COMESA sees slight uptick in merger notifications

Merger filings still dither, but YTD numbers now tentatively promise to exceed FY2015

Making sense of the COMESA Competition Commission’s merger notification site is no  easy undertaking.  The perplexing nature of its case-numbering system mirrors perhaps only the level of confusion surrounding the CCC’s original merger threshold and notification-fee guidelines (e.g., see here on that topic).

As we pointed out here, the merger statistics (as they had been released as of January 2016) for 2015 were disappointingly low.  In today’s post, please note that we are upgrading those numbers, however, to reflect additional material now made available on the official CCC web resource, reflecting 3 additional filings, bringing the year-end total for FY2015 to 18.  Three of those were “Phase 2” cases.  In addition, according to the CCC, there were 3 supplemental cases in which “Comfort Letters” were issued to the parties.

For year-to-date 2016 statistics, the numbers look analogous, albeit somewhat higher than the 2015 slump — that is to say, still diminished from the 2013-2014 height of COMESA ‘mergermania’, during which (mostly international) counsel took the confusion surrounding the CCC notification thresholds to heart and erred on the side of caution (and more fees), advising clients to notify rather than not to (65 in the 2 years), or to seek Comfort Letters, which also were issued in record numbers (19 total for the 2-year period)…   With that said, the agency is now up to 16 merger cases, with 2 Second-Phase matters on deck.

AAT 2016 September mergermania statistics

Number of merger notifications based on CCC-published notices (using educated inferences where the original CCC case numbers, dates and/or descriptions lack intelligibility; note that 2013-14 statistics only reflect actual filings made available online and not the official statistics issued by the CCC of 21 and 43, respectively)                                                                         (c) AfricanAntitrust.com

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COMESA acknowledges low merger filing stats

2015 figures plummet 66% year-over-year

Going from 44 notifications in 2014 to 15 filings last year, the Competition Commission of the COMESA common-market area has seen a dramatic decline in merger filings.

Says Andreas Stargard, a competition lawyer with Africa advisory firm Pr1merio:

“These statistics are akin to the agency’s inaugural year — a slump that can only be explained by one of two likely underlying rationales:

Andreas Stargard, editor

A. Stargard

(1) Potential filers have begun to follow widespread advice from legal counsel that effectively admonishes would-be notifying parties not to do so until COMESA establishes a more robust enforcement and notification regime; or (2) — and this is the CCC’s preferred official explanation — the increased filing thresholds as of March 2015 caused fewer transactions to be caught in the mandatory filing net of the regulator.”

Of further concern, Stargard notes, is that the supporting merger documents made available by the CCC do not reflect the purported official statistics.  This fact is reflected in the MergerMania article published on AAT last August..  “For each and every one of the 15 filings identified by the Commission in its official statement, we should be able to see the underlying SOM [statement of merger] and the concomitant Decision — ideally published contemporaneously with the occurrence of each relevant event,” he says.  “Unfortunately, on the CCC merger site, two merger filings are missing entirely (numbers 9 and 10), and the others are commonly published many months after the public-comment deadline for the transactions has long expired.”

To date, a parsing of the (available) 2015 statistics shows that 3 of 15 cases actually went into Phase Two review, Stargard observes.  “This would generally imply a more serious concern raised by the authority in terms of the effect on competition post-merger.  Here, however, it is quite unclear what the potential threat to competition in, for example, a purely private-equity deal would be.  The official decision (no. 15, from November 2015) fails to even hint at a possible threat — as one would commonly expect from a PE to PE transaction, which usually raises little to no antitrust eyebrows…”

Our updated AAT COMESA MergerMania statistics are therefore as follows (again noting the fact that AAT bases its count on only the official, published and available merger documents, instead of relying on mere press release-based summaries published by the CCC).  We also note that to date, 2016 has seen one “merger inquiry notice,” namely of the Dutch Yara / Zambian Greenbelt fertiliser deal.  The public-comment period for that transaction expires on January 22, 2016.

