Legislation and jurisdictionRelevant legislation and regulators
What is the relevant legislation and who enforces it?
The relevant legislation is the Competition and Consumer Protection Act No. 24 of 2010 (the Act) and it is enforced by the Competition and Consumer Protection Commission (the Commission). All disputes arising from the decisions made by the Commission’s Board are adjudicated by the Competition and Consumer Protection Tribunal (the Tribunal) whose decisions are subject to appeal to the superior courts of Zambia. In addition, the Competition and Consumer Protection (General) Regulations 2011, and the Competition and Consumer Protection (Tribunal) Rules 2012 have been issued pursuant to sections 87 and 78, respectively of the Act. Further, in exercise of its powers under section 84 of the Act, the Commission released the Competition and Consumer Protection Commission Guidelines for Merger Regulations (the Guidelines) in 2015 and the Settlement Procedure Guidelines in 2016. Further, the Commission also issued Administrative and Procedural Guidelines in 2014 (the Administrative Guidelines) and the Leniency Programme has come into effect as well as the Fines Guidelines and the Guidelines on Calculating Merger Fees (2018).Scope of legislation
What kinds of mergers are caught?
All transactions where an enterprise, directly or indirectly, acquires or establishes direct or indirect control over the whole or part of the business of another enterprise, or when two or more enterprises mutually agree to adopt arrangements for common ownership or control over the whole or part of their respective businesses are captured as mergers. Such transactions include amalgamation or combination of enterprises, joint venture mergers or acquisition of interest in another enterprise; for instance, acquisition of shares, assets or leases, etc.
What types of joint ventures are caught?
The Act provides that a merger occurs where a joint venture (JV) occurs between two or more independent enterprises. The Act does not define the term ‘joint venture’ nor does it provide express instructions on which joint ventures should be captured. However, not all JVs are subject to merger control. The Commission distinguishes between ‘full function’ JVs and JVs that are ‘auxiliary’ to the activities of their parent enterprises.
A full-function JV, whose assets or turnover value is above the notification threshold, has to be notified to the Commission as a merger. By definition, such a JV performs on a lasting basis all the functions of an autonomous economic entity, competing with other enterprises in a relevant market, and has sufficient resources and staff to operate independently on the relevant market. Although full-function JVs would generally conduct little business with the parent enterprises, there may be situations in which the JV uses a parent enterprise’s networks or outlets to conduct its sales. A full-function JV may also rely entirely for an initial start-up period on sales to its parent enterprises or purchases from them before it can become established independently on the market. The length of the start-up period depends on the characteristics of the market concerned.
Auxiliary JVs fulfil a specific purpose for their parent enterprises; for example, in sales, production or research and development. Such JVs will not be considered as a merger subject to control. However, parties to auxiliary JVs may have to apply to the Commission for authorisation under Part III of the Act.
Is there a definition of ‘control’ and are minority and other interests less than control caught?
Scenarios of when control occurs are given in the Act as:
- beneficially owning more than half of the issued share capital of the enterprise;
- being entitled to the majority of the votes at a general meeting or having the ability to control the voting of a majority of those votes, either directly or through a controlled entity of that enterprise;
- having the power to appoint or to veto the appointment of a majority of the directors of the enterprise;
- being the holding company of a subsidiary;
- having the ability to materially influence the policy of the enterprise; and
- having the ability to control the majority of the votes of the trustees, to appoint the majority of the trustees or to appoint or change the majority of the beneficiaries of the trust.
In light of the above, the definition of ‘control’ would extend to having the ability to control the composition of a board (through veto or appointment powers) as well as contractual arrangements (such as voting agreements that result in the ability to control a majority of the votes that may be cast at a general meeting). Control may exist where minority shareholders have additional rights that allow them to veto decisions that are essential for the strategic commercial behaviour of the enterprise, such as budget, business plans, major investments, appointment of senior management or market specific rights. The latter would include decisions on technology to be used where technology is a key feature of the merger enterprise.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?
A merger transaction requires authorisation by the Commission where the combined turnover or assets, whichever is higher, in Zambia of the merging parties is at least 50 million fee units in the merging parties’ most recent financial year in which these figures are available. Fifty million fee units is equivalent to 15 million kwacha. There are circumstances, however, in which transactions falling below the above thresholds may be investigated. The Commission may, where it has reasonable grounds to believe that a merger falls below the prescribed thresholds, review the merger if the following factors exist:
- the merger is likely to create a position of dominance in a localised product or geographical market;
- the merger is likely to contribute to the creation of a dominant position through a series of acquisitions that are not individually subject to prior notification;
- the merger may substantially prevent or lessen competition;
- the merger is concluded outside Zambia and has consequences in Zambia that require further consideration; or
- as a result of the merger there are, or are likely to be, competition and public interest factors that must be considered.
