COMESA – MERGER CONTROL REGIME: A QUICK GUIDE FOR BUSINESS – THE CRITICAL FACTS YOU OUGHT TO KNOW

  1. What does COMESA stand for?

COMESA stands for the Common Market for Eastern and Southern Africa. It is created under a “Treaty” called the Treaty establishing the Common Market for Eastern and Southern Africa

 

  1. Which Countries are Member States of COMESA?

COMESA comprises 21 Member States namely: Burundi, Comoros, Democratic Republic of Congo, Djibouti, Egypt, Eritrea, Eswatini, Ethiopia, Libya, Kenya, Madagascar, Malawi, Mauritius, Rwanda, Tunisia, Seychelles, Sudan, Somalia, Uganda. Zambia and Zimbabwe.

 

  1. Do Member States of COMESA have National Competition Laws?

Yes: The majority of COMESA Member States have National Competition Laws. Some are at an advanced stage in promulgating Competition Laws. Those that do have are:

  • Burundi
  • Comoros
  • Democratic Republic of Congo
  • Djibouti
  • Egypt
  • Eswatini
  • Ethiopia
  • Kenya
  • Madagascar
  • Malawi
  • Mauritius
  • Rwanda
  • Seychelles
  • Sudan
  • Tunisia
  • Zambia
  • Zimbabwe

 

  1. Do the National Competition Laws of COMESA Member States apply to mergers and acquisitions with cross-border effect?

No: The National Competition Laws do not apply to mergers and acquisitions with cross-border effect. This is because they lack extra-territorial application that is the application of national competition laws do not extend beyond the boundaries of their borders.

 

  1. In view of the above, is there a Regional Competition Law regulating mergers and acquisitions with cross-border effect in COMESA?

Yes: The COMESA Competition Regulations (“the Regulations”) and the COMESA Competition Rules (“the Rules”) regulate mergers and acquisitions with cross-border effect in COMESA. The Regulations and Rules are administered by the COMESA Competition Commission (“the Commission”).

 

  1. Are there supplementary or additional legislation that the Commission uses in the regulation of mergers and acquisitions?

No: However, the Commission has since 31 October 2014 developed the COMESA Merger Assessment Guidelines (“the Guidelines”). The Guidelines provide the approach the Commission takes when applying the Regulations and Rules pertaining to merger assessment. It should also be pointed out that the Guidelines are not law and therefore not binding on the Commission. This notwithstanding, the Commission does not blatantly depart from them but may do so only in exceptional circumstances with clear justification.

 

  1. Who are the enforcement Authorities of the Regulations and Rules?

The following institutions are responsible for the enforcement of the Regulations and Rules:

 

  1. Do the Regulations call for a mandatory notification of mergers and acquisitions?

Yes: The Regulations call for the mandatory notification of mergers and acquisitions that satisfy the requirements of Part 4 of the Regulations. Among these requirements are:

  • The definition of a merger under Article 23(1) of the Regulations
  • Both the acquiring firm or the target firm or either the acquiring firm or the target firm operate in two or more Member States under Article 23(3)(a)
  • The exceeding of the prescribed thresholds as required under Article 23(3)(b)

Article 24 of the Regulations makes it mandatory to notify mergers that meet the above requirements.

 

  1. How do the Regulations define a merger?

A “merger” is defined as the direct or indirect acquisition or establishment of a controlling interest by one or more persons in the whole or part of the business of a competitor, supplier, customer or other person. Therefore, in order to be notifiable, a transaction should fall within the above definition. In simple terms, a merger is constituted whenever two or more previously independent undertakings begin to operate as one in the market.

 

  1. Are all mergers that fall under the definition of the Regulations notifiable?

Not all mergers that satisfy the definition above are notifiable to the Commission but only those that involve parties with operations in two or more Member States and meet the prescribed thresholds. The thresholds are met where:

  • the combined annual turnover or value of assets (whichever is higher) in the Common Market of all parties to a merger equals or exceeds US$50 million; and
  • the annual turnover or value of assets (whichever is higher) in the Common Market of each of at least two of the parties to a merger equals or exceeds US$10 million, unless each of the parties to a merger achieves two-thirds of its aggregate turnover or assets in the Common Market within one and the same Member State.

