During the latter half of 2013, guidelines were published in Kenya which set out that proposed mergers between firms with a combined turnover or asset value (whichever is the highest) of KSh1 billion (approximately US$11,520,000 or R121,000,000) requires compulsory notification to the Kenyan competition authority (CAK). Effectively, therefore, prior to the introduction of this compulsory notification threshold, all transactions which met the definition of a merger required notification to the CAK.
Under the Kenyan Act No 12 of 2010 (Kenyan Act) implementing a merger without obtaining approval from the CAK is an offence and the party concerned "shall be liable on conviction to imprisonment for a term not exceeding five years or to a fine not exceeding ten million shillings, or both". Moreover, the CAK may seek to impose a financial penalty of up to 10% of the gross annual turnover derived by the merging parties in the preceding financial year.
Earlier this year, the CAK sought to criminally penalise (by lodging a complaint with the Director of Public Prosecution, which subsequently referred the matter to the Directorate of Criminal Investigations) the executives of Ipsos for failing to secure such regulatory approval prior to implementing its £525 million acquisition of the Synovate division of the Aegis Group Plc's in Kenya. The acquisition dates back to October 2011 and is reported to have created the world's third-largest global market research company.
The CAK's decision to seek criminal sanctions for failing to obtain regulatory approval demonstrates that competition law enforcement in Kenya is on the rise. At this stage, it is unclear whether the Directorate of Criminal Investigations will also require that the merger be unwound. The unwinding of a merger which was implemented in 2011, will place the merging parties in the unenviable position of having to unbundle a merged business which has been operating as such for almost three years.
In transactions involving firms with operations in Africa (and in certain instances even sales alone into a particular African country is enough to confer jurisdiction), it is imperative for transacting parties to determine whether the transaction will have an effect in any African jurisdictions which have merger regulations and then to ensure that the relevant authorities are notified accordingly. Given that Kenya has not yet incorporated the Common Market for Eastern and Southern Africa (COMESA) regulations into its own national laws, it remains to be seen whether the CAK will seek to impose similar penalties on firms failing to notify domestically in Kenya where those firms have notified the COMESA competition authorities. Clearly, there an urgent need for clarity in this regard.