Number of merger notifications based on CCC-published notices

Number of merger notifications based on CCC-published notices

The full text of the COMESA release follows below:

During the year 2015, the Commission assessed and cleared 15 merger transactions. The transactions involved sectors such as insurance, food additives, water treatment, agro-chemical, banking, telecommunication, non alcohol-ic beverage, publishing, packaging and retail. The Commission handled 12 merger notifications in the year 2013 and 44 merger notifications in the year 2014. The Pie Chart below shows the number of mergers handled by the Commission from inception to date.

COMESA merger statistics (official graphic)

As shown in the pie chart the Commission dealt with more mergers in 2014 as compared to 2013 but this trend has gone down in 2015. This trend may be attributed to the supposition that in 2013, the Commission had just commenced operations and therefore some stakeholders were not immediately aware of its existence and operations. By 2014, most stake-holders had become aware of the Commission and its operations, hence the significant increase in the number of mergers notified. The significant reduction in 2015 can be attributed to the supposition that the merger notification thresholds approved by the Council of Ministers on 26 March 2015 which has resulted in smaller mergers escaping the notification. Before 26 March 2015, the merger notification thresholds were Zero hence all mergers were notifiable regardless of size.

MergerMania update: COMESA CCC clears 5 notified mergers

COMESA old flag color

COMESA CCC clears 5 notified mergers

At their July 29, 2015 meeting, COMESA Competition Commissioners Chikankheni, Langa, and Okilangole rendered decisions in five merger cases notified earlier in the spring.  The affected sectors are: Packaging (Nampak), Retail (Steinhoff), Academic Publishing (Springer Verlag), Telecom Towers (Eaton Towers), and Non-Alcoholic Beverages (Coca-Cola).

Ethos/Nampak MER/03/01/2015 SOM/8/2015 Decision/10/2015  29/07/2015
Steinhoff/Pepkor MER/03/02/2015 SOM/7/2015 Decision/9/2015  29/07/2015
Holtzbrinck PG/ Springer Science MER/04/06/2015 SOM/6/2015 Decision/8/2015  29/07/2015
Eaton Towers/ Kenya, Malawi, Uganda Towers MER/04/05/2015 SOM/5/2015 Decision/7/2015 29/07/2015
Coca-Cola BAL/ Coca-Cola SABCO MER/04/07/2015 SOM/4/2015 Decision/6/2015 29/07/2015

Our statistics (while discrepant with those identified by COMESA head of mergers Mr. Willard Mwemba) show the following numbers for COMESA notifications to date:

COMESA MergerMania July 2015

Number of merger notifications based on CCC-published notices

Insight into COMESA thinking: CCC executives speak

COMESA old flag color

COMESA officials’ pronouncements: merger enforcement #1, cartel ‘follow-on enforcement’, jurisdictional swamp

As other attendees of the 17 July 2015 regional sensitisation workshop have done, the Zimbabwean daily NewsDay has reported on the Livingstone, Zambia event — a session that has yielded a plethora of rather interesting pronouncements from COMESA Competition Commission (“CCC”) officials, including on non-merger enforcement by the CCC, as we have noted elsewhere.

In light of the additional comments made by CCC officials — in particular George Lipimile, the agency’s CEO, and Willard Mwemba, its head of mergers — we decided to select a few and publish the  “AAT Highlights: COMESA Officials’ Statements” that should be of interest to competition-law practitioners active in the region (in no particular order):