The thresholds are enshrined under Rule 4 of the Rules on the Determination of Merger Notifications and method of calculations.

 

  1. When is a firm considered to operate in a Member State?

An undertaking is considered to operate in a Member State if it derives turnover in that Member State or have assets therein to which a business activity can be associated.

 

  1. Does the Commission hold pre-merger notification meetings?

Yes: the Commission is transparent at all stages of the merger procedure. The Commission is open to engagement with the parties before they notify a merger, during the assessment of the merger until the decision is issued.

 

  1. When must a merger be notified to the Commission?

A merger  must be notified to the Commission within 30 calendar days of the parties’ decision to merge.

 

  1. What constitutes a decision to merge?

The Commission considers that a decision to merge must either be

  • a joint decision taken by the merging parties and so comprise the conclusion of a definitive, legally binding agreement to carry out the merger (which may or may not be subject to conditions precedent); or
  • the announcement of a public bid in the case of publicly traded securities.

 

  1. What are the consequences of not notifying a merger with the Commission?

A merger that has not been notified to the Commission has no legal effect and no rights or obligations imposed on the participating parties by any agreement in respect of the merger will be legally enforceable. In addition, the Commission may impose financial penalties of up to 10% of either or both of the merging parties’ annual turnover in the Common Market.

 

  1. Are the parties free to elect to implement a merger before approval is granted by the Commission?

Yes: the COMESA merger control regime is non-suspensory and parties may implement their merger before approval is granted and after notification has been made. However, caution should be exercised as the parties may implement the merger at their own peril should the Commission decide to reject their merger after assessment.

 

  1. Does the notification of a merger require a fee?

Yes: a merger notification fee is required for merger notification. The merger notification fee is calculated as 0.1% of the merging parties’ combined annual turnover or value of assets in the Common Market (whichever is higher) with a cap of US$ 200 000.Rule 55(5) of the COMESA Competition (Amendment) Rules, 2014 provides for this.

 

  1. How long does it take the Commission to complete the assessment of a merger?

The Commission has up to a 120 calendar days within which to give its decision on a merger. This period may in some exceptional circumstances be extended if the Commission decides a longer period is necessary. In these circumstances, the Commission shall inform the parties of such an extension.

 

  1. Are notifications to the National Competition Authorities still required if the Commission has been notified?

No: the Commission offers a ‘one stop facility’. This means that all mergers and acquisitions with cross-border effect and notified to the Commission should not be notified to National Competition Authorities.

 

  1. Are there instances when a Member State may review a merger that has been notified to the Commission?

Yes: it is possible where the Commission refers such a case to a Member State. A Member State having attained knowledge of merger notification submitted to the Commission may request the Commission to refer the merger for consideration under the Member State’s national competition law if the Member State is satisfied that the merger, if carried out, is likely to disproportionately reduce competition to material extent in the Member State or any part of the Member State. It is important to note that the Commission shall consider such a request and decide whether or not to refer the case to the requesting Member State.

 

  1. What are the possible decisions that the Commission may issue after the assessment of a merger?

After the assessment of the merger, the Commission may issue the following decisions:

  • Approve the merger unconditionally
  • Approve the merger with conditions
  • Reject the merger

 

  1. What are the consequences of breaching the conditions of approval of the merger?

Breaching the conditions of approval of a merger will render the merger illegal and no rights or obligations imposed on the participating parties by any agreement in respect of the merger shall be legally enforceable in the Common Market.

 

  1. If I have further questions, how do I get in touch with the Commission?

You may get in touch with the Commission using the contact details below:

 

COMESA Competition Commission

5th Floor – West Wing, Kang’ombe House

P.O Box 30742

Lilongwe 3

Malawi

Tel: +265 (0) 1 772466
Email: wmwemba@comesa.int – Manager, Mergers and Acquisitions
Compcom@comesa.int

mdisasa@comesa.int – Registrar