Category: mergers

COMESA receives first global merger notification

Posted on by andreasstargard

COMESA old flag color
Once more, big news out of southern Africa. According to a notice published on COMESA’s web site, the Competition Commission (“CCC”) has received its first merger filing. And it is not merely any old filing — rather, two large global consumer electronics players, Philips and Funai, are the parties to this virginal transaction being notified to the CCC. As the notice points out in its aptly-named (yet somehow almost ‘cute’, if there is such a thing as cute in competition law) title, it constitutes “Merger notice no. 1”.

With the CCC numbering these filings sequentially (based on all appearances), one can’t help but wonder how many more of these notices will we see in the near future? Will the number reach 2 or 3 digits in the first year of operation of this young competition watchdog? After all, as we pointed out previously on this blog, the scope and reach of the (suspensory!) COMESA merger regime are extremely broad and would presumably cover hundreds of transactions similar to the now-notified first deal…

As background to the transaction, neither party apparently operates on its own in the COMESA jurisdictional countries. They merely have sales via distributors and remote agents. An article in the Kenyan paper “Daily Nation” mentions that the parties had announced in January (right around the time that COMESA’s CCC became operational) that Philips would be selling its remaining audiovisual business to Funai as part of a changing business strategy.

Here’s the upshot for antitrust lawyers and parties to future transactions with a potential impact in any of the COMESA member states: the mere fact of this notification legitimizes the entire COMESA regime. This is all the more true, as the parties are two global and important players, with presumptively excellent legal competition counsel (who must have advised that a filing with the CCC would be required, if not advantageous).

My take: The fact that this rather important (and moreover rather remote, for COMESA jurisdictional purposes!) deal constitutes “Merger notice no. 1” is an absolute stroke of luck for the CCC. It lends serious credibility to its legitimacy.

Competition Authority of Kenya wrests right to control M&A from COMESA.

Posted on by andreasstargard

(See also our prior reporting here: https://africanantitrust.com/2013/01/31/kenyan-competition-authoritys-comesa-jurisdiction-questions/)

COMESA old flag colorkenya
The Competition Authority of Kenya (“CAK”) has won the first round in its apparent jurisdictional battle against COMESA to control acquisition of shares, interest or assets among local firms, ending two months of uncertainty as to who the regulatory authority was for dealmakers. Kenyan Attorney General Githu Muigai has given the CAK the authority to act as the sole agency with the mandate to administer and clear local Kenyan mergers and acquisitions.

This power purports to shield, at least temporarily, local firms from the COMESA competition laws. Under the multi-state competition regime, firms engaging in certain mergers and acquisitions with an effect in two or more member states are required to seek clearance from COMESA’s Competition Commission, a process that comes with significant costs and time delays not expected to the same extent with the CAK procedure.

Clarification of COMESA merger regime filing fee

Posted on by andreasstargard

COMESA old flag color

Yesterday, on 26. February 2013, the COMESA Competition Commission issued new guidance relating to the amended merger notification requirements, as follows. Note especially the clarification on the “higher of / lower of” filing fee issue that AfricanAntitrust.com had previously reported on, correcting several law firm client alerts, which had falsely described the fee as the “higher of” the two thresholds:

INTERPRETIVE MEANING OF THE NOTIFICATION FEE PURSUANT TO RULE 55(4) OF THE AMENDED COMESA COMPETITION RULES

Rule 55(4) of the amended COMESA Competition Rules reads as follows:

“Notification of a notifiable merger shall be accompanied by a fee calculated at 0.5% or COM$ 500000, or whichever is lower of the combined annual turnover or combined value of assets in the Common Market, whichever is higher”. The interpretation of the above provision is that the COM$500,000 is the maximum fee payable for merger notification.

1. When a merger is received, the COMESA Competition Commission (‘the Commission’) will first calculate 0.5% of the combined turnover of the merging parties.

2. The Commission will then calculate 0.5% of the combined value of assets of the merging parties.

3. The Commission will then compare results in 1 and 2 above and get the higher value.

4. The Commission will then compare this higher value to the COM$500,000. If the higher value is lower than the COM$500,000, the Commission will consider the higher of either the combined assets or turnover as a notification fee. If either the combined assets or turnover is higher than COM$500,000, then the latter shall be the notification fee.

The example below illustrates this:

• Company A proposes to acquire 100% of the assets of Company B. Both operate and have sales in at least two COMESA member states. Company A has turnover (within COMESA) of $15 million; Company B has turnover of $10 million. One-half of one percent of their combined turnover is equal to $125,000 (i.e., $25 million X 0.5%).

• Company A has assets (within COMESA) of $7 million; Company B has assets of $3 million. One-half of one percent of their combined assets is equal to $50,000 (i.e., $10 million X 0.5%). $125,000 (turnover) is the higher of the two figures in steps 1 and 2.

• Since the higher value of the assets vs. turnover (i.e., $125,000) is lower than $500,000, the filing fee is $125,000.

