Pending Amendments of the COMESA Merger Control Regime

In early 2024 The Common Market for Eastern and Southern Africa (COMESA) Competition Commission (CCC) proposed amendments to the COMESA competition regime. Following the publication of the draft of new COMESA Competition Regulations (Draft Regulations), the CCC sought comments from interested parties on the proposed amendments. Initially, the amendments were supposed to enter into effect at the end of 2024. However, it appears that this timeline will not be upheld.

The most relevant changes proposed in the Draft Regulations is the shift of the COMESA merger control regime from a voluntary, non-suspensory to a mandatory, suspensory regime. Furthermore, the amendments to the COMESA merger control regime will extend the scope of public interest considerations the CCC may employ, include provisions addressing digital markets and gatekeepers, clarify the application to of the merger control regime to joint ventures, and provide formalized procedures for market inquiries.

Notification Obligation

Once the amendments enter into force, notification under the COMESA merger control regime will be mandatory, where a transaction (1) has a regional dimension within the COMESA region, and (2) the notification thresholds are met.

Under the current regime a transaction has a regional dimension, if:

• at least one party has operations in at least two (or more) and another party has operations in at least one COMESA Member States; and
• the parties do now achieve two thirds of their COMESA wide revenue or hold two thirds of their local assets in one COMESA Member State.

Furthermore, both of the following thresholds must be met to require notification under the current regime:

• the combined, COMESA wide revenue/assets of the parties must be at least USD 50 million; and
• the COMESA wide revenue/assets of at least two parties must be at least USD 10 million each.

The Draft Regulations maintain the dual concept of regional dimension and turnover based threshold. However, neither concepts are defined in the Draft Regulations. Both are left to be determined by the board of the CCC with the approval of the Council of Ministers of the COMESA Common Market.

Suspensory Effect

Possibly the most notable amendment proposed to the COMESA merger control regime is the shift from a voluntary, non-suspensory to a mandatory, suspensory merger control regime. Under the current regime a transaction that meets the notification requirements shall be notified to the CCC within 30 days of the decision to implement the transaction. However, the notification does not trigger a stand-still obligation. The parties are free to close the transaction at any time regardless of whether the CCC rendered their decision. However, in closing prior to CCC approval, the parties assume the risk that the CCC imposes remedies or prohibits the transaction.

The Draft Regulations introduce a stand-still obligation and makes notification to the CCC mandatory. Hence—upon the amendments entering into effect—a transaction must be notified to the CCC, if it:

• has a regional dimension;
• meets the notification thresholds; and
• leads to a change of control within the meaning of the Regulations.

A transaction that must be notified may not be closed before the CCC approved it. A transaction

implemented without the CCC approval will have no legal effect. Furthermore, the parties may be fined of up to 10 percent of their annual turnover in the COMESA Common Market.

Filing Deadline and Review Period

The Draft Regulations abolish the deadline for filing 30 days after the parties decided to implement the transaction. Under the new regime no specific deadline applies. A notification only must be made before closing.

Currently, the review period is 120 days, with an open-ended option to extend. Pursuant to the Draft Regulations the CCC will have 120 days to conduct their review, with the option to extend the review period by an additional 90 days. Abandoning the open-ended extension option is appreciated considering the shift to a mandatory, suspensory merger control regime. Also, the Draft Regulations mention a simplified review procedure, which will apply to transactions that do not raise significant competition or public interest concerns. However, the Draft Regulations do not determine specific circumstances in which the simplified procedure will apply. We expect further detail to be provided in pending guidelines of the CCC.

Extended Public Interest Considerations

Under the current regime the CCC may consider transaction both from a competition and public interest perspective. Still, public interest considerations applicable under the current regime are essentially competition matters. Within their competence to review transaction on public interest grounds, the CCC may consider the transaction’s impact on matters such as the price, quality, and variety of goods and services, as well as barriers for market entry of (potential) competitors.

The proposed amendments expand public interest considerations the CCC may deliberate to include matters that are more clearly distinct from competition concerns. Under the new regime the CCC may also assess transactions with respect to whether they have positive or negative implications for:

• employment in the COMESA Member States;
• the ability of small and medium sized businesses to compete in the COMESA Common Market;
• the ability of COMESA based businesses to compete internationally;
• environmental protection and sustainability; and innovation.

The amendments also address the relationship between competition and public interest concerns Pursuant to the Draft Regulations the CCC shall in their assessment of a transaction primarily consider competition concerns. Public interest matters shall only be deliberated as a secondary considerations. We expect the CCC to expand on their interpretation of the public interest concerns determined by the Regulations and possibly give more detail on how they will weight these in their assessment in pending guidelines.

Digital Markets and Gatekeepers

In line with global trends, the amendments seek to better equipped the CCC to address potential impacts of transactions in digital markets and those involving gatekeepers. To do so the Draft Regulations introduce a separate threshold applicable to transactions involving digital platforms or markets. Such transactions will require notification, if:

• one of the parties operates in at least two COMESA Member States; and
• the transaction meets a prescribed transaction value threshold to be determined in accordance with the Draft Regulations.

It is unclear whether this threshold can be met where the target has no revenue or other connection to the COMESA Common Market. The wording of the Draft Regulations is open to this interpretation. It remains to be seen whether the CCC will clarify this issue in guidelines.

The proposed amendments also do not define gatekeepers. It does appear that gatekeeper specific provisions were drafted with firms operating in digital markets in mind. Still, the Draft Regulations do not describe conditions that would lead to a business being designated a gatekeeper.

Joint Ventures

The current Regulations do not address joint ventures. However, in the CCC in their current Merger Guidelines clarified that the creation of a joint venture that, on a lasting basis, performs all the functions of an autonomous economic entity, is notifiable. The Draft Regulations explicitly include this requirement. Pursuant to the Draft Regulations a joint venture will be notifiable, if:

• the joint venture is intended to operate in two or more COMESA Member States;
• at least one of the joint venture parents operates in one or more COMESA Member States; and
• the parties combined COMESA turnover/asset meet the thresholds to be determined in accordance with the Regulations.

Greenfield joint ventures are notifiable. This approach is in line with current CCC practice. Presumably, the CCC will also continue their practice of not requiring notification of greenfield joint ventures, if the parties can establish that there is no intention for the joint venture to operate in the COMESA Common Market.

Market Inquiries

The Draft Regulations for the first time establish the authority of the CCC to conduct formal market inquiries. According to the Draft Regulations market inquiries may include market research and studies, as well as formal inquiries in respect of issues affecting consumers or the competitive environment in general. Hence, the Draft Regulations allow the CCC to conduct their own market assessments as well as reach out to potentially affected parties—such as (potential) competitors, customers, and suppliers.

The amended Regulations give the CCC board authorities to address (potential) competition concerns identified through such market studies. Most relevant in context of merger control review, the CCC may impose remedies to address concerns they identified.

Way Forward

The shift to a mandatory, suspensory COMESA merger control regime has significant implications for parties active in the COMESA Common Market. Remaining ambiguity as to when the new regime will enter into force, therefore, poses considerable concerns. Parties contemplating transactions with connection to the COMESA Common Market need to consider the new regime when drafting agreements. Furthermore, some COMESA Member States still do not respect the one-stop-shop principle of the COMESA merger control regime. For example, Egypt—that introduced a new, pre-closing merger control notification regime effective 1 June—does require notification to their domestic competition authority, even where a COMESA filing was submitted. Hence, parties may have to make multiple filings in the COMESA Common Market, if a transaction meets COMESA and domestic thresholds.