As reported in our briefing COMESA's Competition Commission commences operations the COMESA Competition Commission (CCC) has started to enforce its competition rules and to accept merger control filings since 14 January 2013 for the 19 eastern and southern African states that are members of COMESA. In the two weeks since enforcement has commenced, there have been significant developments in relation to the following issues:

  • the nature of the CCC's jurisdiction over transactions with a regional dimension and whether national authorities will retain parallel jurisdiction;
  • the question whether COMESA's merger control regime is suspensive;
  • the CCC's intentions regarding the calculation of merger filing fees.

'Jurisdictional turf war' looming

As reported in our briefing, the CCC is working on the assumption that it will have exclusive jurisdiction over transactions meeting COMESA's merger control test, subject to the possibility of a 'referral back' request by a COMESA national competition authority. However, COMESA's Competition Regulations are stated to have only 'primary jurisdiction'. It is unclear therefore whether COMESA's national competition authorities will retain (parallel) jurisdiction over transactions with a regional dimension, over and above the right to request a referral. For example, Kenya's competition authority is reported to be seeking to clarify the extent of the CCC's jurisdiction and the interaction between COMESA's competition rules and Kenya's competition rules. In the meantime, Kenya's competition authority is reported to be advising parties to continue to apply Kenya's merger control rules and therefore to file transactions to the Kenyan Competition Authority, in addition to any COMESA filing.

Uncertainty over merger suspension obligation

The CCC states in its merger filing form that merging parties may not implement a transaction until it has been approved and that implementation prior to clearance may attract fines of up to 10 per cent of aggregate turnover in the COMESA region. As reported in our initial briefing, there is some uncertainty in this respect. This is because COMESA's Competition Regulations do not explicitly provide that merging parties must suspend completion of their transaction prior to receipt of approval or that fines should be imposed for implementing prior to clearance. The upcoming COMESA Merger Assessment Guidelines 2013 – which are referred to in the merger filing form but which have not been made public yet – may shed further light on this issue.

CCC clarifies its intentions over calculation of merger filing fees

As a result of the confusion created from the drafting of COMESA's rules on merger filing fees, senior officials at the CCC have clarified to us that the CCC intends to apply the USD 500,000 filing fee as a maximum fee. As a result, the CCC would calculate the filing fee as follows: (i) the higher of 0.5 per cent of the parties' combined annual turnover or combined value of assets in the COMESA region; and then (ii) the lower of the result in (i) and COM$ 500,000 which is equivalent to USD 500,000.

For example, company A – which operates in three COMESA member states – and company B are planning to merge. Company A has combined turnover and assets in the COMESA region of USD 10m and USD 15m respectively. Company B has combined turnover and assets in the COMESA region of USD 70m and USD 50m respectively. The merger filing fee will be calculated as follows: (i) the higher of 0.5 percent of 80m (turnover) and 65m (assets), ie USD 400,000; and then (ii) the lower of USD 400,000 and USD 500,000. As a result, in this example, the filing fee will be USD 400,000.

The CCC's proposal for calculating filing fees would somewhat alleviate the financial burden for those merging parties with combined turnover or assets in the COMESA region below USD 100m. Nevertheless, the financial burden will clearly continue to be significant.

Outlook

Further clarification on these and other points of interpretation are likely to be provided in the near future as the first transactions are notified to the CCC. We will continue to monitor and report on significant developments.

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