African merger control Ten things to know

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02 Norton Rose Fulbright – October 2014

African merger control – Ten things to know

There is growing complexity surrounding merger control across the African continent. Not only are more merger control regimes being implemented across Africa, but African competition authorities are also playing a more interventionist role with an increasing number of conditional clearances and prohibitions. The use of public interest considerations is becoming increasingly prevalent across a number of jurisdictions. In addition, regionalisation of competition regimes is developing across Africa through the Common Market for Eastern and Southern Africa (COMESA) and other trading blocs (including the East African Community (EAC), the Central African Economic and Monetary Community (CEMAC) and the West African Economic and Monetary Union (UEMOA)).

01 | To what extent are mergers regulated across Africa?

There are an increasing number of competition regimes across Africa, illustrating growing recognition of the importance of competition law and policy for economic development and investment. However, not all of these competition regimes, such as the Egyptian regime, include merger regulation. This may change over time as merger regulation becomes prioritised in different jurisdictions.

There are presently over 25 countries with merger control regimes on the continent. There are situations where mergers are not regulated on a country-level, but are regulated on a regional level because the country falls into a regional bloc which regulates mergers. For example, while the Democratic Republic of Congo does not have its own merger regime, as a COMESA member state, any transactions affecting this jurisdiction could be subject to the COMESA Merger Regulations.

02 | What types of transactions qualify as mergers across African merger control regimes?

African merger regimes are, broadly speaking, very similar to other merger regimes across the globe in terms of qualifying transactions. In general terms, a transaction will qualify as a merger if it results in a firm acquiring control of the whole or part of another firm in any manner.

‘Control’ in this regard can take a number of different forms which can vary across jurisdictions. Common examples of ‘control’ include purchasing more than 50 per cent of another firm’s shares; acquiring more than half of the voting

rights at a shareholders or board meeting; and acquiring a material influence over the strategic direction of another firm. In some instances, the test for ‘control’ will be met by the acquisition of minority shareholding leading to some form of joint control. In many cases, joint ventures fall within the scope of merger control regimes across Africa.

03 | Do African competition authorities apply the same substantive test as their counterparts in the US and Europe?

The tests that African countries use in merger regulation are broadly similar to the tests used in other jurisdictions. For example, the test used by the South African competition authorities – that is, whether the merger will substantially lessen or prevent competition – is not dissimilar to the test employed by the European Commission.

At the same time, however, an aspect of African merger regimes which sets them apart from other jurisdictions is the importance of public interest considerations. These considerations include the promotion of national ownership, preservation of employment, the enhancement of economic participation by indigenous populations and the enhancement of the ability of national businesses to compete internationally. These considerations can lead to conditional clearances or prohibitions even where a transaction is neutral or even positive from a competition perspective.

In addition to the long-standing jurisprudence of public interest considerations in South Africa and Zimbabwe, there have been string of public interest cases in Botswana and Namibia. More recently, the Competition and Consumer Protection Commission (CCPC), the Zambian competition authority, and the Competition Authority of Kenya (CAK) have also commenced to implement conditional clearances in pursuit of public interest grounds.

The main focus of public interest considerations often requires a moratorium of any retrenchments at either the merging parties as a result of the implementation of the merger or some form of re-training of any retrenched employees. In more interventionalist cases, as in the Massmart-Walmart merger, the parties may need to undertake to protect local suppliers.

African merger control – Ten things to know

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African merger control – Ten things to know

04 | Which jurisdictional nexus is necessary to trigger the requirement to notify across African countries?

There is a range of jurisdictional tests across African merger control regime. For example, the COMESA Merger Regulations can, in theory, be triggered where either the acquirer or target is present in two or more COMESA member states. It is however unlikely that the COMESA Competition Commission would assert jurisdiction over transactions where only the acquirer is active in COMESA.

