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Pieter Steyn, director,
Werksmans Attorneys
Direct line: +27 (0)11 535 8296
Email: psteyn@werksmans.com

Ahmore Burger-Smidt, director,
Werksmans Advisory Services
Direct line: +27 11 535 8462
Email: aburgersmidt@werksmans.com

The Common Market for Eastern and Southern Africa (“COMESA”) is a regional body of 19 African countries namely Burundi, Comoros, the Democratic Republic of Congo, Djibouti, Eritrea, Ethiopia, Kenya, Libya, Madagascar, Mauritius, Rwanda, Seychelles, Sudan, Swaziland, Uganda, Zambia, Zimbabwe, Egypt and Malawi.

The COMESA Competition Regulations came into effect on 14 January 2013 and have very significant implications for transactions and firms doing business in COMESA countries. The COMESA Competition Commission (“CCC”) is based in Lilongwe, Malawi.

Key points to note are:

1. All mergers (regardless of size) are notifiable to the CCC if the buyer, the target or both of them “operate” in two or more COMESA member states. The term “operate” is not clear (for example do foreign exporters of goods to COMESA “operate” in COMESA?) and the regulations themselves limit their ambit to economic activity within or having an effect within the COMESA Common Market and conduct with an “appreciable effect” on trade between COMESA member states and which restricts competition in the Common Market. The CCC’s approach is however very wide and will catch many transactions. Adding to the uncertainty is that the CCC has the discretionary power to require the notification of a merger even if it is not notifiable under the regulations eg if the parties only “operate” in one COMESA country;
   
2. The merger filing fee is the higher of US$ 500 000 or 0.5% of the lower of the merging parties’ combined annual turnover or combined assets in the Common Market. No method is prescribed for calculating turnover and assets, leading to further uncertainty;
   
3. A penalty of up to 10% of either or both the merging parties’ annual turnover in the Common Market may be levied if the parties fail to give notice of the merger to the COMESA Commission within 30 days of the “decision to merge”. It is unclear whether the penalty also applies if parties implement a merger before CCC approval. Failure to obtain CCC approval also results in the merger not being enforceable in the Common Market;
   
4. The rationale for establishing the CCC was to have a “one stop shop” dealing with competition issues in the Common Market. However the relationship between the CCC and national competition regulators is not clear and a jurisdictional “turf war” may arise due to the uncertainty. The COMESA regulations state that they have "primary jurisdiction" over an industry or sector subject to another domestic or regional regulator in the Common Market. Member states are obliged to take steps to give effect to the regulations. However if member states have not taken steps to ensure the enforceability of the regulations in their countries, the national regulators arguably retain jurisdiction - this means that merger filings with the CCC as well as in COMESA member states may be required, leading to delays, multiple filings and additional costs. National laws may also differ from the COMESA regulations and require firms to comply with both;
   
5. The CCC has a 120 day review period to investigate notifiable mergers but may apply for unlimited extensions from the Board of Commissioners (who are appointed by the COMESA Council of Ministers). Appeals against the CCC's decisions lie to the Board but the appeal procedure is unclear and there is no provision for recourse to the courts;
   
6. The CCC will also regulate anti-competitive conduct in or having an effect in the COMESA region and this refers not only to cartels and agreements with customers and suppliers but also the conduct of dominant firms. The CCC can investigate a firm either on the basis of a complaint by a third party or by initiating its own investigation. The provisions in the COMESA regulations are to a large extent similar to those in the South African Competition Act. Firms engaging in conduct prohibited by the regulations may be fined up to 10% of their COMESA annual turnover in their previous financial year. As the Comesa Regulations came into effect on 14 January 2013 without a transitional period, conduct which may have been lawful before 14 January, may now be unlawful. The CCC has called on firms to discuss their existing arrangements with the CCC and to apply for exemption although this will mean disclosing conduct that contravenes the regulations (it is not clear if the CCC has or will have a leniency or immunity program);
   
7. The CCC also has powers regarding consumer protection issues like false or misleading advertising, contractual terms with consumers, product safety, product information standards and product liability.

Disclaimer:
Nothing in this publication should be construed as legal advice from any lawyer or this firm. Werksmans’ Legal Briefs should be seen as general summaries of developments or principles of interest that may not apply directly to specific circumstances. Professional advice should therefore be sought before any action is taken.