South Africa: The Effect Of The Launch Of COMESA´s Regional Competition Commission In Africa And Beyond

Last Updated: 20 May 2009
Article by Jason Van Dijk and Vandana Lowton

Recognising that anti-competitive behaviour is likely to prevent economic growth, efficiency and trade liberalisation in its member states, the Common Market for Eastern and Southern Africa recently launched a regional Competition Commission to promote fair competition within the common market across its member states.

COMESA comprises member states Burundi, Comoros, the Democratic Republic of Congo, Djibouti, Eritrea, Ethiopia, Kenya, Libya, Madagascar, Mauritius, Rwanda, Seychelles, Sudan, Swaziland, Uganda, Zambia, Zimbabwe and the Republics of the Egypt and Malawi.

Based in Blantyre in the Republic of Malawi, the COMESA Competition Commission is tasked with the enforcement of fair trade practices and the eradication of abuse of dominance and cartel behaviour by certain firms in the common market. Most notably, the Commission may also investigate conduct that, whilst falling outside of the common market, may nonetheless have an impact on trade between member states.

Prior to the establishment of the Commission, COMESA enacted Competition Rules and Regulations governing both the Commission and its operations, as well as conduct within the common market and competition related matters that have an effect on trade between member states. The Regulations include provisions for the Commission to be notified of mergers in certain instances, failing which, such mergers will not be legally enforceable in the common market and the parties may be liable for a fine of up to ten per cent of both merging parties' annual turnover in the common market.

'Notifiable Mergers', in terms of the Regulations, occur when the acquiring and target firms to a proposed merger, or either the acquiring or the target firm, operate in two or more COMESA member states. In addition, the combined annual turnover or asset value of the firms must exceed the specified threshold provided for in the Regulations. Notwithstanding the fact that a firm to a merger transaction may operate in a jurisdiction that is not a member state of COMESA, if the other party to the transaction is operative in two or more member states, notification to the COMESA Commission is obligatory if the financial threshold values are met by the transaction.

Examples of mergers that would be notifiable in terms of the Regulations would include a firm operating in Germany for instance, that would have to notify the Commission of its intended acquisition of a firm that is operative in both Kenya and Mauritius (provided the financial thresholds are met), albeit that Germany is not a member state of COMESA. Alternatively, a merger transaction that meets the financial thresholds, whereby a firm that operates in Ethiopia and Libya wishes to acquire a firm with a South African presence, would also constitute a notifiable merger.

Due to the fact that the Regulations have such a far-reaching impact on business in Africa, and in particular those provisions pertaining to merger transactions, African jurisdictions that are not COMESA member states may not necessarily escape the Regulations. It is imperative that firms, when proposing to merge with a firm operative in any African country (irrespective of whether that country is a member state of COMESA), must have regard to the Regulations, lest the merger should be notifiable. Failure to do so may render the merger and any consequent rights and obligations of no legal effect within the COMESA member states and may result in a substantial fine being imposed.

Whilst many COMESA member states have moved towards developing and further implementing domestic competition legislation, many member states, for various reasons, only have fledgling competition authorities and are therefore often unable to adequately implement legislation targeting anti-competitive behaviour. However, with the launch of COMESA's Competition Commission, firms may not be able to escape compliance with competition law principles and engage in anti-competitive conduct.

It is clear that doing business in the African landscape is rapidly changing and the need to be able to adapt to and address new business issues is becoming imperative. Continually recognised as the African leader in competition law, South Africa, with its fully functional competition authority, has legal experts who are well versed in competition law principles and who will certainly play a major advisory and integrated role in the development and application of competition law throughout the African arena, and perhaps be the key to unlocking Africa's business potential.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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