M&A: CCC claims approval of 72 deals since 2014

Non-Merger Enforcement by COMESA

As we noted in yesterday’s post, the CCC’s head, executive director George Lipimile, foreshadowed non-merger enforcement by the agency, including an inquiry into the “shopping mall sector,” as well as cartel enforcement.  On the latter topic, Mr. Lipimile highlighted cartels in the fertiliser, bread and construction industries as potential targets for the CCC — all of which, of course, would constitute a type of “follow-on enforcement” by the CCC, versus an actual uncovering by the agency itself of novel, collusive conduct within its jurisdictional borders, as John Oxenham, a director at Africa consultancy Pr1merio, notes.
“Here, in particular, the three examples given by Mr. Lipimile merely constitute existing cartel investigations that we know well from the South African experience — indeed, the SA Competition Commission has already launched, and in large part completed, its prosecutions of the three alleged cartels,” says Oxenham.
As AAT has reported since the 2013 inception of the CCC, antitrust practitioners have been of two minds when it comes to the CCC: on the one hand, they have criticised the COMESA merger notification regime, its unclear thresholds and exorbitant fees, in the past.  On the other hand, while perhaps belittling the CCC’s merger experience, the competition community has been anxious to see what non-merger enforcement within COMESA would look like, as this (especially cartel investigations and concomitant fines under the COMESA Regulations) has a potentially significantly larger impact on doing business within the 19-member COMESA jurisdiction than merely making a mandatory, but simple, filing with an otherwise “paper tiger” agency.  Says Andreas Stargard, also with Pr1merio:
“If the CCC steps up its enforcement game in the non-transactional arena, it could become a true force to reckon with in the West.  I can envision a scenario where the CCC becomes capable of launching its own cartel matters and oversees a full-on leniency regime, not having to rely on the ‘follow-on enforcement’ experience from other agencies abroad.  The CCC has great potential, but it must ensure that it fulfills it by showing principled deliberation and full transparency in all of its actions — otherwise it risks continued doubt from outsiders.”

COMESA Judge Proposes Judicial Enhancements

Justice Samuel Rugege, the former principal judge of the COMESA Court of Justice, is quoted as arguing against the COMESA Treaty’s requirement for exhaustion of local remedies prior to bringing a matter before the Court of Justice:
“I think that the rule ought to be removed and members should have access to the courts like the Ecowas Court of Justice. The matter has been raised by the president of the Court and the matter needs to be pursued. It is an obstacle to those who want to come and cannot especially on matters that are likely to be matters of trade and commercial interest. Commercial matters must be resolved in the shortest possible time as economies depend on trade,” Rugege said.
Justice Rugege also highlighted the potential for jurisdictional infighting in the COMESA region (see our prior reporting on this topic here), observing that said COMESA currently lacks any framework for coordinating matters involving countries that are part of both SADC and the COMESA bloc.

MergerMania: Are CCC notifications picking up pace unnoticed?

COMESA Competition Commission logo

COMESA Merger Mania

To answer our rhetorical question in the title above: We don’t believe so.  For the merger junkies among our readership, here is AAT’s latest instalment of “COMESA MergerMania” — AfricanAntitrust’s occasional look at merger matters reviewed by the young multi-jurisdictional competition enforcers in south/eastern Africa.  (To see our last post on COMESA merger statistics, click here).

COMESA publishes new Merger Filings, still fails to identify dates thereof

As nobody else seems to be doing this, let us compile the latest news in merger notifications to the COMESA Competition Commission.  Prior to doing so, however, we observe one item of utility and basic house-keeping etiquette, which we hope will be heeded in future official releases by the agency: Please note the dates of (and on the) documents being issued.  Using the date as a ‘case ID’ is insufficient in our view — the CCC’s current PDF pronouncements invariably remain un-dated, a practice which AAT deplores and which simply does not conform to international business (or government) standards.  So: please date your press releases, opinions, decisions, and notifications on the documents themselves.

We observe that the matters below have not yet been assigned final “case numbers” (at least not publicly) in the style typical of the CCC decisions in the past, namely sequential numbers per year, as they are currently under investigation and have not yet been decided.

We also note that one notification in particular appears to have been retroactively made in 2014, even though it is identified as merger no. 3 of 2015 (Gateway), a peculiarity we cannot currently explain.  Likewise, AAT wonders what the “44” stands for in its case ID (“12/44/2014”), we surmise it’s a typo and should be “14” instead.

Internal Case ID Statement of Merger
Holtzbrinck PG/ Springer Science MER/04/06/2015 SOM/6/2015
Eaton Towers/ Kenya, Malawi, Uganda Towers MER/04/05/2015 SOM/5/2015
Coca-Cola BAL/ Coca-Cola SABCO MER/04/07/2015 SOM/4/2015
Gateway/Pan Africa MER/12/44/2014 SOM/3/2015
Old Mutual/UAP MER/03/04/2015 SOM/2/2015
Zamanita /Cargill MER/03/03/2015 SOM/1//2015

Which brings us to the bi-monthly…

AAT COMESA Merger Statistics Roundup

COMESA Merger Statistics as of July 2015

COMESA Merger Statistics as of July 2015 (source: AAT)

