By Gina Lodolo & Tyla Lee Coertzen

On 24 January 2024, the COMESA Competition Commission (the “CCC”) issued a press release requesting comments to its proposed Draft Regulations (as amended in November 2023) (“Draft Regulations”).

The Draft Regulations contemplate an over hall of many key features of the CCC’s current competition regime, which has been in place since 2014. The Draft Regulations, importantly, make provision for the CCC to act as a consumer protection agency as well as an antitrust enforcer. While the consumer protection provisions have also been significantly bolstered, this article provides an overview of the salient aspects that the Draft Regulations seek to change vis-à-vis the competition regime. We highlight the key proposed amendments in this article.

Merger Control Regime:

• One of the most salient amendments to the regime is contained in Article 37, which proposes to change the CCC’s merger control regime from non-suspensory to suspensory. In this regard, when the amendment comes into effect, notifiable mergers cannot be implemented by parties before approval is obtained from the CCC.

Previously, a party to a merger was required to notify such a merger within 30 days from the date of the ‘decision to merge’ (which date has generally been considered by the CCC to be the date any agreements underlying a merger were signed by parties). With the introduction of a suspensory regime, the 30-day rule is expected to fall away, thereby alleviating the pressure off of merging parties to ensure timeous notification of a merger with the CCC.

However, under the current regime, the CCC has a review period of 120 calendar days, with the ability to extend the review period for a maximum of 90 days. Importantly, the Draft Regulations do not envisage a shorter review period, and given that the regime is to be amended to a suspensory one, such a review period could result in significant delays in global transactions, particularly as the old regime was non-suspensory. In its Draft Regulations, the CCC has, however, contemplated a simplified procedure where a merger does not give rise to significant competition or public interest concerns.

• In the Draft Regulations, the threshold for the definition of a merger has been heightened through the introduction of a change of control of a firm being on “a lasting basis”. 

The definition of a ‘merger’ also now expressly includes joint ventures, that perform on a long-lasting basis all the functions of an autonomous economic entity. In this regard, the Draft Regulations bring the notifiability of joint ventures largely in line with European case precedent. Thresholds have also been introduced for joint ventures whereby a joint venture will be notifiable if it intends to operate in two or more member states, at least one parent of the joint venture operates in one or more member states and the thresholds are met.

• Interestingly, the Draft Regulations introduce separate thresholds for firms operating in digital markets. In this regard, the Draft Regulations contemplate that a prescribed transaction value be met, as opposed to the more traditional asset/turnover value thresholds.
• The CCC has also introduced broad powers under Article 38(3) to conduct an investigation where it believes that a merger has been implemented without approval and where the CCC finds that a merger has been implemented prior to approval, a penalty of up to 10% of the merging parties’ annual turnover in the Common Market may be imposed.
• Another important contemplated amendment is found in Article 40, which provides COMESA Member States with an opportunity to request that a merger be considered under its national competition law within 21 days of receiving notice of the merger from the CCC. The relevant Member State must, however, demonstrate that the merger is likely to disproportionality reduce competition to a material extent in the Member State before the CCC determines whether it will allow the referral in whole or part. Similarly, the CCC may refer a merger for independent consideration to any Member State.
• The CCC has introduced significant consideration for public interest factors when considering mergers. These include, inter alia, the effect on employment, ability of small and medium sized businesses to be competitive, ability to compete in international markets, environment protection / sustainability considerations and innovation. The latter two considerations are a rather novel concept that the CCC is seeking to introduce, and which has been introduced more prominently in the European Union. The consideration of public interest factors could, however, lead to unintended consequences such as introducing uncertainty and subjectivity / favouring short term public interest considerations at the behest of long-term growth for the greater public interest benefit. Following finalisation of the Draft Regulations, the CCC will publish Public Interest Guidelines which may give guidance in relation to the CCC’s extent of its public interest considerations.
• The Draft Regulations apply to mergers that meet the relevant threshold, and additionally, where a merger is non-notifiable, the Regulations will still apply to mergers that are likely to restrict competition in the Common Market or any substantial part of it- this may introduce some uncertainty over when the CCC will exercise jurisdiction over mergers that do not meet the statutory thresholds. This seems to be an indication that the CCC is trying to avoid situations of ‘merger creep’ in the digital platform markets.

Market Inquiry powers:

• The Draft Regulations introduce the powers of the CCC to conduct ‘market inquiries’, in order to inquire into issues affecting consumers or the general state of competition without necessarily referring to the conduct or activity of any particular undertaking.
• On the basis of the CCC’s findings following the conclusion of a market inquiry, the CCC may initiate a formal investigation, enter into agreements with or order undertakings to implement remedies aimed at addressing the CCC’s concerns, make policy recommendations, conduct advocacy initiatives or take further actions within its powers.  
• The Draft Guidelines further obligate COMESA Member States to assist the CCC with its investigations, market inquiries or studies within their territory when requested, which investigations, market inquiries or studies may be conducted jointly or under the CCC’s guidance.