Is the filing mandatory or voluntary? If mandatory, do any exceptions exist?
Filing is mandatory only in relation to the mergers that meet the notification requirements. A filing is not mandatory in the case of a transaction that does not meet the prescribed threshold. However, a party seeking clarification as to whether a proposed merger is required to be notified may apply to the Commission for negative clearance in the prescribed manner and upon payment of the prescribed fee.
Do foreign-to-foreign mergers have to be notified and is there a local effects or nexus test?
Foreign-to-foreign mergers that have an indirect or direct effect on the structure of local markets are notifiable.
The Commission focuses on foreign-to-foreign mergers where the merging foreign entities have a subsidiary or interest in an undertaking operating or located in Zambia. An enterprise in Zambia that comes within the control of a foreign enterprise will be subject to notification and review as far as the operation has an effect on competition in Zambia. In such a case, the turnover or assets that will be assessed will be those of an enterprise present (ie, the enterprise is duly registered in accordance with Zambian law and generates turnover within Zambia) or with a presence in Zambia (ie, the enterprise is not duly registered in accordance with Zambian law but has sales in Zambia). In the event that the control of a Zambian enterprise comes about purely as a result of a merger or acquisition involving enterprises wholly domiciled outside Zambia, the Commission will nonetheless assess the merger if it has a local nexus. The Commission will only assert jurisdiction over such transactions if the foreign enterprise has a local nexus of sufficient materiality, such as having subsidiaries in Zambia or having made 10 per cent of its sales in Zambia over the last three years.
Are there also rules on foreign investment, special sectors or other relevant approvals?
There are no rules on foreign investment and special sectors prescribed by the Act. However, merging parties have to obtain approvals from other relevant regulators, if any.
Notification and clearance timetableFiling formalities
What are the deadlines for filing? Are there sanctions for not filing and are they applied in practice?
The Act does not impose deadlines for filing and the Commission has in certain instances accepted notifications made after conclusion. The Act prohibits the implementation of a merger without obtaining merger approval.
There are sanctions for implementing a merger that is reviewable by the Commission without the approval of the Commission. These sanctions include an administrative penalty not exceeding 10 per cent of the annual turnover of the enterprise. Furthermore, the implemented transaction is declared void.
Which parties are responsible for filing and are filing fees required?
Any party to the transaction or the parties’ appointed representatives can notify the Commission and pay filing fees. The parties may lodge a joint notification (which is the option preferred by the Commission), but if there are two or more independent parties intending to take over a competitor separately then each party is required to lodge a separate notification.
The notification fees for the application for authorisation of a merger in respect of notifiable mergers is 0.1 per cent of the turnover or assets, whichever is higher. The turnover or assets refers to the annual turnover or assets of all the parties to the transaction in Zambia. The annual turnover and assets of the parties to the transaction will be grouped in sets and it will be the sets that will be considered. The highest value among the figures reflected in the sets of annual turnover and assets will be considered for the calculation of the notification fee, with a ceiling of 5 million Kwacha on the filing fee. When considering the annual turnover or assets of the parties to the transaction, the concept of a single economic unit will be considered (ie, it is the position of the Commission that if a merging party has subsidiaries located in Zambia, they form a single economic unit). For parties wholly domiciled outside Zambia, the notification fee will be based on the total values of the assets or turnover generated in Zambia.
What are the waiting periods and does implementation of the transaction have to be suspended prior to clearance?
There is no prescribed waiting period, but there is an initial assessment period of 90 days for authorisation of the merger, which runs from the date of notification to the Commission for the grant of approval. The Commission may extend the assessment period by a period not exceeding 30 days after it gives notice 14 days prior to the expiry of 90 days.
If the Commission does not issue its determination regarding a proposed merger within the period specified, the proposed merger shall be deemed to be approved.
The implementation of the transaction has to be suspended while awaiting clearance.Pre-clearance closing
What are the possible sanctions involved in closing or integrating the activities of the merging businesses before clearance and are they applied in practice?
It is an offence punishable by an administrative fine not exceeding 10 per cent of the enterprise’s annual turnover (based on the latest audited accounts), in the absence of authority from the Commission, to participate in effecting:
- a merger that is reviewable by the Commission but has been implemented without the approval of the Commission;
- a merger that is rejected by the Commission; or
- a merger that fails to comply with conditions stated in a determination or with undertakings given as a condition of a merger approval.
