- update by Michael-James Currie
In September 2019, the Competition Authority of Kenya (CAK) formally penalised two merging parties for having implemented a transaction without having obtaining the requisite prior regulatory approval.
The trigger for mandatory notification in this case was a change from joint control to sole control when Patricia Cheng acquired an additional 50% of the shareholding in Moringa School.
The maximum penalty which may be imposed for prior implementation is 10% of the parties’ combined turnover in Kenya. In this case, the CAK imposed a nominal penalty (approximately USD 5000) in light of the parties having voluntarily notified the CAK of their failure to obtain prior approval, having co-operated with the CAK’s investigatory agency and after having subsequently assessed the transaction, the CAK concluded that the merger was unlikely to have any adverse effects on competition and would have positive public interest benefits.
The public interest benefits included the fact that the school would offer coding technology to over 1000 students and employees over 100 staff members.
In light of the mitigating factors, the CAK found that the penalty was balanced taking into account principles of deterrence and proportionality of the infringement.
The case is noteworthy not only because it signals a clear message from the CAK that the prior implementation of mergers will attract penalties (which are likely to increase substantially as firms ought to have greater awareness of the merger control regime in Kenya) but also confirms that a move from sole to joint control of an entity or, as in this case, a move from joint to sole control, requires mandatory notification to the CAK.
The CAK has one of the most effective merger control regimes in Africa and is increasingly becoming a more robust competition agency from an enforcement perspective.
[Michael-James Currie is a competition lawyer practising across the majority of sub-Saharan African jurisdictions]