SRC”) in August
2000
SUPREME COURT CASES
(JURISPRUDENCE)
In the case of Gokongwei, Jr. v Securities and Exchange Commission, et
al., the Supreme Court narrowly defined monopoly as "unified tactics with
regard to price.“
The material consideration in determining its existence is not that prices
are raised and competition actually excluded, but that power exists to
raise prices or exclude competition when desired.
In the Tatad case, the Supreme Court, in its original decision, held that: "A
monopoly is a privilege or peculiar advantage vested in one or more
persons or companies, consisting in the exclusive right or power to carry
on a particular business or trade, manufacture a particular article, or
control the sale or the whole supply of a particular commodity. It is a form
of market structure in which one or a few firms dominate the total sales of
a product or service."
RECOMMENDATIONS
Based on the literature stated, it is advisable to
propose the increase from 100 to 150 value as
part of the condition to fulfil the merger, it
being effectively an acquisition process by the
larger company, as additional incentive, we
suggest you opt for a waiver of all claims in the
resulting company in exchange for a premium
acquisition share price of 150 instead of the
book value of 100 in order to facilitate the terms
you desire for the merger.
In your case, there is a greater probability of
obtaining the premium shares in exchange for
controlling interest of your company.
For the merger to properly take place, certain
protocol must be accomplished. The law firm has
prepared this guideline for the smooth transition
of the merger between the 2 companies, they are
as follows:

Specific Industry Regulation


Non-Regulatory Consents and Approvals
DOCUMENTATION AND DUE DILIGENCE

Preliminary Agreement - Memorandum of


Understanding/Letter of Intent

Due Diligence- The general rule in the Philippines is


caveat emptor or buyer beware

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