A reviewable merger that is implemented without the Commission’s authorisation is void.
The Commission, however, accepts notifications even after the conclusion of a merger and in practice may not impose the foregoing sanctions.
Are sanctions applied in cases involving closing before clearance in foreign-to-foreign mergers?
Sanctions can be imposed in cases involving closing before clearance in foreign-to-foreign mergers if such transaction had the necessary nexus requiring notification with the Commission. This is usually the case where enterprises involved in foreign-to-foreign mergers have subsidiaries or sales in Zambia and merger approval has not been obtained from the Commission.
What solutions might be acceptable to permit closing before clearance in a foreign-to-foreign merger?
Where an initial assessment reveals no competition concerns, the Commission as a matter of course issues interim authorisations and this enables the parties to close before final clearance by the Board of the Commission (the Board). An interim authorisation is only issued when the Commission is satisfied that a notified transaction gives rise to no competition concerns and it can be reviewed before the final authorisation being granted. The Commission may also require parties to make such undertakings that, in the opinion of the Commission, may remedy any competition concerns to which a notified merger may give rise.Public takeovers
Are there any special merger control rules applicable to public takeover bids?
The Act does not make reference to public takeover bids and consequently sets no special rules in relation to public takeover bids.Documentation
What is the level of detail required in the preparation of a filing, and are there sanctions for supplying wrong or missing information?
The notification is required to be detailed enough for the Commission to be able to make a preliminary assessment with a view of authorising the merger. The notification is made on a prescribed Form 1 as well as a Supplementary Information Request form, which are fairly detailed. Form 1 specifies the following documents to accompany the application:
- two copies of the latest annual report and audited accounts (including the balance sheet);
- a copy of the agreement or other documents relating to the transaction;
- a press release or other shareholders, board or management statement on the transaction;
- other market or industry study reports that support the transaction; and
- strategic plans or minutes of the board on the transaction.
Notwithstanding the above, supplementary information requests may be done prior to assessment and during assessment if need be. Further, applicants for merger approval may have pre-notification meetings with the Commission to, inter alia, determine the information actually required by the Commission and may result in a significant reduction in the information required to be submitted. The Commission may, at any time, revoke an approved merger if a party to the merger submitted materially incorrect or misleading information in support of the merger.Investigation phases and timetable
What are the typical steps and different phases of the investigation?
There is a two-phase investigation process. The first phase is conducted by the Commission’s management during the first 35 calendar days of an investigation and starts with the review of the application, followed by third-party stakeholder consultations and, finally, a preliminary assessment report. If it is concluded at the first phase that a merger is less than likely to harm competition and that no further evidence is likely to be uncovered to revise this finding, the Sub-Technical Committee of the Board (TC) will ‘fast-track’ clearance of the merger application. The full Board may then delegate authority to the TC to issue a final authorisation of the merger by calendar day 45.
In the event that a TC Phase I clearance is rejected by the full Board, the application proceeds to Phase II of the investigation. During Phase II, the Commission will conduct further market research and analysis, culminating in a staff paper to the Board. By day 90, merging parties are informed in writing of the Board’s determination and the Board’s decision will follow thereafter.
What is the statutory timetable for clearance? Can it be speeded up?
The period allowed for assessment of a proposed merger is up to 90 calendar days from the date of application with the possibility of an extension of 30 days if prior notice is given 14 days before the expiry of the 90 days. The Commission is required to complete its assessment of a proposed merger and issue its determination within 90 days of the date of the application for authorisation, unless a party to the proposed merger fails to provide the Commission with the information required. The speed of the transaction will depend on their complexity and on whether they fall under Phase I or Phase II. Phase I transactions are concluded within 45 days, while Phase II take more than 45 days but are subject to statutory time limitations.
Substantive assessmentSubstantive test
What is the substantive test for clearance?
There are three substantive tests for clearance:
- the first test is the market assessment test, which simply seeks to determine the likely effects of the proposed merger in the relevant market, on trade and the economy in general;
- the second test is the competition assessment test, which seeks to assess whether the merger is likely to prevent or substantially lessen competition in a market in Zambia; and
- the third test is the public interest assessment test, which seeks to determine whether the proposed merger will be in the interest of the public. Public interest factors that may be considered include the saving of a failing firm, the extent to which a proposed merger would maintain or promote exports from Zambia or employment in Zambia, the extent to which a proposed merger would promote technical or economic progress and the transfer of skills in Zambia, etc.
Is there a special substantive test for joint ventures?
