COMESA publishes new Merger Assessment Guidelines, uses back-door defintion to adjust threshold to >$5 million
On Friday, the COMESA Competition Commission published its 2014 Merger Assessment Guidelines, available here in PDF. They finally replace the prior Draft Guidelines, which the agency’s Willard Mwemba had predicted would be finalised no later than June 2014. The new final version fails to put a formal end to the technical zero-dollar notification threshold, but — through a back-door definition of what it means to “operate” in the COMESA region — does achieve the practical effect of terminating what AAT has dubbed the “zero-threshold contagion” – i.e., any transaction between parties with any turnover/revenue whatsoever within the common market of COMESA used to be notifiable.
We invite our readers to take a look at the entire document. Rather than having the COMESA Board meet and re-draft the actual Rule, the CCC appears to have taken the short-cut solution of ex parte “Commission consider[ation]” of what it means for a company to “operate” in the organisation’s jurisdiction. Section 3.9 re-defines “operat[ion]” of a COMESA company as follows:
3.9 The Commission considers that an undertaking only “operates” in a Member State for purposes of Article 23(3)(a) of the Regulations if its operations in that Member State are substantial enough that a merger involving it can contribute to an appreciable effect on trade between Member States and restriction on competition in the Common Market. For these purposes, the Commission considers that an undertaking “operates” in a Member State if its annual turnover or value of assets in that Member State exceeds US $5 million.
However, it notably maintains all references to the “Rules on Notification Threshold,” which continue to specify a “U.S. $ zero” threshold:
3.4 The Commission’s Board prescribed such threshold with Council approval in the Rules on Notification Threshold, the scope of which is also limited to mergers having a “regional dimension”(Rule 3). According to the Rules on Notification Threshold currently in force, the threshold of combined annual turnover or assets for the purposes of Article 23(4) is exceeded if:
(a) the combined worldwide aggregate annual turnover or the combined worldwide aggregate value of assets, whichever is higher, of all undertakings to the merger in the Common Market equals or exceeds US $ zero; and
(b) the aggregate annual turnover or the aggregate value of assets, whichever is higher, of each or at least two undertakings to the merger in the Common Market equals or exceeds US $ zero.
It is not as though the CCC’s staff were unaware of the critiques levied against their zero-threshold regime. Mr. Mwemba stated back in February 2014 that the agency had been setting “the wheels in motion for the threshold to be raised.” The Commission has been eportedly working with the World Bank’s International Finance Corporation to determine what the proper notification thresholds should be. AAT also understands that other antitrust advisors — including former FTC Commissioner, Chairman, law professor and competition-law conference mainstay Bill Kovacic — were helping the young enforcement agency to design a more workable and internationally respected merger-review regime.
One thought on “New Merger Guidelines fail to revise Rules flaw, but adjust notification threshold upwards”
Para 3.12 of the Guidelines says:
“To summarize the preceding sections, a merger will be notifiable to the Commission only if:
(a) at least one merging party operates in two or more Member States (an undertaking “operates” in a Member State if it has annual turnover in that Member State exceeding US $5 million);
(b) a target undertaking operates in a Member State;
(c) it is not the case that more than 2/3 of the annual turnover in the Common Market of each of the merging parties is achieved or held within one and the same Member State.”