Anthea Paelo
The COMESA Competition Commission (CCC) in October 2014 published merger guidelines to help clarify procedural issues regarding the notification of mergers. The CCC is relatively new having been established in January 2013. In the last year alone, the CCC has approved mergers worth over US$41 billion.1 In an earlier issue2, we discussed some of the concerns and opportunities that can arise with enforcing competition law across the 19 COMESA member states. Given a likely increase in merger activity in years to come3, providing clearer guidelines for merger evaluation is an important step towards improving the functions of the authority. The revised provisions on notification in particular help to provide certainty for companies involved in cross-border transactions although we note that by their very nature, the guidelines and the legislative environment in terms of evaluating transactions will need to be tested on a case-by-case basis.
The main features of the new guidelines relate to what constitutes a notifiable merger and the two-phase merger review process. The COMESA competition regulations define a notifiable merger as one with a regional dimension and that has a value at or above the threshold of turnover or assets prescribed by the Commission’s Board under Article 23(4).4
The current threshold of combined annual turnover or assets is zero, however the number of notifications is restricted by a clause that requires mergers to have "an appreciable effect on trade between Member States and which restrict competition".5 The regional dimension refers to mergers taking place where at least one party has operations in two or more member states. The firm is considered to be operating in a member state if its annual turnover in the member state exceeds US$ 5 million. The CCC also has to be notified when the target undertaking is in a member state. However, a notification is not necessary where more than two thirds of the annual turnover in the common market of each of the merging parties is held in one member state. The notification fee is set at 0.5% (or US$ 500 000, whichever is lower) of the combined annual turnover or combined value of assets in the common market.
Another feature of the merger guidelines is the two-phase merger review process. The two phases allow for mergers that do not raise significant competitive concerns to be evaluated within 45 days. If at the end of the first phase the director determines that the merger is likely to cause a substantial prevention or lessening of competition, the companies would have to go through both phases, a process which can take up to 120 days. The guidelines provide helpful reference for companies intending to merge in the region which is especially true when considering that a number of member states do not have national competition authorities. This is also in light of certain tensions over jurisdiction between the COMESA Competition Commission and national competition authorities as discussed in our previous article, as well as the need for cooperation between the authority and national authorities in terms of obtaining information and actually investigating cases, which has been required in practice.
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Notes
1. Mutomweno, N. ‘COMESA approves US$1bn mergers’ (04 November 2014). African Review of Business and Technology.
2. Zengeni, T. ‘Update on the COMESA Competition Commission’ (April 2014). CCRED Quarterly Review.
3. Thomas, S. ‘Mergers & Acquisitions: Africa’s Resurgence’ (10 July 2014). Financial Mail.
4. COMESA. (2014). ‘The COMESA Merger Guidelines’. COMESA Competition Commission.
5. See note 4.