The COMESA Competition Commission (CCC) is a regional competition authority created to facilitate increased pan-African trade. It consists of 19 member states namely Burundi, Comoros, the Democratic Republic of Congo, Djibouti, Eritrea, Ethiopia, Kenya, Libya, Madagascar, Mauritius, Rwanda, Seychelles, Sudan, Swaziland, Uganda, Zambia, Zimbabwe, Egypt and Malawi.
As per an earlier e-Bulletin, the COMESA Competition Regulations came into effect on 14 January 2013. It has very significant implications for transactions and firms doing business in the COMESA member countries.
Werksmans director Pieter Steyn and his team has lodged the first ever merger filing under the COMESA regulations in respect of the acquisition by Funai Electric of Philips' Lifestyle Entertainment business group. The implementation of the COMESA merger control regulations has raised several legal and practical questions including –
- whether the CCC is a "one stop shop" for the entire COMESA region so that filings with national authorities are not necessary if a filing is made to the CCC. Some national regulators (most notably in Kenya) have challenged this. Until this issue is resolved it will not be clear whether filings must be lodged both with the CCC and national regulators. Multiple filings will add to the costs of and delay transactions and also raises the scenario of conflicts between the CCC and national regulators;
- all mergers regardless of size are notifiable to the CCC if the acquiring firm, the target firm or both of them “operate” in two or more COMESA member states. The CCC's view is that "operations" are not limited to a physical presence and sales turnover from COMESA states is sufficient. The strict wording of the regulations implies that a CCC filing could be triggered even if the target business being acquired is outside the COMESA region (although it is arguable that this will not be the case as long as the transaction will have no effect on the COMESA region);
- the filing fee wording is a maximum amount of USD 500 000 or, if lower, 0.5% of the combined annual turnover or combined value of assets in the COMESA region. No method is prescribed for calculating turnover and assets but it is understood that gross turnover must be taken into account. A question remains on whether the COMESA turnover and assets of the whole acquiring group must be taken into account. The USD 500 000 amount is high by world standards and could have a chilling effect on smaller transactions given the absence of merger filing thresholds;
- the regulations require filings must be made to the CCC within 30 days of the "decision to merge" which is not defined and arguably includes (but is not necessarily limited to) signature of an agreement. This causes great uncertainty especially as failure to file within such period renders the parties liable for a penalty of 10% of either or both the merging parties’ annual turnover in the COMESA common market. This puts great pressure on merging parties and it remains to be seen how the CCC will apply this provision in practice;
- whether a transaction may be implemented before the grant of CCC approval. There is no express prohibition in the regulations so it appears that this is permitted although the parties will have to assess and accept the risk that the CCC may prohibit or impose unpalatable conditions to its approval. Failure to notify at all, will result in the parties being liable for penalties and the merger will be void in the COMESA region.
Werksmans has found the CCC to be very approachable and to have a practical view on several logistical and other issues for example by accepting electronic filings.
It is understood that the CCC intends to publish guidelines for comment by the end of March/early April and this is a very welcome development to bring more clarity and certainty to the CCC merger filing process.
Pieter Steyn is a director at Werksmans Attorneys and Vice Chair of the Antitrust Committee of the International Bar Association (IBA).