New COMESA merger approvals: stats and details

COMESA Competition Commission logo

COMESA publishes new Merger decisions

In the past week, the COMESA Competition Commission published the following decisions in its most recent merger cases, resulting from the CCC’s 14th meeting:

  • Case 1/15: Cannon (insurance) – decision time: 176 days – 4 member states affected.
  • Case 2/15: ImproChem (water treatment) – decision time: 166 days – 12 member states affected.
  • Case 3/15: Chlor Arkali (food-grade salt) – decision time: 135 days – 3 member states affected.

…and from its 15th meeting:

  • Case 4/15: Telkom SA (information and telecom technology) – decision time: 11 days (!) – 10 member states affected
  • Case 5/15: Platform Specialty Products (fungicides, herbicides, and insecticides) – decision time: 112 days – 9 member states affected

Of note are the following:

  1. The record time11 calendar days — in which the CCC resolved the Telkom transaction in favor of the South African provider, which aquired a BBBEE entity, despite the fact that the affected geographies encompassed 10 COMESA member states.
  2. The average time it took for the CCC to clear these 5 transactions was 120 days from notification to decision.
  3. All 5 notified transactions were unconditionally approved.
  4. The voting Commission members were, in all cases, Chilufya Sampa (Zambia), Thabisile Langa (Swaziland), and Alexander Kububa (Zimbabwe).

Finally, we observe that none of these merger matters presumptively benefitted from the upward-adjusted threshold (>$5 million), as they date to a pre-Assessment Guidelines era (see also here).

AAT’s updated COMESA merger statistics are thus as follows:

 COMESA merger stats 3-2015

Has national antitrust enforcer abdicated to COMESA?

swaziland

Swaziland Competition Commission all but shuttering its doors

Since the creation of its competition-law authority in 2007, COMESA member state Swaziland has seen only 2 (two) enforcement matters, according to a report by the Observer.  Even by COMESA’s statistical standards, 2 matters in 7 years amounts to a record low.

Over in the virtual world, the SCC’s web site reflects the agency’s real-life inactivity: The last update appears to have been made in March 2012, a full two years ago; many, if not most, hyperlinks to “news” are broken or lead the viewer to blank pages; PDF document downloads often fail for no obvious reason.

As to the two discernible cases undertaken by the agency, the Observer article quotes Swaziland Competition Commission (SCC) Advocacy and Communications Officer Mancoba Mabuza as follows:

[T]he first enforcement matter the commission dealt with was The Gables (Pty) Ltd versus Pick n Pay Retailers (Pty) Ltd where the secretariat conducted an investigation into allegations made by The Gables against Pick n Pay.

[T]he second enforcement case involved Eagles Nest (Pty) Ltd and Usuthu Poultry (Pty) Ltd which was investigated by the secretariat and at the conclusion of the investigation; the report was shared with the parties to the matter as the finding was adverse to the parties.

“The matter was then taken to court where the commission successfully defended the case in the court of first instance and the parties then appealed the matter. In a judgement delivered on May 30, the parties’ appeal was dismissed and that the commission will be adjudicating on this matter soon,” he said.

 

Slow-going M&A statistics in COMESA before anticipated threshold revision

COMESA Competition Commission logo

Strong numbers from early 2014 did not hold up

After posting a record three merger notifications in January, the COMESA Competition Commission has seen its M&A filing statistics decline to zero in February and merely one in March.

As we have reported here (optimistic for 2014) and here (pessimistic on 2013 statistics), COMESA’s notified M&A deals have seen erratic ups & downs.  Not surprising, perhaps, if one considers the exquisite confusion that has reigned since the inception of the young antitrust authority about filing thresholds and fees.

The current ebb in notified deals (despite the record set in January) reflects, in our view, the impending end of the current “zero-threshold” regime in COMESA, which was foreshadowed by The CCC’s head of mergers, Willard Mwemba, back in late February 2014.  Quite understandably, parties to ongoing transactions are willing to risk “flying under the radar” if the agency has de facto admitted that the zero-dollar filing threshold is unworkable in practice.