Some jurisdictions have zero thresholds for notification. For example, in Swaziland, notification is mandatory if the transaction involves a Swazi firm irrespective of assets or turnover. In other regimes, such as those in Botswana, Namibia, Zambia and Zimbabwe, whether a transaction is notifiable depends on the transaction meeting the different combined annual turnover or asset value thresholds set by the different competition authorities. In many cases, the thresholds are quite low and are easily satisfied.

Certain regimes, such as Kenya and Tanzania, only capture foreign to foreign mergers if the transaction results in the acquisition of a business or asset in the given jurisdiction.

A further important consideration is that a merger may have to be notified both in COMESA and in the relevant member state(s). Although COMESA has primary jurisdiction over mergers, certain national competition authorities, such as the CAK, require that a proposed transaction is notified to them irrespective of whether the transaction is notified to COMESA.

05 | How long does merger approval normally take?Many African jurisdictions have mandatory waiting periods for mergers. Some jurisdictions have a short waiting period, such as 30 days in Namibia, whilst others have longer waiting periods, such as 90 days in Zambia. Other filing periods can take between 20 and 90 days, depending on factors such as the size of the proposed transaction. In some cases there is no prescribed waiting period, such as in Zimbabwe, although the Competition and Tariff Commission (CTC), the Zimbabwean competition authority, aims to provide its determination within 30 days.

However, these initial periods can in most cases be extended, either in fixed time periods or in the discretion of the authority. For example, the COMESA Competition Commission has 120 days to make a determination after filing, and may extend this for an undefined period of time.

As a general rule of thumb, parties to a non-problematic merger can expect to wait between two and three months for merger approval. This general rule may, however, depend on practicalities such as the scheduling of internal meetings by the relevant competition authority.

06 | Can a merger be implemented before approval is granted?

In many jurisdictions, including South Africa, Botswana, Namibia, Tanzania, Zambia and Zimbabwe, parties cannot implement a transaction without first filing a merger notification and being granted approval from the competition authority in question. Implementing a transaction without first obtaining approval means that the transaction has no legal effect in the country in question.

However, in other jurisdictions, notably COMESA, the transaction may be implemented before approval is obtained. In these situations, if the competition authorities ultimately decide not to grant approval, the transaction will have to be reversed.

07 | Have African competition authorities taken action against gun-jumping and failures to notify?

African merger regimes make provision for issuing material sanctions against gun-jumping and the failure to notify mergers, such as fines up to 10 per cent turnover and individual fines for the parties’ officers. Failing to notify a merger in some jurisdictions, such as Swaziland, is a criminal offence that could be met with a fine or imprisonment, or both.

Authorities are taking an increasingly active interest in investigating whether firms are notifying mergers. African competition authorities monitor local and international press reports to identify possible transactions as well as those transactions that are notified in other countries.

Competition authorities in Botswana, Kenya, South Africa, Zambia and Zimbabwe have issued sanctions against non-compliant firms. In some cases, such as Botswana, failures to notify may be met with a wide range of restorative remedies (such as divestment) instead of fines. Equally, as in Kenya, parties to a non-notified merger may be more readily pursued for entering into a cartel.

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African merger control – Ten things to know

08 | How much do merger filings cost?Filing fees vary significantly across Africa and, in some cases, may compare unfavourably to filing fees across the world.

For example, the COMESA filing fee amounts to 0.5 per cent of the parties’ combined annual turnover or assets (whichever is higher) in COMESA, up to a maximum of US$500,000. Certain national merger control regimes also have material filing fees, such as Zambia filing fee of 0.1 per cent of the merging entities’ combined turnover or assets (whichever is higher) in Zambia, to a maximum of ZMW3 million (about US$470,000).

There are also, however, a number of jurisdictions with lower filing fees, such as the maximum filing fee in South Africa of R350 000 (about US$31,625) and in Zimbabwe of US$50,000. In Botswana, the filing fee is 0.01 per cent of the merging firms’ combined turnover or assets in Botswana. Merging parties in Kenya can pay a maximum of KSh 2 million (about US$22,435) depending on the combined turnover or assets of the merging entities in Kenya.

