Law Nr 10/2013, that establishes the legal competition regime applicable to economic activities in Mozambique (hereinafter "Competition Act" or "Act"), entered into force yesterday. The Act was published on of 11 April.

Mozambique was one of the few countries in the Southern Africa Development Community (SADC) that did not have specific competition legislation. The principle of protection of free competition was only established in diplomas regulating specific economic sectors (such as energy, financial services and telecommunications).

In the end of 2003, Mozambique’s Ministry of Industry and Trade ordered a study to evaluate the adoption of a Competition Act ("Study"), with the intent to design an adequate competition policy for Mozambique. The Study resulted, in 2007, in the adoption by the Council of Ministers of the Competition Policy (Resolution Nr 37/2007, of 12 November), which established the need for specific legislation for competition matters and for an authority with powers to apply such legislation. This need of competition legislation was further reinforced, in 2011, by the United Nations Conference on Trade and Development, responsible for the Study "Status of Competition Policy in Mozambique".

Law Nr 10/2013 foresees the creation of the Competition Regulatory Authority (Autoridade Reguladora da Concorrência, hereinafter "Authority"), who will be responsible for guaranteeing the respect of the competition rules set of the Law. The Authority received, for that purpose, administrative and financial autonomy as well as supervision, regulatory and sanctioning powers. The Authority will have in its composition business associations, workers unions and consumers. The Statutes of the Authority will be adopted by the Council of Ministers.

The legal competition regime of Mozambique applies to both private and public companies, but it foresees four exceptions to its scope of application: (i) certain collective agreements entered into with workers’ organizations; (ii) practices with non-commercial purposes; (iii) specific agreements that result from international obligations; and (iv) sectors of the economy that are subject to specific protection, in the national or in the consumer interest.

The Competition Act of Mozambique prohibits anticompetitive practices, such as (horizontal and vertical) agreements between companies that restrict competition, as well as abuse of dominant position and of economic dependence. The legal framework for competition establishes that some of these practices may be justified, as well as the possibility of exempting the prohibition of anticompetitive practices, upon request to the Authority.

Law Nr 10/2013 also establishes prior merger control: some concentrations must be notified to the Competition Regulatory Authority within seven days of the conclusion of the agreement (or of the acquisition project), and may not be implemented before the Authority’s (express or tacit) non opposition decision. The Council of Ministers will have to determine the criteria that establish the obligation to notify (market share, turnover and/or annual invoicing criteria), as well as the calculation methods of those criteria.

The breach of the Competition Act rules may result in sanctions, including fines up to 5% of the turnover in the previous year of each of the companies involved, as well as ancillary sanctions (as the prohibition for the infringer to participate in public tenders and the sale of the assets or partial divesture of the activity), and periodic penalty payments.

The Competition Act refers that the decisions of the Competition Regulatory Authority constitute a "title, its execution being immediately ordered, followed by its communication to the Public Prosecutor". As the Law is silent regarding the possibility of appealing the Authority’s decisions, this is one of the aspects that must be clarified when the Council of Ministers regulates Law Nr 10/2013.

The Council of Ministers is responsible for regulating fundamental aspects of the Law (such as the creation of the Competition Regulatory Authority and the definition of the notification criteria) within 90 days of its entry into force.

In the last years, several key sectors of Mozambique’s economy (railways, telecommunications and banking) have been liberalized and therefore the new competition regime, in particular the rules that prohibit the abuse of dominant position, will be particularly important in opening the Mozambican market to competition.

With the entry into force of the Competition Act in July 2013, companies with economic activities in or having an effect in Mozambique must review the agreements they entered into, as well as their commercial practices, and provide training to their workers on competition rules, to ensure that they are not at risk of contravening Law Nr 10/2013.

This Legal Flash was prepared in collaboration with Law Firm Couto Graça & Associados, Sociedade de Advogados, partner Law Firm of Cuatrecasas Gonçalves Pereira in Mozambique