S.A. Clears 3-to-2 Infant Nutrition Merger with Remedies

Posted on by andreasstargard

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The South African Competition Tribunal has green-lighted the almost $12bn (R106bn) Nestlé/Pfizer deal, which will combine the largest and 3rd-largest infant-nutrition companies in the South African republic, leaving competitor Aspen in second place.

The conditions imposed by the Tribunal echo those accepted by the E.U., the Australian and other authorities, which require the merged entity to license certain of its brands to independent third parties, for up to 10 years post-closing, in order to stimulate and maintain a competitive marketplace.

To seasoned antitrust practitioners, certain aspects of the deal ring a bell — although the outcome is diametrically different (except for Mexico, where the transaction has been rejected thus far by the authorities): I speak of the Heinz/Beech-Nut U.S. deal in 2000, where the FTC blocked the deal. In the agency’s view at the time, the only competitive constraint, according to the FTC, was the Gerber company, which would have been the sole effective remaining competitor. For a retroactive analysis on this, see here for one of the voting Commissioner’s point of view. The FTC promptly sued to block the 3-to-2 “Baby Food” deal, as it became known in the antitrust world, and ultimately prevailed both at the court level and, in the end result, with the parties’ abandonment of the merger while an appeal was pending.

In conclusion, it appears that the efficiencies defence, creative design of remedies (e.g., licensing), and overall agency outlooks have changed in more than a decade, after all.

COMESA MERGER FILING FORMS- FORM 12

Posted on by oxenhamjmj

COMESA old flag color
The COMESA Competition Commission has recently made available the relevant merger filing documentation and forms.  Complying with the requirements set out in Form 12 certainly appears, at first glance, to be relatively straightforward, however, contrary to what is stated in the COMESA Regulations, the Merger notification form appears to prohibit the closing of a transaction without approval (i.e., parties may not implement the merger or acquisition without the COMESA Commission approval).

The attempt to legislate by way of the notification documents further erodes  merger control certainty.  Given the extremely wide ambit of what constitutes a notifiable merger, the COMESA Commission will need to ensure that the contradiction contained in the merger filing forms is urgently rectified.

“How much for this merger filing?” – Clarifying the COMESA fees

Posted on by andreasstargard

COMESA old flag color
We have recently seen several articles and law firm client alerts incorrectly identifying the filing fee schedule of COMESA.  This post is designed to clarify and to provide accurate information to our readers.

Rule: The filing fee for a merger notification under the COMESA regime is the lower of:   [1]   500,000 COMESA-$,  or    [2]   0.5% of parties’ combined annual turnover or asset value within the COMESA market.

The confusion as to “higher of” vs. “lower of”, which has sprung up in many firm publications, may be due to the somewhat awkwardly worded language of the amendments to the original 2004 Competition Rules.  The amendments changed the text of Rule 55(4), dealing with the fee schedule and its calculation.

Example:  The two notifying parties have a combined turnover of 90m COM$ in the common market of COMESA.  In this scenario, 0.5% of 90m COM$ equals 450,000 COM$, which is lower than the maximum fee of 500,000.  Thus, the fee to be paid by the parties is 450,000 COM$.

As a rule of thumb, if the combined annual turnover/revenues/asset values of the notifying parties is 100 million COMESA-$, then the fee will be the maximum 500,000 amount.  Otherwise, it will be lower.

COMESA CCC now functional

Posted on by andreasstargard

COMESA old flag color
COMESA Fundamentals:

COMESA (Common Market for Eastern and Southern Africa) is a supra-national group of 19 sovereign African countries; it is the successor entity to the 1982 Preferential Trade Area Agreement among eastern and southern African nations.  For starters, here is a map of COMESA’s member states, which are as follows: Burundi, Comoros, the Democratic Republic of the Congo, Djibouti, Egypt, Eritrea, Ethiopia, Kenya, Libya, Madagascar, Malawi, Mauritius, Rwanda, Seychelles, Sudan, Swaziland, Uganda, Zambia, and Zimbabwe.

Notably absent from its membership is the largest economy of the region, namely South Africa.  Likewise, Tanzania is no longer a member, having left the bloc in 2000.

What is the competition-law relevance of COMESA:

Headquartered in Lusaka (Zambia), the 19 year-old organisation has recently upped the ante for companies engaged in commercial activities within the borders of COMESA member states…  It has created and activated the COMESA Competition Commission (the “CCC”).

The CCC, based in Lilongwe (Malawi), is tasked with supervising and enforcing competition-related matters within the bloc.  In this function, it may be compared to the Directorate General Competition (“DG COMP”) of the European Union, as a supra-national enforcement authority, specialised in antitrust / competition-law matters.  The CCC’s primary areas of responsibility are, unsurprisingly:

  1. Merger enforcement (using an “SLC” – substantial lessening of competition – test)
  2. Cartel conduct and other horizontal and potentially also vertical agreements
  3. Unilateral conduct (i.e., abuse of a dominant position in the market)

The COMESA Board of Commissioners is an appellate authority in relation to the CCC.  Companies may also maintain actions against COMESA member states before the Court of Justice, provided they have fully exhausted their national-court remedies.