By Rostom Omar, Esq. (Primerio Ltd.)
Egypt finally adopts a new merger-control regime that would transform the system from a post-notification to a pre-approval system.
After nearly twenty years of applying Competition Law in Egypt and After several attempts from the Egyptian Competition Authority (ECA) to introduce a pre-merger notifications regime and several discussions with government, the parliament and sectorial regulators; on Dec 4th, 2022 the Egyptian parliament has finally approved the proposal to amend the Law on Protection of Competition and Prohibition of Monopolistic Practices No. 3 of 2005 (ECL).
It is worth mentioning in this regard that Egypt was the only country in the region and one of the few countries in the world whose law was not adopting merger Pre- approval system; at a time when M&As increased significantly in the region during the last few years and in which Egypt occupies an advanced position.
According to article 19 of the ECL (Post notification) the acquisition of shares or assets, or joint venture that results in a change of control of an entity or material influence over such entity should be notified after 30 days of concluding the transaction if the combined turnover of the parties exceeds 100 M EGP. It is not yet clear if the non-controlling minority acquisitions would be included in the new filing requirement.
The statement by the ECA indicates that the new filing requirements would apply to merger and acquisition transaction when the annual turnover of the parties exceeds 900 million EGP (around U.S. $30m).
Under the new regime, the ECA will get to assess each reportable transaction prior to closing to decide whether to clear it or not, or impose conditions on approval. The ECA will have the authority to block a transaction that may result in “limiting, restricting, or harming competition”. According to ECA most transactions should be cleared as far as they don’t harm the market structure. The ECA will have the authority to block or to issue a conditional approval for the merger.
Two types of assessments will be included, as is the case with other legislations such as the Moroccan law, one of which is a preliminary examination of the transaction in question and the other is an in-depth examination as needed to speed up the adjudication of notifications.
The details and scope of the amendments will become clearer in the law and via ancillary regulations, and we expect there to be guidelines published in the near future as well. We will continue to monitor the progress of the entry into force and all relevant details for companies doing business in Egypt and the region more broadly speaking.
We expect more activity from ECA in the next stage for promoting and explaining the new amendments, and we expect more transparency and clarity when dealing with the concerned persons regarding M&As files, especially in the context of the short period of time required by this type of files and their impact on the market and on investments promotion in Egypt.
Currently, parties considering future transactions that may involve businesses with revenues in Egypt should ensure compliance with the latest Egyptian merger control amendments.