The issue of Corporate Mergers in Egypt is one of the important topics raised practically with the development of economic performance in the country and the increase in commercial competition in the countries of the world, the presence of intercontinental companies, and the increase in competition among them.
A corporate merger has become a mechanism through which many companies with similar activities resort to merging for a variety of reasons, including reducing expenses or costs, limiting competition, increasing production, or increasing capital.
Nonetheless, Merger may hinder effective competition by changing the market structure in a way that companies in a relevant market are more likely to coordinate and raise their prices, which may make it harder for competition to flourish; wherefore, the ability and/or incentive of businesses to compete may be diminished, which could have negative consequences for prices or innovation.
As a result, it was necessary to enact legislation to set a Merger Control Regime in Egypt. Law No. 3 of 2005 on Competition Protection and the Prevention of Monopolistic Practices was issued and regulated the aforementioned Regime in Egypt. However, the aforementioned law lacked coverage of the merger control system similar to the systems adopted in other jurisdictions, where the merger control system previously adopted under the aforementioned law required companies to notify the competent authority within 30 days after the closure (post-closing notification), at a time when most other legal systems have adopted the idea of a merger pre-approval regime with suspended effect.
Accordingly, a new amendment to the said Law has been issued on December 29, 2022, whereby the notification of closure shall be concluded prior to the process of closure.
Based on the foregoing, the Egyptian Competition Protection and Prevention of Monopolistic Practices Law No. 3 of the year 2005 and its most recent amendment, which came into effect as of December 29, 2022, have regulated the issue of Merger Control in order to maintain the idea of competition protection, which may be impacted by the idea of Economic Concentration.
Overall review of the recent amendment to the Egyptian Competition Protection and Prevention of Monopolistic Practices Law:
Pursuant to Article 2 of the abovementioned Law which was embedded lately by the last amendment, the phrase "Economic Concentration" shall have the following meaning:
"Economic Concentration is every change in the control or material influence of one or more persons, which is a result of any of the following cases:
- The merger of one or more persons with an existing person who retains his legal personality after the merger, or the creation of a new person through the merging of at least two previously independent persons, and the expiry of its legal personality or any of its parts.
- The acquisition by one or more persons, directly or indirectly, of control or material influence over another person or part thereof by virtue of a contract, or through the purchase of securities, assets or other means, and the acquisition may take place individually or collectively.
- Establishing a joint venture or the acquisition by two or more persons of an existing person for the purpose of establishing a joint venture that carries out economic activity independently and permanently.
None of the following cases is considered economic concentration:
- Any company working in the field of securities temporarily acquires securities held by a person for the purpose of reselling them within a year from the date of acquisition, provided that they do not exercise any voting rights or take any action or measure that would influence strategic decisions or the commercial objectives of the acquired person, and the Agency may extend this period upon request if the acquirer proves that the securities cannot be resold within a year, as determined by the Executive Regulations of this law.
- The occurrence of a merger or acquisition between companies affiliated with the same person, and this process is considered a kind of re-structuring, and the obligation to notify does not arise except in the event of a change in control or material influence, directly or indirectly..."
Consequently, Economic concentration shall be prohibited if it would limit, restrict or harm freedom of competition. Article 19/Law No. 3/2005.
Regulatory Body and the Merger Control Regime Method:
The Egyptian Competition Authority is the entity duly authorized to examine the aforementioned economic concentration or its notification.
Where the Economic Concentration shall be subject to the ECA's examination if it meets one of the following limits:
- The realized annual turnover or the accumulated assets in Egypt of the concerned persons collectively exceeded the amount of nine hundred million Egyptian pounds for the last year in the latest approved consolidated financial statements, provided that the annual turnover in Egypt for at least two of the concerned persons, each of them separately, exceeded an amount of two hundred and one million Egyptian pounds for the last year in the latest approved consolidated financial statements;
- The realized annual turnover or the accumulated assets worldwide for the concerned persons collectively exceeded the amount of seven billion and five hundred million Egyptian pounds for the last year in the latest approved consolidated financial statements, provided that the annual turnover in Egypt for at least one of the concerned persons in the last certified consolidated financial lists exceeds EGP 200 million pounds.
In all cases, the ECA shall be entitled, based on the approval of the Council, to start examining an economic concentration that does not exceed the limits indicated for the duty of notification if it has evidence or presumptions that limit, restrict, or harm competition within a period not exceeding one year from the date of implementation of the economic concentration.
The Agency shall continue to examine the notification file within sixty working days starting from the date of issuance of a decision by one of the examination committees to refer the notification file to the second examination stage. If the period of 60 days lapses without a decision being issued, this shall be considered approval for the implementation of economic concentration.
After the completion of the second examination phase, the council's decision in this regard can be summarized in one of the following decisions:
- Keeping the application: in the event that the concerned persons refrain from executing the economic concentration;
- Approval: in the event that the economic concentration that has been notified to the Authority is in compliance with the provisions of the said Law;
- Conditional approval: If the economic concentration becomes compatible with Article 19 bis b) of the said law after approving the offer of obligations and controls submitted by persons,
- Refusal: If the economic concentration limits, restricts, or harms the freedom of competition, in such a case, a petition may be made against the refusal decision within thirty days (30) from the date of notifying the persons thereof.
Finally, the ECA must be notified of any economic concentration that meets the conditions set out in the aforementioned law. Additionally, economic concentration may not be implemented before obtaining the approval of the ECA.
The new amendment has come into force and set a Pre-Merger Review/Notification to ameliorate the Merger Control Regime in order to grant more protection and freedom of competition to economic activities that may be negatively affected by Economic Concentrations that can limit, restrict, or harm freedom of competition.
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.