Long-awaited clarity provided by COMESA Competiti... | KPMG | ZA

Long-awaited clarity provided by COMESA Competition Commission

Long-awaited clarity provided by COMESA Competiti...

On 31 October 2014, the COMESA Competition Commission published its 2014 Merger Assessment Guidelines. The guidelines provide much needed clarity on the interpretation of the COMESA Competition Regulations in so far as merger control is concerned.

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M&A in Southern Africa

Although South Africa is not a COMESA Member State, the COMESA Competition Regulations apply to all firms (including South African firms) “operating” in COMESA Member States.  The COMESA Member States are: Burundi, Comoros, DRC, Djibouti, Egypt, Eritrea, Ethiopia, Kenya, Libya, Madagascar, Malawi, Mauritius, Rwanda, Seychelles, Sudan, Swaziland, Uganda, Zambia en Zimbabwe.

In terms of the new COMESA Merger Assessment Guidelines:

  • A merger must be notified to the COMESA Competition Commission when either the acquiring firm or the target firm “operate” in two or more COMESA Member States. However, an undertaking will only be considered to “operate” in a Member State if its annual turnover or value of assets in that Member State exceeds US $5 million.
  • A merger will not be a notifiable merger where the target firm does not operate in any Member State in the Common Market.
  • Likewise, a merger will not be a notifiable merger where each of the merging parties realises more than two-thirds of its annual turnover or value of assets within one and the same Member State in the Common Market.
  • Internal restructures within a group of undertakings will not be regarded as an acquisition of control for purposes of merger notification. Internal restructures are defined as instances where one undertaking already controls the other undertaking, or the undertakings concerned are ultimately controlled by the same undertaking.
  • The COMESA Competition Commission may be approached for a “comfort letter” or a “pre-notification consultation” if uncertainty exists regarding the potential notifiability of a merger.

Even if a merger is not notifiable to the COMESA Competition Commission, always consider whether the merger must be notified to another competition regulator in Africa or elsewhere in the world.

Bear in mind that a “merger” occurs when one undertaking establishes direct or indirect “control” over the whole or part of the business of another undertaking. “Control” is not always a clear-cut concept in law and the assessment whether a merger is formally notifiable to the COMESA Competition Commission can be quite complex. It is important for specialist input to be obtained in each instance.

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