Administered by the ECOWAS Regional Competition Authority (ERCA) ECOWAS introduced a supranational merger control regime in late 2024. One of its key pillars is the concept of control, broadly interpreted to include not just acquisitions of majority shareholdings but also instances of material influence. This approach reflects a deliberate choice by ECOWAS to prevent regulatory gaps, particularly in deals involving complex corporate structures, minority investors, or contractual arrangements that confer strategic power without formal ownership. The regime seeks to capture transactions that involve the transfer of decisive influence can be exercised over the commercial strategy or key operational decisions of an undertaking. This client brief explores how control is defined and interpreted under the ECOWAS rules, examines the indicators used to identify material influence, and compares the ECOWAS framework to the more traditional approach adopted by Nigeria.
The ECOWAS change of control and material influence test
Pursuant to Art. 11 of the ECOWAS Supplementary Act on Competition Rules, a merger includes any transaction that results in a lasting change of control in an undertaking. The ECOWAS Merger Guidelines go further to clarify that control may be acquired through rights, contracts, or other means that, either separately or in combination, confer the possibility of exercising decisive influence over an undertaking. This means that control does not necessarily require legal ownership or a majority of voting rights. Material influence is defined broadly to include situations where an acquirer—despite acquiring a stake of less than 50%—can shape decision on key commercial and strategic matters of the target. This may arise from board representation, special weighted voting rights, provisions of shareholder agreements, as well as factual influence or financial dependency.
Key criteria for determining control or material influence
The ECOWAS Merger Guidelines do not set specific thresholds for shareholding relevant to material influence. However, they provide guidance suggesting that minority acquisitions may indeed fall within scope if they confer material influence. There is no safe harbor threshold below which transactions are presumed not to lead to control; rather, each case must be assessed based on qualitative factors. Veto rights over matters such as the appointment of senior management, approval of budgets, business plans, or major investments are strong indicators of material influence. Such rights—often found in shareholder agreements—may enable a minority investor to exercise decisive influence over the conduct of the business, even without controlling a majority of votes.
Shareholder agreements, especially those that establish a concert party—i.e., a coalition of shareholders acting in unison—are also relevant. If multiple investors agree to vote together or coordinate their decisions, their collective influence may constitute control. ECOWAS is likely to view such arrangements as a de facto concentration, especially where they restrict independent decision-making by the target.
Control may also arise through contractual or operational arrangements beyond equity ownership. Private equity firms, for instance, often use management agreements to appoint executives or dictate operational strategy. If such agreements give the investor the ability to shape key aspects of the business, the ERCA may deem this sufficient to constitute control. Similarly, licensing agreements—common in the pharmaceutical sector—may be treated as conferring control if they result in the licensee acquiring the exclusive right to produce, market, or distribute a product. If a licensing deal effectively transfers the commercial exploitation of a product or line of business, this may amount to an economic concentration under ECOWAS rules.
Another emerging concept is control through financial dependence. Lenders may acquire material influence if loan agreements give them significant rights over management decisions—such as vetoes on capital expenditures or strategic direction. While not yet tested under ECOWAS law, the guidelines suggest a willingness to consider such indirect forms of influence as relevant for merger review.
Finally, the guidelines refer to “other means of control,” a catch-all category that leaves room for further interpretation. This might include long-term supply or distribution agreements, outsourcing contracts, or other commercial arrangements that effectively shift decision-making power to a third party. In this context, the ERCA's enforcement posture will be crucial in shaping how expansive this category becomes.
Comparative analysis: ECOWAS and Nigeria
Nigeria provides a notable comparator for understanding how ECOWAS's approach differs from national regimes. Under the Federal Competition and Consumer Protection Act (FCCPA) and the Merger Review Regulations administered by the Federal Competition and Consumer Protection Commission (FCCPC), Nigeria recognizes both de jure and de facto control. While FCCPC has started to assess non-traditional indicators of influence, its practice remains relatively focused on majority acquisitions and formal governance thresholds. For example, Nigeria typically requires notification where a party acquires more than 50% of the voting shares in an undertaking or obtains the ability to appoint a majority of the board of the undertaking. While FCCPC's guidelines do acknowledge the possibility of influence arising from contractual rights, such cases are less frequently pursued. Minority shareholdings without explicit governance rights are often presumed not to confer control, unless there is clear evidence of coordinated behavior or structural influence.
In contrast, ECOWAS adopts a more anticipatory stance, explicitly listing various forms of material influence as potential triggers for notification. The ECOWAS framework aims to pre-empt enforcement gaps by recognizing a wider array of control mechanisms from the outset. This reflects the supranational nature of ECOWAS enforcement, where the emphasis is on cross-border effects and regulatory completeness.
The broad scope of the ECOWAS change of control test requires heightened vigilance from dealmakers, particularly those involved in minority investments, joint ventures, or complex commercial arrangements. Investors should conduct early-stage assessments of whether any governance rights, contractual powers, or collaborative arrangements may trigger notification obligations under ECOWAS rules. Special attention should be given to licensing or management contracts that could be deemed to shift operational control.
Moreover, transaction timelines must account for the suspensory nature of ECOWAS merger review. Transactions caught by the regime may not be implemented prior to receiving clearance from ERCA. Failure to notify can result in enforcement action, including fines, transaction unwinding, and reputational damage. In short, the ECOWAS framework introduces a modern and risk-sensitive approach to control and material influence, aimed at preserving competition across a highly interconnected regional market. As enforcement practice matures, parties should expect growing scrutiny of minority acquisitions and an expansive interpretation of what constitutes strategic control.
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.
