ECA introduces pre-notification regime for horizontal mergers in Egypt

Posted in Competition Blog post

There is effectively no merger control regime in Egypt, at least not in the terms comparable to those in other jurisdictions. While certain mergers and acquisitions must be notified to the Egyptian Competition Authority (ECA), parties are only required to notify after completion and the ECA has no powers to either prohibit or even approve these deals. Without any amendments to Egyptian completion legislation, the ECA is applying provisions relating to restrictive practices in order to, in practical terms at least, introduce a mandatory and suspensory regime for horizontal mergers (i.e. between competitors).

The Egyptian competition legislation currently requires parties to notify the ECA of transactions within 30 days of completion where the parties’ combined turnover in Egypt is over EGP 100m (approx. USD 6m). The ECA does not have jurisdiction to prohibit, conditionally approve or even approve transactions. It can only initiate investigations where parties have failed to notify within the 30 days and refer them for criminal prosecution.

The ECA has been seeking the introduction of a pre-merger control regime for a number of years. In 2017, the ECA undertook consultation on its proposals to amend Law No. 3 of 2005 promulgating the Law on the Protection of Competition and the Prohibition of Monopolistic Practices (Law No. 3), the Egyptian competition legislation, to introduce a mandatory and suspensory regime for transactions satisfying financial thresholds. The ECA also proposed that it could require the notification of non-qualifying transactions for up to 6 months after completion.

As these proposals had not progressed, the ECA last year took matters in its own hands by invoking provisions of Law No. 3 relating to restrictive practices whereby agreements between competitors that restrict competition must be notified to and approved by the ECA prior to implementation. A failure to notify has the effect of rendering the agreement null and void. As part of its review of these agreements, the ECA may prohibit or conditionally approve agreements.

In October 2018, the ECA issued an interim measure order in response to media reports that Uber was acquiring Careem, two providers of ride-hailing services in Egypt. The ECA stated that it was concerned that the transaction would significantly impede competition in the markets on which the entities are active. In seeing the merger agreement as an agreement falling within the provision relating to restrictive practices, the ECA required the parties to notify the merger agreement and to refrain from implementing the transaction until the ECA’s approval.

On 26 March 2019, the parties notified the ECA that they had signed a purchase agreement that was conditional on applicable approvals of competition authorities (including the ECA). The ECA’s review of the transaction is progressing and, on 4 May 2019, the ECA held a hearing with the parties to discuss the impact of the transaction on investments from new rivals and the competitive environment.

The ECA’s effective introduction of a mandatory and suspensory merger control regime for horizontal mergers has material implications for businesses operating or investing in Egypt with much depending on the predictability of the ECA’s assessment of the competitive relationship between the parties as well as of the likely impact of any transaction on competition. The use of the provisions relating to restrictive practices can be expected to continue as a stop-gap until such time as, and if, the ECA’s 2017 proposals are adopted. At this stage, however, no further steps have been taken to push through these proposals through the legislative process.

The Inside Africa team would like to thank Susan Bisset, Candidate Attorney, for her contribution to this blog post.

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