Legislation and jurisdiction

Relevant legislation and regulators

What is the relevant legislation and who enforces it?

The overarching competition regulation is promulgated by virtue of Law No. 3 of 2005 (the Competition Law). The Competition Law has since been amended on three occasions: in 2008, 2010 and 2014.

The Egyptian Competition Authority (ECA) is entrusted with the task of overseeing the implementation of the Competition Law and is, therefore, considered as the primary designated regulator of competition in Egypt. Although the ECA administratively follows the Ministry of Trade and Industry, it is actually managed by a board of directors constituted by the Minister, which includes representatives of various ministries, independent experts and representatives of trade unions and industry associations.

An amendment to the Competition Law was issued, in July 2014, that grants the ECA more autonomy by allowing its board of directors to initiate criminal procedures without the previous prerequisite approval of the Minister of Trade and Industry.

The Competition Law is not the only competition-related regulation in Egypt, nor is the ECA the only regulator. Sectors such as telecommunications and banking are also regulated by other regulators that work in close coordination with the ECA to ensure application of the principles of the Competition Law, albeit in wide and general terms, and the banking and telecommunications regulations. Yet, despite the overlapping jurisdiction of the various regulators in respect of competition matters, the merger notification regime instated by article 19 of the Competition Law remains applicable to all sectors under the sole jurisdiction of the ECA.

For telecommunications, the National Telecommunications Regulatory Authority (NTRA) applies articles 4 and 24 of Telecommunications Law No. 10 of 2003 to regulate competition and to ensure economic freedom in the sector. The NTRA controls mergers indirectly through reviewing the licence requirements of any given operator. Although there are no particular provisions in the Telecommunications Law regarding merger control, the NTRA usually assesses and evaluates any merger on the basis of its possible impact on competition. In the absence of specific penalties, the NTRA may simply block any merger by revoking or threatening to revoke the merging entities’ licences.

In the banking sector, the Central Bank of Egypt (CBE) exerts more power in managing competition in the sector and explicitly approving or disapproving transactions over shares in banks and financial institutions operating under the Banking Law umbrella. Basing itself on article 12 of the Banking Law No. 101 of 2004, the CBE has the right to review all applications to own more than a 10 per cent stake in a bank or any other percentage that would enable the acquirer to exert control over the management and the decision-making within said bank. The CBE retains all discretion to evaluate the application technically, financially and from a competition impact point of view.

According to article 12, applications to own more than 10 per cent (or any controlling stake) must be presented to the CBE along with a long list of required documents (strategic plans, financial statements of the acquirer, credentials in the banking business, etc) 60 days prior to the date on which the acquisition is planned to take place. Historically, the CBE has demonstrated a high level of selectivity by imposing strict qualitative requirements before approving any merger or acquisition in the banking sector.

Finally, public utilities are excluded from the scope of application of the Competition Law either automatically by law, if they are managed by a public sector entity, or by explicit request if they are managed by private sector companies. If a private sector company runs a public utility, it should file an application with the ECA requesting its exclusion from the application of the Competition Law, and the ECA may grant this exclusion on the grounds of public interest alone.

Scope of legislation

What kinds of mergers are caught?

According to article 19 of the Competition Law, introduced by Law No. 190 of 2008 as an amendment to Law No. 3 of 2005, each party – with an annual turnover of more than 100 million Egyptian pounds generated in Egypt – that acquires assets, proprietary rights, usufruct or shares, or sets up a union, a merger, an amalgamation or a joint management transaction, must notify the ECA within 30 days after its date of completion. The scope and extent of applicability of the merger notification requirement is quite vast and may include a very wide range of transactions undertaken or contemplated by medium-sized and large businesses.

Although the notification is simple and not disruptive to business, it remains a mandatory endeavour that requires a certain level of disclosure on a probably recurrent basis for active companies on the Egyptian market. No approval from the ECA is currently required, but this may change in the future.

Although the text of the Competition Law itself suggests extraterritoriality, the ECA initially published its notification guidelines, explicitly excluding foreign-to-foreign transactions from the scope of notification even if those transactions have an impact on the Egyptian market; however, the notification guidelines were modified in June 2018 to impose notification on foreign transactions if either party generates a turnover in Egypt in excess of 100 million Egyptian pounds. These guidelines took effect on 1 September 2018.

