The COMESA Competition Commission commenced operations on 14 January 2013. COMESA’s merger notification requirement may have far-reaching implications for all transactions involving firms active in Eastern and Southern Africa.
This update explains the most important features of COMESA’s competition law.
What is COMESA?
COMESA is the Common Market for Eastern and Southern Africa. It is a free trade area which comprises 19 Member States - Burundi, Comoros, the Democratic Republic of Congo, Djibouti, Egypt, Eritrea, Ethiopia, Kenya, Libya, Madagascar, Malawi, Mauritius, Rwanda, Seychelles, Sudan, Swaziland, Uganda, Zambia and Zimbabwe.
When do mergers have to be notified to the COMESA Competition Commission?
Firms are required to submit a merger notification if a transaction:
- Has an effect within the COMESA common market, and
- either of the merging parties operates in two or more member states.
There is some uncertainty about whether the ‘effect’ of the transaction in the COMESA Common Market must be ‘appreciable’, or whether any effect is sufficient. It is at least arguable that any effect whatsoever could be regarded as sufficient.
The COMSEA Competition Commission has advised us that ‘operates in’ should be broadly construed. A physical presence in the COMESA Common Market is not required. Sales into the Common Market would be sufficient.
The financial thresholds for notifiability have been set at zero dollars. In other words, all transactions that meet the above two requirements are potentially notifiable.
What is the merger filing fee?
The merger filing fee is the lower of 0.5% of the merging parties’ combined assets or turnover in the COMESA Common Market, or 500 000 COMESA Dollars.
One COMESA Dollar is equal to one US Dollar.
Who needs to submit the merger filing?
Mergers need to be filed by each party, separately, unless the merger is a hostile takeover. The COMESA Competition Commission has confirmed that only one merger filing fee is required to be paid by the merging parties.
How long does the merger review process take?
The Regulations provide for a period of 120 days for the review of a merger.
The COMESA Competition Commission may seek an extension of this period from the COMESA Board of Commissioners.
We are only aware of one merger having been filed with the COMESA Competition Commission to date. Therefore, it is not yet possible to predict the actual likely time period.
If I notify the COMESA Competition Commission, do I have to notify each relevant member state, too?
There is no clear answer to this question yet. We understand that the COMESA Competition Commission’s view is that a ‘COMESA filing’ extinguishes notification obligations in each member state. However, some member states disagree, and would still require domestic filings.
What are the consequences of failure to notify a merger to the COMESA Competition Commission?
Failure to notify a merger results in the merger having no legal effect in the COMESA Common Market. It is not clear what this would actually mean in practice, in instances where firms only have sales into the COMESA Common Market.
Merging parties may also be liable for fines not exceeding 10% of either or both of the merging parties' annual turnovers in the COMESA Common Market for the previous financial year.
It is not clear whether penalties are once-off penalties, or whether periodic penalties are possible.
We understand that enforcement of any sanctions would have to be carried out by local law enforcement agencies in a particular member state.
Fasken Martineau Comment
It is critical that in planning any transaction which may have an effect within the COMESA member states, the COMESA competition law should be taken into account.
In particular, a COMESA merger filing requirement may have significant timing implications, which need to be considered and properly incorporated into transaction agreements.
COMESA’s competition laws are not clearly drafted, and there is uncertainty on their scope of application in a number of areas.
Therefore, it is important that the Johannesburg ACM Practice Group should be consulted whenever there is a possibility that COMESA merger notification requirements may be triggered.
