New Pan-African Merger Guidelines

On 31 October 2014, the regional competition authority for the Common Market of Eastern and Southern Africa (“COMESA”), the COMESA Competition Commission (the “Commission”), published its finalised Merger Assessment Guidelines (the “Guidelines”).

The Guidelines are not legally binding, but rather are intended to offer general guidance on the interpretation of the merger control provisions in the COMESA Competition Regulations 2004 (the “Regulations”), published in January 2013. In particular, the Guidelines have introduced new guidance to assist in determining if a “merger” needs to be notified to the Commission in accordance with merger control provisions in the Regulations. The purpose of such a merger notification is to allow the Commission to assess whether the merger would have the effect of substantially preventing or lessening competition in the COMESA region, in particular through the creation or strengthening of a dominant position.

So what is a “merger” and when does it need to be notified?

For the purposes of the Regulations, the term merger means the direct or indirect acquisition or establishment of a controlling interest by one or more persons in the whole or part of the business of a competitor, supplier or other person (“Merger”). A Merger is subject to the merger control provisions in the Regulations (and so needs to be notified to the Commission) where:

i. both the acquiring undertaking and target undertaking or either the acquiring undertaking or target undertaking operate in two or more Member States; and

ii. the threshold of combined annual turnover or assets specified in the Regulations is exceeded.

A big problem with the Regulations as drafted, is that the threshold referred to at (ii) above is currently set at USD 0! This means that, as far as the Regulations are concerned, all Mergers satisfying condition (i) above are notifiable, no matter how small. However, the Guidelines have addressed this issue by introducing separate threshold requirements in the context of the meaning of the term “operate”. Accordingly, now an undertaking will only be deemed to be operating in a Member State if its annual turnover or value of its assets in that Member State exceeds USD 5,000,000.

For the purposes of the Guidelines, annual turnover and value of assets will be calculated by adding together, respectively, the annual turnover and value of assets in COMESA nations of:

i. the undertaking concerned;

ii. its subsidiaries;

iii. its parents; and

iv. other subsidiaries of its parents.

Furthermore, the Guidelines have clarified that only mergers having a regional dimension are notifiable. The regional dimension test will not be met if an undertaking does not operate in any Member State and/or more than two thirds of the annual turnover or value of the assets of each of the merging parties is achieved within one and the same Member State.

Accordingly, a merger is only notifiable if:

i. at least one merging party operates in two or more Member States (i.e. has an annual turnover in that Member State of USD 5,000,000);

ii. the target undertaking operates in a Member State; and

iii. it is not the case that each of the merging parties achieves or holds more than two-thirds of its COMESA-region turnover or assets in one and the same Member State.

When a merger is technically notifiable, but it is clear that it will not have an appreciable effect on Competition, the Guidelines have formalised the procedure by which the Commission can issue a comfort letter confirming that the merger does not need to be formally notified.

Other means of control” and “joint ventures

In instances where control over an undertaking or asset is not established by any of the specific means specified in the Regulations (e.g. by a purchase of shares) but by other means, a decisive influence test applies. Joint ventures are subject to a full functionality test, meaning that it must perform, for a long duration (typically more than 5 years) all the functions of an autonomous entity. These tests are designed to the mirror the EU Competition regime’s equivalent concepts.

Two stage merger review process

The Guidelines have also introduced a two phase merger review process. Any mergers not raising significant issues and that may be easily determined may be dealt with within 45 days, whilst investigation into more complex cases may last up to the full 120 day period provided for by the Regulations. These time limits only start to run when Commission has received a complete application.


The Guidelines are a welcome development and make clear that the Commission has listened to the suggestions of other competition authorities for improvements to its nascent competition regime. However, areas of improvement still remain. In particular, the filing fees (set at the lower of (i) 0.5% of the combined annual turnover or combined value of assets of the merging undertakings (whichever is higher) or (ii) USD 500,000) are still very high. By contrast, the maximum filing fee in the US is only USD 280,000, and this only kicks in for transactions valued at more than USD 758,000,000. Neither the EU nor China have any filing fees at all. However, it is understood by some commentators that any such amendments need to be approved by the COMESA Council of Ministers. Hopefully, the Council of Ministers will legislate for a fee which corresponds more closely with those of its international peers sometime soon.