09 | Will any filings/submissions to African competition authorities be kept confidential?

Merger regimes across Africa routinely provide merging parties with the right to claim confidentiality over information submitted as part of a merger filing. As a rule, concerns have not been raised regarding the treatment of confidential information by competition authorities.

It is also worth noting that, in some cases, merger filings are shared with the responsible Minister who may, in some jurisdictions, play an active role in merger control. In addition, stakeholders in merger cases (such as trade unions) are increasingly requesting the parties to provide access to merger filings in order to inform their comments on mergers.

10 | How active are African competition authorities in merger control?

African competition authorities are, to a large degree, playing an increasingly activist role in merger control. The continent’s competition authorities are becoming increasingly more interventionist as they continue on their developmental path to contribute to their respective economies. This activism is clear from the number of jurisdictions which have prohibited or conditionally approved mergers.

While the South African competition authorities have for some time adopted an interventionist stance through the imposition of a wide range of structural and behavioural remedies, other authorities have intervened in mergers over recent years. For example, the Namibian Competition Commission, the CAK, the BCA and CCPC have all either prohibited or conditionally approved a number of mergers, especially where the proposed transactions would affect concentration in key priority markets to developing economies.

However, an exception to this activist trend is the COMESA Competition Commission, which has to date focussed on establishing its mandate and jurisdictional scope given the concerns regarding the extra-territoriality of the COMESA merger control regime.

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African merger control – Ten things to know

Competition offering

Our Africa competition team is highly experienced in high-profile, complex merger and antitrust matters across Africa. Our value proposition is market leading for a range of reasons including:

• Our in-depth industry and sector regulatory experience across the value chain of many industries, in particular, we have been advising on ground-breaking challenges to sector regulation across the continent.

• We are trusted advisors for many competition authorities across Africa and are in almost daily contact with the heads of competition authorities across Africa (including West and North Africa).

• We provide a seamless pan-African service and, in particular, as our team contains native French speakers, we advise clients in relation to Francophone Africa (including CEMAC and UEMOA).

• We are commercially minded counsel with unparalleled insights into conducting business across Africa.

• We are thought leaders across the continent; in particular, we are non-governmental advisors to the COMESA Competition Commission and have recently significantly enlarged the scope of comfort letters in the COMESA merger control regime whereby parties do not need to comply with expensive and cumbersome regulatory requirements.

• We have been involved in a number of pivotal developments across the region especially in relation to Botswana, Kenya, Mauritius, Namibia, Tanzania and Zambia.

• We draw on the team’s combined experience across a range of jurisdictions from South Africa to the European Union as well as the team’s experience from working as private practitioners, in-house counsel and regulator in these jurisdictions.

Please contact your usual Norton Rose Fulbright or one of the following for further details on our various offerings across Africa (including the coordination of multi-jurisdictional transactions).

Contacts

If you would like further information please contact:

Adam LovettPartner, Dar Es SalaamNorton Rose Fulbright TanzaniaTel +255 76 470 0901adam.lovett@nortonrosefulbright.com

Heather IrvineDirector, JohannesburgNorton Rose Fulbright South AfricaTel +27 11 685 8829heather.irvine@nortonrosefulbright.com

Marianne WagenerDirector, JohannesburgNorton Rose Fulbright South AfricaTel +27 11 685 8653marianne.wagener@nortonrosefulbright.com

Mark GriffithsDirector, JohannesburgNorton Rose Fulbright South AfricaTel +27 11 685 8864mark.griffiths@nortonrosefulbright.com

Melanie Thill-TayaraPartner, ParisNorton Rose Fulbright LLPTel +33 1 56 59 52 52melanie.thill-tayara@nortonrosefulbright.com

Rosalind LakeDirector, JohannesburgNorton Rose Fulbright South AfricaTel +27 11 685 8941rosalind.lake@nortonrosefulbright.com

06 Norton Rose Fulbright – October 2014

African merger control – Ten things to know

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