United States: New Competition Law Regime Established In African COMESA

Last Updated: February 11 2013
Article by Alexandre G. Verheyden, Johannes Zöttl and Francesco Liberatore

A new supra-national African competition law regime, the COMESA Competition Commission ("CCC"), began operations in January 2013. This new regime includes new merger control regulations likely to have a significant impact on international businesses with local operations in the region. The CCC is intended to streamline regulatory approvals for transactions by operating as a one-stop shop for merging companies. However, with potentially lengthy merger reviews, suspension of transactions, onerous filing fees, and heavy sanctions for noncompliance, the new CCC may lead to delays in global and regional transactions. Companies operating in the region will need to carefully evaluate the potential effect of this new set of competition laws on their transactions and businesses.

COMESA. COMESA stands for the Common Market for Eastern and Southern Africa and comprises the following 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. Of these, eight states currently have their own national merger control regimes.

Merger Control

Very wide scope potentially. The CCC will review any merger or acquisition where at least one party "operates" in two or more COMESA states, regardless of the parties' local revenues and assets or the size of the transaction. It is currently unclear whether a merger control filing requirement would be triggered if either the buyer or the target had limited sales in two or more COMESA states without a corporate presence.

One-stop-shop, with exceptions. A transaction falling under the CCC's jurisdiction only needs to be filed with the CCC and not individual states. However, the new regime is similar to EU merger control regulations in that it provides for a number of exceptions that allow for referrals to individual COMESA states for them to review instead of COMESA. This referral mechanism, if not properly managed, may add significant delays to a transaction timetable.

Filing requirements. The CCC has the following filing requirements: 

  • Filing obligation: A filing must be made within 30 days of the parties' decision to merge. Each party must individually submit a notification to the CCC using the relevant CCC Merger Form requiring extensive information on the parties' business activities and markets impacted by the transaction.
  • Suspension of transaction:  The parties must obtain the CCC approval before they can close the transaction.
  • Sanctions for noncompliance: Sanctions for failing to notify the CCC or implementing the transaction prior to obtaining clearance (gun jumping) are serious.  The transaction may not be legally enforceable in COMESA and the parties may be fined up to 10% of the aggregate local turnover.
  • Filing fee: Each party must pay a filing fee of the higher of: (i) US$500,000 or (ii) the lesser of 0.5% of the parties' combined turnover or 0.5% of their combined assets in the COMESA region.
  • Review period: The CCC will complete review of notified mergers within 120 working days from the date of filing. The 120 day clock starts only once the CCC is satisfied it has received a complete notification. The CCC has the power to ask for an extension of the review period.  

Substantive test – Substantially lessen competition. Like many of the national merger control regimes in Africa, the substantive test for review of mergers is two-fold.

First, the CCC must consider whether the merger is likely to 'substantially lessen competition' ("SLC"). Under SLC test, the CCC, like the UK, considers, the level of concentration, ease of entry, history of collusion, and other factors.

Second, the CCC will (i) conduct a balancing test to determine whether the merger's benefits will outweigh its anti-competitive effects and (ii) assess whether the merger can be justified on public interest grounds.

Judicial review.If the CCC blocks a transaction or subjects it to remedies, the decision may be appealed by any aggrieved party to the CCC's sister agency, the Board of Commissioners.  Actions by the CCC and Board of Commissioners will be enforced by the national authorities of the member states.

Review of Anticompetitive Practices

The CCC also has the authority to enforce competition laws prohibiting anticompetitive arrangements and abuses of dominant market power. Specifically, the CC can take the following actions: 

  • Launch investigations into business conduct affecting competition in the COMESA region, either pursuant to a complaint or on the CCC's own initiative;
  • Enter premises, examine business records, and take copies of documents (dawn raids) and send requests for information and conduct general inquiries into sectors of the economy; and
  • Fine any company up to 10 per cent of annual local turnover for violation of COMESA competition rules. 

Implications for Business

Despite remaining uncertainty over issues of jurisdiction, the establishment of the CCC will have a significant impact on global transactions as well as on transactions in the African region. The CCC must now be added to the checklist of competition authorities from which mandatory approval may be required. Given the significance of the COMESA region in terms of size and expected growth and the lack of any financial threshold for mergers that fall under the CCC's jurisdiction, businesses will need to carefully consider the potential implications of this new regime and factor it into their regulatory timetable, particularly in view of the CCC's lengthy, 120-day review period. Companies with activities in the COMESA region also will need to review relevant business arrangements and ensure compliance with COMESA regulations regarding potentially anti-competitive conduct.

Jones Day prepares summaries of significant antitrust enforcement, litigation, and policy events as a service to clients and interested readers, to provide timely insight on antitrust and competition law developments relevant to business, but not as legal advice on any specific matter.  Please visit our Publication Request form  to add your name to our distribution list.

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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