The COMESA Competition Commission has published its Merger Assessment Guidelines1. Crucially the Guidelines set out thresholds, still modest but an improvement over the initial zero dollar levels, to establish when merging parties have sufficient turnover or assets in COMESA to trigger mandatory notification. Time periods for review are tightened up and the approach to a number of substantive and procedural issues is explained.
The new Guidelines, which run to 66 pages, will be vital reading for anyone contemplating the sale or purchase of a target operating in the Common Market for Eastern and Southern Africa, COMESA2. They demonstrate a serious effort to take account of many of the issues raised by international business during the consultation process in respect of the draft Guidelines, making the COMESA procedure more practical and predictable.
Key issues to note are:
- An enterprise is only considered to “operate” in a Member State if its annual turnover or value of assets in that Member State exceeds US $5 million. So notification will only be required where:
- the target has annual turnover or value of assets exceeding US $5 million in at least one COMESA Member State; and
- one of the merging parties (which could be the target) has annual turnover or value of assets exceeding US $5 million in at least two COMESA Member States.
- A case will not be notifiable to COMESA, although it may be notifiable to a national agency in one of the COMESA countries, if each of the merging parties has more than two-thirds of its COMESA annual turnover or value of assets in one and the same COMESA Member State.
- Intra-group reorganizations will not qualify as mergers.
- The definition of "control", including veto rights which will be deemed to give decisive influence are spelled out.
- An exception is created for acquisition of a passive shareholding below 15% held for less than 2 years, which will not be deemed a merger.
- Pre-notification continues to be encouraged and comfort letter procedures are formalized.
- The 120 day period for review of notifications, which runs from receipt of a complete notification, is based on calendar days (not working days as had been suggested) and the extensions which can be approved by the COMESA Board may not cumulatively exceed 30 days3. Strict time limits are set for a COMESA Member State to request referral of a merger and for consideration of such requests. A merger is deemed approved if the deadline for Phase 1 or Phase 2 determination is not met.
- The analytical approach which will be applied is spelled out in some detail, including a description of the Commission's approach to theories of harm. Much of this is helpful, although a narrowing of the "safe harbor" thresholds in the draft may be regretted. The Commission now merely indicates that it is unlikely to find concern where the market share of the merged entity is below 15% (in horizontal mergers) or below 30% (in non-horizontal mergers) and, in either case where that of the top three firms combined is less than 70%.
The new Guidelines were published on 31 October 20144 and will apply with immediate effect. COMESA merger rules are not suspensory and do not prohibit parties from implementing a notifiable merger before making a notification or receiving approval. But notification is mandatory and must be made within 30 days of the decision to merge, at risk of unenforceability of the merger agreements within COMESA and penalties of up to 10% of the parties' COMESA turnover. As an exception, parties to mergers which were not duly notified in the past may submit a notification within 90 days5 and will not be penalized for the delay, an option which we would be pleased to assist you to consider. Our COMESA team also stands ready to help with assessing the need for and eventually making notifications to COMESA and in securing merger control approval, whether as part of a global merger control strategy or for a stand-alone COMESA transaction.