The Competition Regulations of the Common Market for Eastern and Southern Africa (COMESA)
19 June 2013Routledge Modise
The Competition Regulations of the Common Market for Eastern and Southern Africa (COMESA), originally published in December 2004, were finally brought into effect in January 2013. The regulations represent the first attempt at cross-border competition regulation in Africa. Guidelines have subsequently been issued for the practical implementation of the regulations.
The regulations, according to article 3 thereof, apply to "all economic activities whether conducted by private or public persons within, or having an effect within, the Common Market ..." They seek to regulate both anti-competitive practices and mergers and acquisitions within the COMESA region. The regulations also contain a section dealing with consumer protection.
In the context of mergers and acquisitions, the regulations apply where either or both the target and acquiring firms operate in two or more member states of COMESA, and the combined value of the assets, or of the turnover, of the acquiring and target firms, exceeds a threshold prescribed by the board of the COMESA Competition Commission.
The member states of COMESA, to which the regulations apply, are: Burundi, the Comores, the DRC, Djibuti, Egypt, Eritrea, Ethiopia, Kenya, Libia, Madagascar, Malawi, Mauritius, Rwanda, the Seychelles, Sudan, Swaziland, Uganda, Zambia and Zimbabwe.
The asset and turnover threshold has been determined by the board at $0.00, which effectively means that all transactions falling within the definition of a merger, where either or both of the parties operate in two or more member states, will be reportable, irrespective of the value of the assets or turnover of the parties. In the guidelines, the Commission has indicated that it has not prescribed a threshold because the scale of economic activity in member states varies considerably. The Commission has said that it intends to impose a threshold once it has experience of the workings of the regulations in practice and can determine a practical level at which the threshold should be set.
The fees for merger filings have been set at a high level, being 0.5% of the higher of the combined asset and turnover values of both parties, subject to a maximum of $500 000.00.
Unlike the South African Competition Act, the COMESA regulations do not prohibit the parties from implementing a merger prior to approval by the Commission, but provide that a merger implemented before approval has been granted shall have no legal effect, and no rights or obligations imposed on the parties by any agreement in respect of the merger shall be legally enforceable in the COMESA region.
One of the questions that remains unclear is whether, where a member state has its own domestic competition regime, its domestic authorities will retain jurisdiction over mergers having an effect within that state, notwithstanding that they must be reported to COMESA. The regulations provide that a member state, which has attained knowledge of a merger notification submitted to the Commission, may request the Commission to refer the merger for consideration under the member state's national competition law. This indicates that COMESA recognises the continued application of domestic competition regimes, but does not answer the question whether the parties themselves are required to report a merger in each member state, in accordance with that state's laws. It is our view that, unless the laws of a member state specifically exclude its jurisdiction where a merger is reportable in terms of the COMESA regulations, parties would be advised to report the merger in each state, and also file a COMESA notification.