BREAKING BORDERS: COMPETITION LAW DEVELOPMENTS IN AFRICA
There are a range of new developments on a regional level. The recently established COMESA (the Common Market for Eastern and Southern Africa) Competition Commission is likely to play an important role in the future of African competition law. COMESA is a regional organisation, (its members are Burundi, Comoros, the DRC, Djibouti, Egypt, Eritrea, Ethiopia, Kenya, Libya, Madagascar, Malawi, Mauritius, Rwanda, Seychelles, Sudan, Swaziland, Uganda, Zambia, and Zimbabwe) that promotes trade and investment in the common market.
The COMESA Competition Regulations (the Regulations) were promulgated in 2004 but have not yet been implemented. The Regulations aim to protect consumers, ensure fair competition between economic operators in the region and prevent anti-competitive practices from impeding economic growth, trade liberalisation and economic efficiency. The COMESA Commission was established in 2008 with offices in Blantyre, Malawi, but has not yet commenced operations, although a Director and Chief Executive Officer have been appointed.
The Regulations apply to all economic activity having an effect within the common market. Where member states have domestic competition laws, the Regulations will have primary jurisdiction over an industry, or a sector of an industry, which is subject to the jurisdiction of a separate regulatory entity if that regulatory entity regulates anti-competitive business practices and conduct or merger control, subject to certain exclusions. Therefore, at this stage, it is expected that the Regulations will, as a general rule, take precedence over domestic competition legislation of member states.
In relation to merger control, mandatory notification to the COMESA Commission is required if either the acquiring firm, or the target firm, or both, operate in two or more COMESA member states and certain thresholds of combined annual turnover or assets are exceeded. These thresholds have not yet been determined. A member state with domestic competition law may request that the Commission refer the merger for consideration by the member state under its national competition law if it is satisfied that the merger is likely to disproportionately reduce competition to a material extent in that state. The COMESA Commission has the discretion as to whether it will refer the merger to the member state or consider the merger itself.
On this basis, if merging parties meet the notification requirements in the Regulations, a single filing can be submitted to the COMESA Commission and it is unnecessary to notify the national competition authorities of each member state where the merger would have been notifiable in terms of domestic competition legislation. Insofar as this allows merging parties to avoid the costly and time-consuming process of preparing multiple filings this is undoubtedly a positive development. However, merger notification will still be required if merging parties meet the notification requirements of countries like South Africa that are not COMESA members.
Other regional developments to watch include the formation of CEMAC (Central African Common Market) (its members are Cameroon, Central African Republic, Chad, Republic of the Congo, Equatorial Guinea and Gabon) and WAEMU (West African Economic and Monetary Union) (its members are Benin, Burkina Faso, Côted’Ivoire, Guinea-Bissau, Mali, Senegal, and Togo). These organisations have not yet implemented regional competition law policy and Cameroon is the only member state of either CEMAC or WAEMU with a national competition regime. However, increased trade and economic activity in these regions may lead to the implementation of competition legislation in due course.
There have also been a number of Southern African developments that impact on merger notification in multi-jurisdictional transactions. The introduction of the Botswana Competition Act (which became effective in its entirety in October last year) means that merging parties with a presence in Botswana may now be required to notify their transaction to the Botswana Competition Authority. A number of ambiguities and inconsistencies in the Botswana Competition Act have already come to light, in particular, with regard to the calculation of merger notification thresholds. Despite a discrepancy between the Botswana Competition Act and the Regulations, the Botswana Competition Authority has taken the view that merger notification in Botswana is required when the turnover or asset value of the target firm exceeds BWP 10 000 000 or the merging parties would, following implementation, supply at least 20% of a particular category of goods or services in Botswana.
In addition, the introduction of merger notification thresholds in Namibia is imminent. This is a long-awaited development after many transactions with a de minimus effect have been notifiable in Namibia. The Namibian Commission has indicated that, once the thresholds come into effect, merger notification in Namibia is only likely to be required if: (i) the combined asset or turnover of the acquiring and target firms is greater than N$20 million; and (ii) the target firm’s asset or turnover exceeds N$10 million.
In Zambia, merger notification thresholds have only recently been introduced, which meant that, in the past, merging parties were often forced to notify even when their operations in Zambia were minimal and/or merely incidental to a larger transaction. Now that thresholds have been introduced, notification to the Zambian Competition and Consumer Protection Committee is only required if the combined turnover or assets (whichever is the higher) of the merging parties exceeds 50 million fee units in the parties’ most recent financial year. Each fee unit is equivalent to 180 million Zambian Kwacha (ZMK), which equates to a combined turnover or asset value threshold of ZMK 9 billion.
Swaziland competition law does not provide for merger notification thresholds and there are currently no indications that thresholds will be introduced. Although this means that merging parties with a presence in Swaziland may be required to notify even when their presence is minimal, the effect of this is somewhat mitigated as notification is only required where the parties manufacture or distribute ‘substantially similar goods’ or provide ‘substantially similar services’. Nkonzo Hlatshwayo (previously the head of the mergers and acquisitions division at the South African Competition Commission) was appointed as the Chairman of the Swaziland Competition Commission in March this year.
The development of regional competition regimes and an increased focus on country-specific competition laws indicate that African competition law is likely to play an important role going forward. We recently published a comprehensive guide on competition law in Africa.
The guide is available on our firm’s website or by contacting email@example.com. The guide was launched when our competition group hosted an Africa competition law seminar, where representatives of competition authorities and legal counsel from various African countries shared their experiences of competition law in their countries and their views on the objectives for competition law in Africa. This is the first time that an African competition law event of this kind has been held and we are proud to have hosted it in South Africa.