The Common Market for Eastern and Southern Africa (COMESA) Competition Commission (CCC) is a regional regulator mandated with enhancing regional economic integration among the 19 Member States by promoting fair competition and securing consumer protection.

The CCC published the long awaited Merger Assessment Guidelines on Friday, 31 October 2014.  The purpose of the Guidelines is to clarify the widely criticized provisions of the COMESA Regulations.  The Merger Control provisions, in particular, have been a contentious issue for firms involved in or contemplating mergers, and for their respective advisors.  Firms have had to consider whether they are obliged to seek merger approval from the CCC based upon  whether the proposed merger had what was described as an appreciable effect on trade between Member States – a so-called ‘regional dimension’,  and whether it met applicable financial thresholds.

The Guidelines have provided clarity in respect of a number of issues that the Regulations left open.  Most significantly, the Guidelines elaborate on (a) when notification of a merger is required; (b) what is meant by the ‘regional dimension’ and (c) the category of transactions in regard where notification is required.

The Regulations provide that the CCC should be notified of a merger if (i) either, or both of the acquiring firm and the target firm operate in two or more Members States; and (ii) the threshold of combined annual turnover or assets of the firms as prescribed in terms of the Regulations is exceeded.

At present, the financial threshold is set at US$0 (yes, zero dollars), which in theory means that all mergers that meet the ‘regional dimension’ test require notification.  However in terms of the new Guidelines a firm will only ‘operates’ in a Member State if it has an annual turnover in that Member State exceeding US$5 million.  Although this would mean that the monetary threshold of US$0 would still be met even if the firm has an annual turnover of less than US$5 million, but as it would fail the ‘regional dimension’ test, no notification would be required.

To summarize the application of the tests: a merger need only be notified to the CCC when:

  1. At least one merging party operates in two or more Member States.  It will ‘operate’ in a Member State if it has annual turnover in that state exceeding US $5 million in a year;
  2. A target firm operates in at least one Member State; and
  3. more than 2/3 of the annual turnover in the Common Market of each of the merging parties is not derived from or achieved within the same Member State.

In addition, the Guidelines provide some clarity as to the types of transactions that the CCC considers as notifiable mergers, particularly as regards joint ventures and asset deals.  The Regulations define a merger as the direct or indirect acquisition or establishment of a controlling interest by the acquiring party in the target.  The Guidelines clarify that joint ventures will only be regarded as constituting a merger, if the joint venture is capable of sustainable long-term operations as an autonomous entity.  Lastly, an acquisition of assets will only constitute a merger where the acquired assets constitute the whole or part of a business of a firm.

The publication of the Guidelines is a welcome development, especially at a time of significant economic development in Eastern and Southern Africa.  The Guidelines will help ensure that only those mergers that the Regulations are intended to regulate, and which in fact have an appreciable effect on trade between Member States and … restrict competition will be subject to detailed analysis by the CCC and this should lead to much welcome increase in efficiency and credibility for the agency. For firms and their advisers, this also means a greater amount of clarity.