Despite the currently applicable post-merger notification framework instated by the Competition Law, the ECA issued, on 23 October 2018, a first-of-its-kind decision in which the ECA explicitly requested Uber and its regional competitor Careem to obtain a pre-approval from it before they complete their contemplated merger, which the ECA learnt about through media reports. In an unexpected turn of events, the ECA threatened to use the provisions of article 6 related to collusions and cartels to go after the two ride-hailing giants if they go through with the notification without the approval of the ECA. The ECA approach is yet to be tested in court and may be ultimately deemed an overstepping of authority based on wrongful interpretation of the law. 

What types of joint ventures are caught?

According to article 19 of the Competition Law, introduced by Law No. 190 of 2008 as an amendment to Law No. 3 of 2005, each party – with an annual turnover of more than 100 million Egyptian pounds generated in Egypt – that acquires assets, proprietary rights, usufruct or shares, or sets up a union, a merger, an amalgamation or a joint management transaction, must notify the ECA within 30 days after its date of completion. The scope and extent of applicability of the merger notification requirement is quite vast and may include a very wide range of transactions undertaken or contemplated by medium-sized and large businesses.

Is there a definition of ‘control’ and are minority and other interests less than control caught?

From a competition protection perspective, only the Banking Law specifies a threshold of an acquired stake above which the approval of the regulator is required. There are, however, in Capital Market Law No. 95 of 1992, provisions that oblige the acquirer of a stake exceeding 33 per cent of any listed company to launch a mandatory tender offer to acquire up to 100 per cent of the shares of the company. The requirement is intended for transparency purposes and to provide minority shareholders with an equal opportunity to cash in on their investments at the same level of economic benefit available to majority shareholders.

The Financial Regulatory Authority (FRA) regulates the tender offer process and must grant its approval before the process is launched. The tender offer approval requirements are listed in article 334 et seq of the Capital Market Law (as regularly amended), and the full application must be presented to the FRA, which must examine and approve, reject or modify the application within set time limits.

Thresholds, triggers and approvals

What are the jurisdictional thresholds for notification and are there circumstances in which transactions falling below these thresholds may be investigated?

The threshold for the required notification of the merger is the size of the annual cumulative turnover of parties involved generated in Egypt. According to article 19 of the Competition Law, when the annual turnover of the acquirer or merging entity exceeds 100 million Egyptian pounds, the notification becomes mandatory, and failure to make the notification is a criminal offence that is punishable by a fine ranging between 20,000 and 500,000 Egyptian pounds, which can be doubled for a repeated offence. The threshold for notification is 100 million Egyptian pounds in combined turnover generated in Egypt.

Theoretically, there are no circumstances where a notification would be due if the quantitative threshold is not met; however, the recent Uber/Careem decision may suggest that notification may be conceptually required if the two parties to the merger are the sole actors in a given market, regardless of the currently generated turnover.

Is the filing mandatory or voluntary? If mandatory, do any exceptions exist?

Notification is mandatory by law. It should be served within 30 days of completion. In principle, no approval from the ECA is to be sought; however, the recent ECA approach, following the Uber/Careem decision, suggests that the ECA will force itself into having a say about certain high-profile transactions.

Do foreign-to-foreign mergers have to be notified and is there a local effects or nexus test?

Based on the principle of extraterritoriality of the Competition Law, foreign-to-foreign transactions are theoretically supposed to fall within the scope of application of article 19 of the Competition Law if they are considered to have an impact on the Egyptian market.

The wording of the Competition Law itself is quite far-reaching and general in respect of the notification requirement. It does not state that the annual turnover that triggers the notification requirement must be generated in Egypt; it also does not state otherwise. However, the ECA’s latest guidelines explicitly include foreign-to-foreign transactions in the scope of notification. According to the guidelines, the threshold for notification is the turnover generated in Egypt alone.

Are there also rules on foreign investment, special sectors or other relevant approvals?

The acquisition of public-owned assets or shares in public sector companies by foreign investors (privatisation) is subject to the approval of the Cabinet of Ministers and is usually granted after a thorough set of procedures. The acquisition of state-owned assets is generally subject to the Public Tendering Law and may not be authorised through a direct order without a duly publicised bidding process, unless in cases where public interest so requires.

Law stated date

Correct on

Give the date on which the information above is accurate.

27 May 2020.