Settlement:

• The Draft Regulations introduce the ability of the CCC to develop procedures to negotiate settlements, however, salient features of a (binding) settlement provided for in the Draft Regulations are as follows:
  • there must be an acknowledgment for engagement or participation in conduct that violated the Regulations;
  • liability in respect of conduct is acknowledged; and
  • agreement with the CCC’s findings to avoid lengthy standard procedures.

Anti-competitive agreements:

• The Draft Regulations provide that anti-competitive agreements can attract a fine of up to 10% of annual turnover in the Common Market for each of the participating undertakings (previously penalties were determined by the Rules).
• Public interest factors will be taken into account when assessing potentially anti-competitive agreements, including the novel consideration of the effect on environmental protection and sustainability (it is not clear whether these will be considered for purposes of aggravating or mitigating circumstances).
• Public interest factors will also be considered when considering whether the CCC will grant an application for authorization for a firm to enter into an agreement even if the agreement is anti-competitive, if the benefits from the agreement outweighs the anti-competitive effects.
• Minimum resale price maintenance has been introduced as a per se contravention. The Draft Regulations do not delineate whether a minimum price may be recommended as long as it is not enforced (such is the case in the South African Competition Act).

Abuse of dominance:

• Article 31 of the Draft Regulations introduces a presumption of dominance threshold of 30%. This is a low market share threshold in circumstances where market power does not also need to be established. The CCC will also give consideration to firms operating in digital markets wherein data quantity, accessibility, control and network effects will be relevant considerations.
• An additional violation for an abuse of dominance has been added for applying dissimilar conditions to equivalent transactions with other trading parties, thereby placing them at a competitive disadvantage.
• Article 33 of the Draft Regulations introduces a separate violation for an abuse of ‘economic dependance’. The reference to ‘gatekeepers’ infers that this Article could be targeted towards digital platforms /markets.

Cartel conduct:

• A leniency policy has been introduced by the CCC. This is particularly welcomed as it will assist in avoiding applying for leniency across multiple jurisdictions, which usually results in firms being disincentivized to apply for leniency where results are uncertain. The CCC will develop Guidelines for the implementation of the leniency programme.

General other proposed amendments include:

• Obligations of Member States will become more extensive under Article 7 of the Draft Regulations and the Draft Regulations clearly provide that decisions of the CCC will bind Governments of Member States as well as State Courts.
• The CCC is set to be renamed as the COMESA Competition and Consumer Commission and will thus increase its focus in relation to consumer protection related matters.
• Stringent appointment requirements and procedures for members of the Board of the CCC have been introduced.
• Article 17 introduces the appointment of an Executive Director to act as the chief executive officer of the CCC. The Executive Director will not be subject to the direction or control of any other person or authority.
• The Executive Director is provided with various new powers, including:
  • the powers to conduct market inquiries into matters affecting competition and consumer welfare.
  • The ability to negotiate and conclude settlement and commitment agreements through the Executive Director, largely solidifying negotiations that already take place in practice.
  • The power to make interim orders, conduct dawn raids, issue comfort letters and issue advisory opinions.
• The Draft Regulations provide the Board with the power to issue block exemptions (subject to approval of the Council, through the Bureau), exempting any category of agreements, decisions, and concerted practices from the application of Article 29 of the Regulations.
• The CCC now has the power to enter into, search and inspect any premises, including a private dwelling where the CCC reasonably suspects that information or documents that may be relevant to an investigation are kept.
• Interim orders can be made in matters of urgency, pending the conclusion of an ongoing investigation where there is a risk of serious irreparable damage to competition or consumer welfare or to protect the public interest.

Asked to comment on the proposed Regulations, Primerio director, Michael-James Currie says “the proposed amendments go a long way to bringing the COMESA antitrust regime in keeping with most jurisdictions with well established competition law enforcement. The removal of finite penalty caps in favour of a common “10% of local turnover” threshold, the (eventual) introduction of a leniency policy and introduction of a suspensory merger regime are welcomed. The ambiguity created by the current regime (which requires a merger to be notified within 30 days after a decision to merge has been taken) can be impractical and served little benefit. Companies operating within the Common Market will need to re-evaluate their commecrial operations from a compliance perspective as the risk matrix will change considerably”. Currie went on to say that these proposed Regulations are a continuation of the strong leadership shown at the CCC under CEO Willard Mwemba, and that he expects to see more enforcement activity by the CCC over the next two years.

The time to provide comment to the Draft Regulations has been extended to 14 March 2024.  The Draft Regulations can be accessed here.