There is no special substantive test with respect to joint ventures, as joint ventures are appraised on the same basis as mergers if they fall under the definition.Theories of harm
What are the ‘theories of harm’ that the authorities will investigate?
The theory of harm, which is the starting point for any merger investigation, is whether the merger is likely to prevent or lessen competition in the relevant market. In a merger assessment, the Commission will generally consider the basic theories of harm, namely unilateral or monopolisation effects, coordinated effects and non-horizontal (foreclosure) effects. Market dominance and vertical foreclosure are important factors and are frequently referred to in most merger investigations, particularly with respect to vertically integrated undertakings.Non-competition issues
To what extent are non-competition issues relevant in the review process?
The Commission applies the public interest test in almost all merger evaluations. Even though there is no definition in the Act of what ‘public interest’ is, it is said to include the extent to which the proposed merger is likely to result in a benefit to the public that would outweigh any detriment attributable to a substantial lessening of competition. There is no exhaustive list of factors that fall under the public interest test, but fundamentally issues such as employment and the effect of the proposed merger on the economy in the relevant market or region affected by the merger are of paramount consideration.Economic efficiencies
To what extent does the authority take into account economic efficiencies in the review process?
One of the expressed substantive tests under the Act is the market assessment test, the main objective of which is to strengthen the efficiency of production and distribution of goods and services.
A review of the cases handled by the Commission since its inception reveals that the concept of economic efficiencies is applied within the context of the ‘rule of reason’. The Commission approved a scheme between two competitor airlines to implement what is essentially a non-compete and joint-marketing arrangement. In making its decision, the Commission considered that the arrangement served the broader interests of the economy.
Remedies and ancillary restraintsRegulatory powers
What powers do the authorities have to prohibit or otherwise interfere with a transaction?
The Commission has power ‘to take such action as it considers necessary or expedient to prevent or redress the creation of a merger’. The Commission has the power to prevent an unauthorised merger and it has jurisdiction to impose fines or make declaratory pronouncements regarding mergers.Remedies and conditions
Is it possible to remedy competition issues, for example by giving divestment undertakings or behavioural remedies?
Almost all merger authorisations are subject to behavioural and sometimes divestiture undertakings. Hardly any authorisations are granted in the absence of these conditions. At times the Commission may give conditional approvals so that some competition concerns can be addressed.
What are the basic conditions and timing issues applicable to a divestment or other remedy?
Should the Commission determine that a merger has resulted or is likely to result in a substantial lessening of competition within a market, it may give an enterprise such directions as it considers necessary to remedy the adverse effects on competition. In the case of a prospective merger, the Commission may require an enterprise to divest such assets as are specified in a direction within the period so specified in the direction, before the merger can be completed or implemented. In the case of a completed merger, the Commission may require an enterprise to divest itself of such assets as are specified in a direction within the period so specified in the direction.
The case of Lublend Limited represents a merger evaluation combining behavioural and divestiture remedies. In this case, the Commission required the acquiring firm to restructure Lublend Limited so as to allow one of the shareholders to increase its stake to 50 per cent. The acquiring firm was also required to undertake not to interfere with the fixing of blending fees in relation to non-shareholders. In addition, the acquiring undertaking was required to give undertakings that it would facilitate free access to blending facilities by its competitors.
This case does not represent a standard approach of the Commission as it evaluates each merger on its own merits and there are no standard conditions or remedies applicable to all cases. For this reason, there are equally no set timelines applicable to all remedies.
What is the track record of the authority in requiring remedies in foreign-to-foreign mergers?
The cases under review show that the Commission has imposed remedies with respect to foreign-to-foreign mergers that have been found to have an effect on local markets, especially where the foreign-to-foreign entities have subsidiaries in Zambia.Ancillary restrictions
In what circumstances will the clearance decision cover related arrangements (ancillary restrictions)?
There are no guidelines in the Act with regard to ancillary restraints and the Commission has not laid down any administrative rules regarding the treatment of ancillary restraints in merger assessments. In practice, clearance decisions will only cover ancillary restraints in circumstances where such ancillary restrictions raise competition concerns as a consequence of which behavioural or structural conditions are imposed. Where a decision is silent on ancillary restraints, they are implicitly cleared.
Involvement of other parties or authoritiesThird-party involvement and rights
Are customers and competitors involved in the review process and what rights do complainants have?
As part of its investigation process, the Commission typically conducts public consultations seeking the comments of relevant industry players and other stakeholders with respect to proposed mergers. To the extent that competitors and customers are consulted, competitors and customers play a role in the review process. The Act does not define the meaning of ‘public’ and therefore both customers and competitors are captured under the Act.Publicity and confidentiality
What publicity is given to the process and how do you protect commercial information, including business secrets, from disclosure?
