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Comesa introduces new rule for mergers

The Comesa Competition Commission has introduced new thresholds on mergers in the region, which stipulate that all companies with a combined turnover of $50 million that intend to merge and whose merger will have a regional effect should notify it with immediate effect.

Since the inception of the Comesa Competition Commission in 2013 there has been confusion on which transactions were supposed to be reported to the regional body and which ones fell under the jurisdiction of local commissions.

However, the new thresholds are going to set parameters and will determine expectations on different merger transactions happening in the region.

Speaking at the Comesa competition law sensitisation workshop in Livingstone, Zambia, Comesa competition Commission chief executive George Lipimile said after inception of the commission they introduced new thresholds to improve the doing business environment in the common market.

He said all companies that do not meet the new threshold of a combined $50 million turnover but want to merge should notify their local competition commissions even if the merger has a regional effect.

“Since we started operations we have managed to deal with threshold issues on mergers. There has been a 76 percent drop in fining fees and currently we are actually charging less than what commissions at national level.

“The new threshold states that merger of two companies in the common markets should have a combined turnover of more than $50 million. In addition, at least two of the parties to the merger should have an individual turnover of $10 million. Failure to notify is subject to penalties. We rather declare the transaction null and void as the first penalty before fining the companies,” said Lipimile

“Corporates should religiously abide to the new thresholds when notifying their mergers for the smooth flow of trade in the region.”

He said since the commencement of operations of the Commission they have managed to reduce the cost of doing business in the common market to 70 percent.

Lipimile said so far the Commission has approved more than 72 mergers transactions with a transaction value of more than $20 million.

“The commission considers this as a success. When the commission commenced operations, there was a lot of confusion on the interpretation of certain provisions of the regulations for example the meaning of regional dimension and appreciable effect on trade between member states,” said Lipimile.

Comesa competition commission manager for mergers and acquisitions Willard Mwemba said the commission received a lot of merger notifications in the insurance, energy, mining and agriculture sectors since 2013.

He said these were transactions that had a bearing on the common market. Mwemba said the regional competition commission introduced a one stop shop for cross border transactions easing doing business in Comesa since such transactions no longer need to be examined in two or more jurisdictions.

He said unlike the national competition authorities, whose jurisdiction is limited by national boundaries, the competition commission established under Article 6 of the Regulations has extra-territorial jurisdiction within the common market and has the power to investigate cases located in any member state jurisdiction.

“The regional competition law’s main objective is to promote and encourage competition by preventing restrictive business practices and other restrictions that deter the efficient operation of markets, thereby enhancing the welfare of the consumers in the common market, and to protect consumers against offensive conduct by market actors.

“The regulations apply to all economic activities whether conducted by private or public persons within, or having an effect within the common market,” said Mwemba.—AllAfrica.com

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