Earlier this year the Fair Competition Commission (Commission) initiated an investigation into whether an acquisition of a minority shareholding of 7.93% in a non-Tanzanian registered firm (Target) (with a Tanzanian registered subsidiary) by a non-Tanzanian registered firm (Acquirer) (that is wholly-owned by a Tanzanian registered firm) from a non-Tanzanian registered firm (Seller) (Share Acquisition) was carried out in contravention of Section 11 of the Fair Competition Act, 2003 (Act). The Share Acquisition was implemented in 2017 without notification to the Commission.

The Commission recently issued its provisional findings, and the following is worth noting:

• Foreign-to-Foreign transactions: The Commission asserts jurisdiction over foreign-to-foreign transactions where the transaction constitutes a ‘merger’ and ‘the combined market value of assets or turnover of the merging firms is above TZS 3 500 000 000’ (approx. USD 1.5 million – as at 22 September 2022) (Threshold Order).
• The approach to a ‘change of control’: Under the Act, a ‘merger’ requires there to be a ‘change of control of a business, part of a business or an asset of a business in Tanzania’. The Act does not define what constitutes a ‘change of control’. In this matter, the acquisition of the minority shareholding was sufficient, in the Commission’s view, to confer ‘decisive influence’ on the Acquirer over the Target, and indirectly give rise to a ‘change of control’ even though the voting rights afforded to the Acquirer by virtue of its minority shareholding do not appear to give the Acquirer any additional rights that would allow them to veto decisions which are essential for the strategic commercial behaviour of the Target (e.g., decisions on the budget, the business plan, major investments or the appointment of senior management). The Commission appears to conclude that the acquisition of a single voting share – regardless of the specific voting entitlements attaching to the share – may be sufficient to constitute a ‘change of control’, and thus, a ‘merger’.
• Application of the Threshold Order: There is no specific guidance on whether the Threshold Order should be applied by reference to global or domestic turnover or assets and specifically which transaction parties’ turnover or assets should be taken into account. The Commission appears to take the approach that regard to the global assets and turnover of merging parties, including that of the seller, is required. In this matter, the Commission relied on the global assets of the Seller to determine whether the Threshold Order was satisfied.
• Liability: A seller party may be held liable for a failure to notify. Notwithstanding that the relevant agreement appears to involve as parties only the Acquirer, Seller and Target (who are all individually respondents), the Commission has also included the Tanzanian affiliated firms of the Acquirer and Target, respectively, as respondent parties. Further, the Commission has proposed a monetary administrative fine for each of the respondents, which fine does not appear limited to the domestic annual turnover of each respondent – as required under the amended Section 60(1) of the Act – but instead appears based on global annual turnover, and for some respondents, on the global annual turnover of the respondent’s parent firm.

In terms of the Act read with the Fair Competition Procedure Rules, 2018, and the provisional findings, the respondents have a right to make written and oral submissions to the Commission in response to the provisional findings. Additionally, the respondents may also pursue settlement with the Commission (prior to the Commission issuing final findings).