By Michael-James Currie and Camilla Johnson
Antitrust enforcement is on the rise across Africa. Many jurisdictions are developing competition authorities and endorsing legislation with the intention of controlling cartel conduct, abuse of dominance and anti-competitive mergers.
In February 2019, Nigeria developed their first competition law regime through the enactment of the Federal Competition and Consumer Protection Act (“FCCPA”), which largely mirrors the South African Competition Act. This legislation was welcomed by market players and consumers, as Nigeria, being the number one oil exporter in the continent, is a key regional player in West Africa.
Prior to the FCCPA, there was no dedicated merger control legislation regulating transactions between non-Nigerian entities that affected the control of a Nigerian business. Section 2(3)(d) of the FCCPA specifically extends the Act’s application to any conduct outside the country by any person through the acquisition of assets resulting in the change of control of a business, or part of a business or any asset of a business, in Nigeria. The Federal Competition and Consumer Protection Commission (“FCCPC”) went a step further in their merger control regime by issuing the Guidelines on the Simplified Process for Foreign-to-Foreign Mergers with a Nigerian Component (“the Guidelines”). They are the first of their kind in Africa.
The legal review of mergers is essential to ensuring competitive behaviour is not undermined, economic performance is promoted, and consumer welfare is protected. The Guidelines provide a succinct, informative glimpse into the requirements for a successful merger review by the FCCPC and are thus intended to incentivise foreign investment.
The FCCPC must be notified of a foreign merger if it meets one of the alternative thresholds provided in the Guidelines. If the parties have a combined turnover of at least NGN 1 billion (approximately USD 2.5 million), they meet the combined leg. The filing fee will be the higher of NGN 3 million or 0,1% of the combined turnover. If the target entity has turnover of at least NGN 500 million (approximately USD 1.2 million), they meet the target leg and the filing fee will be NGN 2 million. A foreign-to-foreign merger could trigger either leg of the threshold. While the Guidelines do not expressly prescribe a “local nexus” test, a transaction which has an impact on the Nigerian economy will trigger the nexus.
Through the review procedure, the FCCPC seeks to uncover whether the proposed merger will activate anti-competitive or competitive behaviour in the Nigerian market. This is executed by considering whether the merger will substantially lessen or prevent competition in the market, or whether the merger would offset the negative effect on competition by producing technological contributions to the economy. A merger will also be justified if it substantially benefits the public interest, for example if domestic entities are able to compete in the international market, or employment opportunities are elevated. These are the tests against which the FCCPC will assess the proposed merger.
In the interest of transactional efficiency, the Guidelines introduced an expedited process for foreign-to-foreign mergers. The FCCPC will conduct a simplified review procedure, which results in a decision being issued within 15 business days. This will circumvent the typically lengthy review period, but at an additional cost of NGN 5 million (approximately USD 12 000).
While the documentation required is generally less cumbersome than what woudl ordinarily be required, parties must provide sufficient information to the FCCPC so as to enable the authority to confidently conclude that the transaction is unlikely to raise any competition concerns.
Parties must submit a description of the merger in the form of a non-confidential summary that will be published by the Commission, an executive summary and an explanation why the merger qualifies for simplified treatment. Detailed information relating to the merging parties and nature of the parties’ business is required, as well as the nature and details of the merger. Here the parties must describe the economic rationale of the merger as it affects Nigerian markets and the value of the transaction. Information on the turnover in Nigeria in the last financial year must be submitted for each of the undertakings concerned. With regards to supporting documentation, copies of the most recent documents relevant to the merger and an indication of the online location where the most recent and relevant financial information is available, is required.
The FCCPC requires market definitions in the form of a product and a geographical study, as well as a description of the local market activities to be provided, in order to ascertain the scope of the market power resulting from the merger. This includes an estimate of the total size of the market and expected sales (in terms of value and volume), and the nature of existing horizontal and vertical relationships with the prospective mergers’ five largest competitors.
[Michael-James Currie is a director at Primerio, Africa’s first boutique law firm dedicated to competition law practice across the African continent. He can be contacted at email@example.com]