Progressive Changes Proposed By Powerhouse Regional Body To COMESA Competition Regulations

Progressive changes proposed by powerhouse regional body to COMESA Competition Regulations

Established in December 1994, the Common Market for Eastern and Southern Africa ("COMESA") is a regional economic community in Africa, which today is made up of 21 independent sovereign states. The primary purpose of COMESA is, among other things, to foster 'economic prosperity through regional integration'. The 21 African states that make up the COMESA region include Burundi, Comoros, Democratic Republic of Congo, Djibouti, Egypt, Eritrea, Eswatini, Ethiopia, Kenya, Libya, Madagascar, Malawi, Mauritius, Rwanda, Seychelles, Somalia, Sudan, Tunisia, Uganda, Zambia and Zimbabwe.

The COMESA Competition Regulations, 2004 (the "Regulations") were adopted by the COMESA Council of Ministers in December 2004. As prescribed by Article 6 thereof, the COMESA Competition Commission (the "CCC") was established to regulate competition in the region and thus, is the core institution responsible for administering and enforcing the Regulations. Since commencing operations in January 2013, the CCC has emerged as a formidable force in the competition law space. It should, therefore, come as no surprise that this powerhouse regional regulator is ready to up the ante.

What lies ahead is a radical set of possible amendments to the Regulations, a draft of which was released for public comment and stakeholder engagement earlier this year (the "Draft Regulations"). While the initial period for comment has closed and the public is yet to see what the final amendments will look like, those businesses that are active in the relevant territories would be well advised to monitor developments in this regard. This is not least of all because of any future mergers and acquisitions that businesses have on the horizon, but also in order to ensure the compliance of business practices with competition principles, especially in light of potential future enhanced powers to be granted to the CCC.

The Draft Regulations propose to introduce a variety of changes to the region's competition law landscape. Many of the changes have no doubt arisen from challenges experienced by the CCC in enforcing its mandate under the current Regulations.

From a mergers and acquisitions perspective, some of the key proposed amendments include:

• Moving to a suspensory merger regime - this is a significant alteration to the position under the current Regulations, whereby a party to a proposed merger is, legally, free to implement a transaction prior to approval, so long as the proposed merger (if notifiable) is notified to the CCC within 30 days of the parties' "decision to merge". Multi-jurisdictional transactions will now need to take into account the particular timelines for approval by the CCC;
• There may be changes to the financial merger thresholds for a notifiable merger and these may possibly differ according to specific industries;
• The 120-day merger investigation period may be extended for periods that do not cumulatively exceed 90 days;
• Where the CCC sends a request for information necessary for the examination of a merger, the CCC will have the ability to stop the clock on an investigation time period until the information is provided;
• The CCC may implement a simplified procedure to fast-track the review of notifiable mergers that do not raise significant competition or public interest concerns;
• The CCC shall develop public interest guidelines; public interest will become a focal point during merger investigations. In its merger investigations, the CCC will consider whether or not mergers are likely to substantially prevent or lessen competition and also whether they significantly affect public interest. However, the CCC shall place a greater weight on the substantial lessening or prevention of competition tests relative to the public interest;
• The CCC may, within 21 days of a notified merger, initiate a referral of the whole or part of the merger to the competent authorities of a COMESA member state/s; and
• In determining if a merger has been implemented without approval, the CCC may consider various factors including, but not limited to, whether there has been an exchange of strategic information between the merging parties for purposes other than valuation or on a need-to-know basis during the due diligence, or in ways compromising the strategic independence of each of the parties to the merger.

The Draft Regulations also attempt to clarify and/or expand on certain concepts to minimise room for vagueness or misinterpretation. Some of these changes include formally defining the concept of 'control' and requiring that it be on a lasting basis; expanding on the definition of a merger to cover full-function joint ventures; and prescribing a market share threshold (30%) at which a firm will be presumed 'dominant'.

Adding extra ammunition to the CCC's arsenal, the Draft Regulations seemingly afford the CCC an unrestricted power to enter, search and inspect any premises occupied by an undertaking, or which is reasonably suspected of having information or documents relevant to an investigation. The CCC is also given powers to conduct market inquiries where it considers it necessary or desirable for the purpose of carrying out its functions and has powers to implement necessary remedies and policy recommendations and take any other actions per the Regulations.

For now, we wait with bated breath for the final amendments to the Regulations to be published and encourage businesses to keep these developments firmly on the radar.

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