14 June 2016

Red Tape | COMESA competition law: Recent developments

This article was written by Rahul Saha and Cameron Firth. 

COMESA: An overview

What is COMESA?

The Common Market of Eastern and Southern Africa (COMESA) is a supra-national organisation with 19 Member States – Burundi, Comoros, Democratic Republic of Congo, Djibouti, Egypt, Eritrea, Ethiopia, Kenya, Madagascar, Malawi, Mauritius, Namibia, Rwanda, Seychelles, Sudan, Swaziland, Uganda, Zambia and Zimbabwe.

What is the COMESA Competition Commission?

The COMESA Competition Commission (CCC) commenced operation on 14 January 2013, enforcing a merger control and antitrust regime under the COMESA Competition Rules (Rules) and COMESA Competition Regulations (Regulations).

Merger Control Developments 

Following the CCC’s commencement, an immediate impact was felt in the area of merger control. Its Rules and Regulations created a requirement for every business operating in the region to consider whether a COMESA merger filing was necessary when entering into an M&A transaction or joint venture. The CCC’s failure to set any financial thresholds for notification, and the lack of clarity on operating procedures, created significant uncertainties for businesses in the region.  

In response to calls for greater clarity and legal certainty, the revised CCC Guidelines on the merger control rules (Revised Guidelines) were published on 31 October 2014. The main changes brought about by the Revised Guidelines were: ƒƒ 

  • the introduction of turnover and asset value thresholds for merger notification; and ƒƒ 
  • clarification that the CCC has exclusive jurisdiction over transactions that meet the turnover thresholds.  

After the introduction of turnover and asset value thresholds, the number of transactions reviewed by the CCC fell significantly: 66 transactions were reviewed by the CCC in 2014, but only 15 in 2015. The transactions reviewed have been across a wide variety of sectors including insurance, food additives, water treatment, agro-chemical, banking, telecommunication, non-alcoholic beverage, publishing, packaging and retail.  

Although the introduction of turnover thresholds was a welcome development, it is uncertain whether the significant decline in CCC filings resulted from this. Commentators have speculated whether the reduction in filings could be attributed to some legal advisers taking the view that, at this stage, a failure to make a COMESA filing does not attract significant penalties. 

The CCC’s exclusive jurisdiction to examine transactions is also subject to significant uncertainty. When the Revised Guidelines were first published, it was reported that the Kenyan Competition Authority took the view that domestic merger control rules continue to apply even if a filing must be made to the CCC. This position was supported at the 2016 ABA Antitrust Spring Meeting, where a former COMESA Competition Commissioner indicated that the CCC does not have exclusive jurisdiction over cases within its jurisdiction. This is likely to create issues for transacting parties who may have to make multiple filings in different COMESA Member States and the issue of where to file requires careful consideration taking into account the specifics of any particular transaction.  

Antitrust Investigations 

Having concentrated on making improvements to its merger control regime throughout 2013 and 2014, the CCC’s executive director, George Lipimile, indicated in August 2015 that the CCC would be commencing a series of antitrust investigations. These investigations would include a sector inquiry into shopping malls, as well as investigating cartels in the fertiliser, bread and construction industries. Investigations into all these industries are already being carried out by the more developed competition authorities in Africa (e.g. the South African authority and Botswanan authority). 

In February 2016, the CCC announced that it had commenced the sector inquiry into shopping malls. 

Looking to the future 

While the CCC has had significant teething problems, recent developments indicate that the COMESA Member States are making a substantial effort to prioritise competition law enforcement and ensure that the CCC is regarded as a serious competition authority. 

As it continues to develop its practices and procedures, the CCC will look for opportunities to assert itself and businesses operating in the region will increasingly need to consider the impact of the Rules and Regulations on their business strategy.

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