In a first for cross-border merger regulation in Africa, a fine has been issued by the COMESA Competition Commission (Commission) for the failure to notify a merger within the prescribed timelines.
In the proposed acquisition by Helios Towers Limited of the shares in Madagascar Towers S.A and Malawi Towers Limited, the parties were fined 0.05% of their combined turnover for the 2020 Financial Year for failing to notify the acquisition to the Commission within the prescribed 30 day period from the date of the parties 'decision to merge'. In this press release [(available at the Commission noted that a decision to merge was executed on 23 March 2021, being the date the Share Sale and Purchase Agreement for the proposed transaction was signed, but the proposed merger was only notified on 2 July 2021, pursuant to Article 24(3) of the Regulations.
Article 24(3) of the COMESA Competition Regulations of 2004 (the Regulations) provides that a party to a notifiable merger must notify the Commission (in writing) of the proposed merger as soon as it is practicable, but not later than 30 days after the parties' 'decision to merge'. The term 'decision to merge' is not defined in the Regulations, but it has historically been assumed that the decision occurs on the date that the merger agreement is signed. This has been confirmed by the latest decision.
Interestingly, although the filing of notifiable mergers is mandatory, once notified, the parties to a merger can implement their transaction whilst waiting for approval, unlike in most other jurisdictions where the parties must wait for merger clearance before implementation.
COMESA is a regional organisation forming a common market, whose 19 member states are Burundi, Comoros, the Democratic Republic of Congo, Djibouti, Egypt, Eritrea, Ethiopia, Kenya, Libya, Madagascar, Malawi, Mauritius, Rwanda, Seychelles, Sudan, Swaziland, Uganda, Zambia and Zimbabwe.
The Regulations govern competition in COMESA and apply to all economic activity within or having an effect in the common market. Cross-border merger control became a reality on 14 January 2013 through the gazetting of the Regulations which enables the Commission to investigate mergers with a regional dimension, being those where the merging parties operate in two or more COMESA member states.
Articles 24(4) and 24(5) of the Regulations confer jurisdiction upon the Commission to impose penalties where parties to a notifiable merger fail to notify timeously, with such penalties limited to 10% of the merging parties' annual turnover in the common market. In determining the first ever penalty, the Commission applied mitigation factors such as the cooperation given by the parties and the fact that the merger did not result in any loss or harm in the market.
The issuing of the fine serves as a warning to companies wishing to pursue acquisitions in the common market that merger control is being actively enforced.
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