We are curious to see what impact the vacuum of the pending revision to the COMESA merger rules will have on filing statistics going forward, until a more sensible threshold is set by the agency.  For now, with the latest notification #4/2014 (fertilizer and industrial products acquisition by Yara International ASA of OFD Holdings Inc.*) the stats look like this:

* we note that in the notice, the CCC erroneously set the deadline for public comment prior to the notice date itself, namely as “Friday, 28th February, 2014.”

competition law antitrust Africa

COMESA CCC M&A filing statistics as of March 2014

COMESA merger stats: January ’14 outperforms first 6 months of 2013

COMESA Competition Commission logo
Three merger notifications in one month set new record for COMESA Competition Commission.

After commenting on the rather lackluster statistics of the first 11 months A.D. 2013, we observed that some deal-making parties might be “flying under the radar” and asked the question:

Combine Point 4 above (low filing statistics) with the zero-threshold and low nexus requirements that trigger a COMESA merger notification, and the following question inevitably comes to mind: With such low thresholds, and the certain existence of commercial deal activity going on in the COMESA zone, why are there so few notifications?

Well, the young agency’s stats have picked up some steam in 2014, it would seem: based on a review of its online document repository, the CC has received a whopping three notifications in January alone.  They are, in chronological order:

  1. Mail & courier services: FedEx / SupaSwift – a transaction involving the acquisition of a South African courier with operations in multiple COMESA member states, Botswana, Malawi, Mozambique, Namibia, Swaziland and Zambia.
  2. Agricultural distribution and financial services: AgriGroupe / AFGRI Ltd. – Mauritian SPV AgriGroupe seems to be taking AFGRI (listed on the JSE) private.  The target has operations in multiple COMESA countries.
  3. Generic pharmaceuticals: CFR Inversiones SPA / Adcock Ingram Holdings Ltd. – Chilean CFR is buying all of South African off-patent pharmaceuticals manufacturer Adcock’s shares. Notably, the buyer has no COMESA activities; target is active in Kenya, Malawi, Rwanda, Sudan, Swaziland, Uganda and Zimbabwe.
(c) AAT

Merger notification stats for COMESA as of Feb. 2014

Take-aways:

  • Activity has increased dramatically.  Is it a coincidence & a statistically irrelevant blip on the radar screen?  This remains to be seen. The parties are – unlike last year’s – not “repeat parties” and therefore the increase in notifications seems to be natural/organic growth, if you will, rather than a case of the same bear falling into the same honey-trap multiple times…
  • The Competition Commission has listened to its critics (including this blog). Notably, the CC now clearly identifies the affected member-state jurisdictions in the published notice – a commendable practice that it did not follow in all previous instances, and which AAT welcomes.

Post-scriptum: Adding up the total 2013 tally of notifications, the Tractor & Grader Supplies Ltd / Torre Industrial Holdings transaction (notified after our prior statistics post in November 2013) brought the sum-total of COMESA merger filings to 11 for FY2013.

COMESA merger rules to change in April 2014 at the earliest

COMESA Competition Commission logo

Breaking news: A senior source at the COMESA Competition Commission (“CCC”), has confirmed that the CCC is currently finalising proposed amendments to the Regulations.

The amendments being debated seek to change, crucially, the applicable thresholds for merger notifications to the CCC and to clarify the definition and (potentially lower?) amount of the administrative notification fees.

For the amendments to come into force, they require approval from the COMESA Council of Ministers.  The Council convenes once a year, now likely in February.  The source adds that, as the amendments will only be finalised toward the end of February, an extraordinary session of the Council of Ministers will likely need to be convened to consider the amendments to the Regulations.  Such an extraordinary session may take place in April 2014.  The amended Regulations will only become enforceable upon approval by the Council.

That is, the way things are looking today, any change to the COMESA merger rules will occur in half a year at the earliest

In practical terms, this means that the dual dilemma of the “zero-threshold contagion” and the inordinately high filing fees currently affecting the CCC’s merger-control regime (and resulting in rather low merger-notification statistics of less than one per month) will continue to hamper the young agency and its customers for the foreseeable near-term future.

We will report back once we have additional details on the precise language of the proposed amendments.