There is no statutory requirement for the review process to be made public, but the Commission shall place any document filed in the public record unless the party submitting it asserts a claim of confidentiality at the time of filing it. A party requesting for information to be treated confidentially must give reasons for the information being confidential and the Commission has the discretion to decide whether the information will be confidential. If the Commission grants the request for confidentiality, an abridged version or a dummy version of the confidential information shall be placed in the public record. Notwithstanding the foregoing, the Commission may share confidential information when it is under a legal obligation to do so. If the Commission rejects a request for confidentiality, it shall inform the relevant party in writing and such party shall have the right to appeal the Commission’s decision. The Commission usually announces its decisions and in its annual reports the Commission highlights cases conducted. The notifying parties may highlight information that they consider confidential and request that such information not be disclosed.
The Board of the Commission prohibits the publication of, or disclosure of information to, unauthorised persons. Any person who contravenes this commits an offence and is liable, upon conviction, to a fine not exceeding 200,000 penalty units (equivalent to 60,000 kwacha) or imprisonment for a period not exceeding two years, or both.Cross-border regulatory cooperation
Do the authorities cooperate with antitrust authorities in other jurisdictions?
The Commission is a member of the International Network of Competition Authorities (CA).
Therefore, the Commission may be requested by a foreign competition authority to investigate and make an appropriate determination where it has reasonable grounds to believe that anticompetitive practices in Zambia are damaging competition in the foreign country. The Act also provides for cooperation.
The Commission cooperates with antitrust authorities in other jurisdictions. This is supported by a statutory provision in the Act. The Commission can enter into a formal agreement with an authority from a different jurisdiction. This cooperation has been reflected in a number of agreements to which Zambia is a party. For instance, in the 2002 Southern African Customs Union Agreement, the 2009 Southern African Development Community (SADC) Declaration on regional cooperation in competition and consumer policies, and the 2004 COMESA Competition Regulations, which all provide for cooperation between member states in the area of competition law enforcement. In January 2013, the Common Market for Eastern and Southern Africa (COMESA) Competition Commission (CCC) became operational and administers the COMESA Competition Regulations and the Commission is expected to cooperate with the CCC. The Commission has also signed Memoranda of Understanding with the CCC, Competition and Fair Trading Commission of Malawi, Federal Trade Commission and a Multilateral Memorandum of Understanding with CA under SADC.
Judicial reviewAvailable avenues
What are the opportunities for appeal or judicial review?
The Act has made provisions for an appeal to the Tribunal. Therefore, any person or an enterprise that is aggrieved with an order or direction of the Commission may appeal to the Tribunal within 30 days. Any person wishing to appeal against the decision of the Tribunal may appeal to the High Court within 30 days of the determination, and thereafter to the Court of Appeal and finally the Supreme Court.
There are recent examples where parities to a merger action aggrieved by the decision of the Commission have appealed to the Competition and Consumer Protection Tribunal (the Tribunal). We are aware of only one Tribunal judgment concerning mergers, which is the 2014 case of First National Bank Zambia Limited and Afgri Leasing Services Limited v the Competition and Consumer Protection Commission 2014/CCPT/006.Time frame
What is the usual time frame for appeal or judicial review?
An appeal has to be lodged within 30 days of the decision being made by the Tribunal. In a recent ruling of the High Court, the court observed that a party that did not appeal against a decision of the Commission within 30 days lost the right to appeal. There is no set period within which an appeal from the Tribunal can be heard, except to mention that matters brought to the High Court by way of appeal are dealt with expeditiously.
Enforcement practice and future developmentsEnforcement record
What is the recent enforcement record and what are the current enforcement concerns of the authorities?
In 2009 and 2010, the Commission considered a total of two foreign-to-foreign mergers, both of which were approved without conditions.
There is still widespread lack of awareness and a lack of adequate appreciation of the principles of competition policy and law within legal circles and this slows down the Commission’s merger assessment because of protracted correspondence with legal practitioners. There is a need therefore for training and capacity building to equip practitioners with the necessary skills and basic knowledge of the principles of competition policy and law. The Commission has thus conducted training for the Supreme, High and Magistrate Courts’ judges as a starting point in ensuring that the necessary skills and basic knowledge on the principles of Competition Law is imparted.Reform proposals
Are there current proposals to change the legislation?
We understand that there are proposals to amend the Act, but we are yet to see what these amendments will entail.
Update and trendsKey developments of the past year
What were the key cases, decisions, judgments and policy and legislative developments of the past year?No updates at this time.