Noting the various criticisms levelled against its competition regime, the Common Market of Eastern and Southern Africa (COMESA) Competition Commission (Commission) recently adopted several amendments to its Competition Rules and Regulations.
Significantly, the thresholds for merger notification have been raised and the merger filing fee payable has now been lowered.
While the amendments do not address all concerns raised by business communities, the changes go a long way in winning investor confidence and improving the existing regime.
Revised thresholds for merger notification
Previously, a merger was notifiable to the Commission where the monetary thresholds for merger notification were met (Monetary Thresholds), and where both or either of the parties to the merger operated in two or more COMESA member states (Regional Dimension).
A firm was considered to 'operate' in a member state if it had an annual turnover or value of assets exceeding $5 million in that member state and it was not the case that more than two-thirds of the annual turnover or value of assets were achieved or held within the same Member State. Given that the Monetary Thresholds were set at nil, once a transaction had Regional Dimension, merger notification was required.
The amendments raise the thresholds for notification. A merger is now notifiable where, during the most recent financial year:
- the combined annual turnover or combined gross asset value, whichever is higher, of the merger parties in the COMESA market, equals or exceeds $50 million; and
- the annual turnover or gross asset value, whichever is the higher, in the common market of each of at least two of the parties to a merger, equals or exceeds $10 million. However, in circumstances where each party achieves at least two-thirds of its aggregate turnover or assets in the common market within one member state, a filing will not be required. Nevertheless, a merger filing with the national competition authority, in the implicated member state, may still be necessary.
The revised thresholds are an important amendment to the COMESA competition law. The previously wide ambit for merger notifiability has now been narrowed and there is more certainty as to when a merger is notifiable. In addition, the Commission will no longer need to expend its time and resources assessing transactions of little value, having a negligible effect in the COMESA market.
Reduced merger filing fee
The merger filing fee previously payable to the Commission was 0.5% of the parties' combined turnover or assets, in the COMESA market, whichever was the higher, capped at $500,000. The capped fee was equivalent to more than R5 million and was considerably higher than the maximum South African filing fee of R350,000.
The introduction of the new amendments sees the filing fee reduced to a capped amount of $200,000 or 0.1% of the parties' combined turnover or assets, whichever is the higher.
While the reduced filing fee offers some relief to investors, it is still difficult to justify the filing fee when you consider that certain national authorities dispute that the Commission ousts their jurisdiction over transactions in member states. Of course, this only applies when such transactions also qualify as COMESA mergers. One of the objectives of the Commission was to become a one-stop shop for all mergers within the COMESA market. The competition regime contemplated a single merger filing to the Commission, substituting filings required by any national authorities. Given that certain national authorities, who impose their own merger filing fees, expressly require that separate notifications be lodged with them, the business community often find themselves having to lodge dual notifications, in order to avoid the statutory risks of failing to notify an otherwise notifiable merger. Until national authorities align their domestic legislation with that of COMESA competition law, businesses have no alternative but to pay merger filing fees to both the Commission and the relevant national authority.
Despite this impracticality, the amendments are welcomed and the COMESA competition regime has moved a step closer to international best practice.