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COMESA Competition Commission merger approval regime


COMESA Competition Commission merger approval regime

JB Cronjé, tralac Researcher, highlights concerns regarding the merger approval procedures under the COMESA Competition Commission

The Competition Commission of the Common Market for Eastern and Southern Africa (COMESA) officially became operational in January 2013 and is based in Lilongwe, Malawi. The increase in the number of companies doing business across borders in the region also increases the likelihood that anti-competitive practices taking place in one Member State could have an adverse effect on competition in another Member State. Very few of the 19 COMESA Member States have national competition legislation and even fewer have competition authorities in place. National competition authorities have little power over anti-competitive practices originating in other countries. This has necessitated the establishment of a regional competition body.

In 2004, the COMESA Council of Ministers adopted the COMESA Competition Regulations and COMESA Competition Rules to implement a regional competition law and policy for the region. These Regulations and Rules entered into force in December of the same year, but could not be applied due to the absence of an enforcement agency.

The function of the Competition Commission is to enforce the COMESA Competition Regulations of 2004 and to promote competition in the Common Market. Article 3 of the Regulations provides that the Regulations apply to all economic activities conducted by private or public entities within or having an effect within the Common Market. The Article also provides that it is intended to apply to all conduct relating to anti-competitive business practices, mergers and acquisitions and consumer protection “which have appreciable effect on trade between Member States and which restrict competition in the Common Market”.

Since the commencement of its operations and the enforcement of the Regulations a few months ago, issues have been raised regarding the interpretation and application of certain provisions of the Regulations. The Commission has received a number of merger notifications to date. It has also approved proposed mergers between Koninklijke Philips Electronics N.V and Funai Electric Company and between Cipla Limited and Cipla Medpro South Africa Limited. These merger notifications brought many of the interpretation and application challenges to the fore. In order to address these and other concerns affecting its enforcement capacity, the Competition Commission recently decided to undertake a review of the current Regulations and Rules to bring these in line with international best practice.

One of the major challenges highlighted by competition law practitioners relates to the nature of the regional competition body’s jurisdiction over transactions with a regional dimension and whether national competition bodies have parallel jurisdiction. Does a merger notification to the COMESA Competition Commission assume the jurisdiction of national competition authorities if the transaction has a regional dimension? These jurisdictional issues create uncertainty among merging parties.

Other major concerns to businesses are merger notification thresholds and the calculation of merger filing fees. The Regulations provide that all mergers must be notified to the COMESA Competition Commission regardless of the size of the undertakings involved. In particular, the merger controls in the Regulations provide that all transactions where both or either the acquiring firm or target firm operate in two or more Member States must be notified to the COMESA Competition Commission. This zero notification threshold creates a huge burden on small merger transactions in particular. In addition, the merger filing fees are high in comparison to the fees charged by national competition authorities in the region and even in comparison to other competition authorities around the world. The fee that should accompany any merger notification is calculated at 0.5 per cent or COM $ 500 000 or whichever is lower of the combined annual turnover of the merging parties or the combined value of assets of the two firms in the Common Market, whichever is higher. The Cipla Limited and Cipla Medpro South Africa Limited has reportedly cost the firms ZAR4.5 million in filing fees. Despite the exorbitant fees, companies cannot simply ignore notification to the COMESA Competition Commission. This can result in monetary penalties up to 10 per cent of annual turnover in the COMESA region or the unwinding of transactions.

All of these challenges could be attributed to teething problems common to the establishment of an organisation of this nature. There seems to be a willingness on the Commission’s side to address these problems. Nonetheless, businesses in the region and beyond are required to comply with this new set of competition rules and requirements when doing international transactions impacting on the COMESA region. Ignoring them would be at their own peril.



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