In November 2019, Kenya introduced The Competition Rules, 2019 (Rules) to govern the Competition Authority of Kenya's (CAK) functions under the Competition Act No 12 of 2010. Some of the key changes in relation to merger control are set out below.
A merger must now meet any of the following thresholds to be mandatorily notifiable to the CAK:
- the undertakings have a minimum combined turnover or assets (whichever is higher) in Kenya of KES 1-billion and the turnover or assets (whichever is higher) in Kenya of the target undertaking is above KES 500-million
- the turnover or assets (whichever is higher) in Kenya of the acquiring undertaking is above KES 10-billion and the merging parties are in the same market or can be vertically integrated (unless the transaction meets the COMESA Competition Commission (COMESA Commission) Merger Notification Thresholds
- in the carbon-based mineral sector, if the value of the reserves, the rights and the associated assets to be held as a result of the merger exceed KES 10-billion
- where the undertakings operate in the COMESA region, if the combined turnover or assets (whichever is higher) of the merging parties does not exceed KES 500-million and two-thirds or more of their turnover or assets (whichever is higher) is generated or located in Kenya
Excluded transactions requiring approval of the CAK
Mergers that meet any of the following thresholds may be considered for exclusion from notification, but an application for exclusion and approval of the application by the CAK is required prior to implementation of the transaction:
- the combined turnover or assets (whichever is higher) in Kenya of the merging parties is between KES 500-million and KES 1-billion
- if the firms are engaged in prospecting in the carbon-based mineral sector, irrespective of asset value
Excluded transactions not requiring approval of the CAK
Mergers that meet any of the following thresholds will be excluded from notification altogether:
- the combined turnover or assets (whichever is higher) in Kenya of the merging parties does not exceed KES 500-million
- the merger meets the COMESA Commission Merger Notification Thresholds and at least two-thirds of the turnover or assets (whichever is higher) is not generated or located in Kenya
Having said that, the CAK may require parties to an excluded transaction to notify such excluded transactions, even if it falls below the exclusion thresholds set out above, where it is likely that the transaction will substantially prevent or lessen competition, restrict trade or raise public interest concerns. In such situations, parties to the merger may seek an advisory opinion from the CAK on whether the transaction requires notification or not.
Merger Filing Fees
The merger filing fees have also been changed. The merger filing fees now payable for merger notifications in Kenya are reflected below:
MERGER FILING FEES
Threshold (Combined value of assets/turnover) Fee
KES 0 - KES 500-million Nil
KES 500-million and one - KES 1-billion Nil
KES 1-billion and one - KES 10-billion KES 1-million
KES 10-billion and one - KES 50-billion KES 2-million
≥ KES 50-billion KES 4-million
Domestic Kenya Filing versus Regional COMESA filing
Historically, the CAK insisted on domestic merger filings even where a merger met the COMESA regional dimension thresholds and a merger filing had been submitted to the COMESA Commission. However, in terms of the Rules, where a merger meets the COMESA regional dimension merger thresholds, undertakings shall merely inform the CAK in writing that a transaction has been notified to the COMESA Commission within 14 days of filing the notification to the COMESA Commission.
Abandonment of a merger
In terms of the Rules, parties to a notified merger shall be deemed to have abandoned the merger if they fail to respond to the CAK's request for additional information within 21 days from the date of request. Of course, parties may also formally withdraw a merger in writing to the CAK. The filing fee paid to the CAK would not be refunded in such a situation.
Mergers implemented without the CAK's approval
The Rules set out the factors that the CAK will take into account in determining whether a merger has been implemented without the CAK's authority. In particular, the CAK will consider whether:
- there has been an actual integration of any aspect of the merging parties, including, but not limited to, the integration of infrastructure, information system, employees, corporate identity or marketing efforts
- there has been placement of employees from the target undertaking to the acquiring undertaking
- there has been an effort by the acquiring undertaking to influence or control any competitive aspect of the target undertaking's business, such as setting prices, limiting discounts or restricting sales to certain customers or certain products
- there has been an exchange of strategic information between the merging parties for purposes other than valuation, or on a need-to-know basis during due diligence, or in ways compromising the strategic independence of each of the parties
What remains to be seen is the manner in which these amendments will be interpreted and implemented in practice by the CAK.
Written by Lerisha Naidu, Partner and Sphesihle Nxumalo, Associate, Competition and Antitrust Practice, Baker McKenzie Johannesburg