On 31 October 2014, the COMESA Competition Commission (the “CCC”), which is responsible for enforcing competition law in the Common Market for Eastern and Southern Africa (“COMESA”), issued guidelines on merger control rules (the “Guidelines”). The Guidelines provide much needed clarification of the mergers that require notification to the CCC.
COMESA consists of the following 19 member states (many of which do not operate their own merger regime): Burundi, Comoros, D.R. Congo, Djibouti, Egypt, Eritrea, Ethiopia, Kenya, Libya, Madagascar, Malawi, Mauritius, Rwanda, Seychelles, Sudan, Swaziland, Uganda, Zambia and Zimbabwe.
According to the Guidelines, a transaction will only require filing to the CCC if the following conditions are met:
- at least one party to the transaction has gross assets or turnover of at least US$5 million in two or more COMESA member states; and
- the target company generated gross assets or turnover of at least US$5 million in one COMESA member state in the preceding financial year; UNLESS
- each of the merging parties generated 2/3 of their annual turnover within the same COMESA member state.
The Guidelines also provide that the merging parties can make a reasoned request to the CCC for a “comfort letter” to obtain an exemption from making a full notification of their proposed transaction if it has no impact on trade in COMESA.
The Guidelines further confirm that the CCC will use a definition of control is based on the EU merger rules and therefore, an acquisition of a minority interest could amount to an acquisition of control if it gives the acquirer of the ability to exercise a decisive influence over the target.
The Guidelines introduce welcome clarity as to when a merger will be notifiable and reduce the impact of the COMESA rules. Previously, a merger was required to be notified to the CCC if one party to the transaction in question operated in two or more COMESA member states irrespective of turnover in those member states. The Guidelines provide much needed certainty and also ensure that mergers with no nexus to COMESA will not be caught.
However, one key area which has not been addressed by the Guidelines is that of the filing fee payable on notification. At present, the guidance on the fee payable is unhelpful as it is unclear whether the relevant turnover for the calculation of the fees is the parties’ worldwide turnover, or their turnover just in COMESA member states alone and the cap of the potential fee is set at a $500,000 – much higher than other jurisdictions.
The CCC is understood to be seeking to amend the rules on filing fees but further changes may be delayed by the need to obtain approval of the COMESA Counsel of Ministers.