Time to reconsider Member State consultation in the COMESA merger control regime

Posted in Competition Southern Africa Eastern Africa

The COMESA Competition Commission (CCC) recently called for comments on how the impact of the Covid-19 pandemic on the COMESA merger control regime could be mitigated. While the CCC’s intention is welcome, the reality is that the pandemic, if anything, has only exacerbated aspects of the CCC’s procedure that were already causing unnecessary delays in the review of COMESA mergers. As a result, there is a broader need for reforms to the COMESA merger control regime, which has remained relatively untouched since becoming operational in January 2013. Inside Africa speaks to Willard Mwemba, Head of Mergers at the CCC, about the potential regulation of the manner in which COMESA member states are consulted on COMESA mergers, which could significantly speed up the CCC’s review period.

On 30 July 2020, the CCC held a webinar with national competition authorities and stakeholders on the impact of the Covid-19 pandemic on the COMESA merger control regime. As part of the discussion, Mr Mwemba revealed that one of main effects has been the delays in obtaining feedback from the national authorities of the COMESA member states as part of their consultation on COMESA mergers.

According to Mr Mwemba, the delays in obtaining feedback was the reason why the CCC recently suspended the phase I and II timelines in its merger guidelines. According to these timelines, a merger was deemed approved unless the CCC opened an in-depth investigation within 45 days. He points out that “The motivation for suspending the Phase 1 and 2 processes under the Regulation was the realisation that most cases would end up being approved automatically without the CID determination as it was mostly going to be the case that the Commission would not conclude assessments within the 45 days provided for under Phase 1. This in light of the challenges that have been occasioned by the pandemic.”

While no doubt the remote working of national officials together with the lockdowns in the COMESA member states has impacted the provision of feedback to the CCC, the reality is that the pandemic has only exacerbated aspects of the CCC’s procedure that were already causing unnecessary delays in the review of COMESA mergers. As context, the average review period for COMESA mergers during the 24 months prior to the pandemic was 108 days despite the fact that all but 5 transactions were unconditionally approved with no prohibitions. As a benchmark, this average review period does not compare favourably to those of peer authorities in the region.

In accordance with the COMESA Competition Regulations, the CCC must consult with ‘relevant’ COMESA member states as part of its evaluation of COMESA mergers. In particular, the CCC consults with authorities in all COMESA member states where the parties have activities even if these activities fall outside of the relevant (product and geographic) market. For example, if a target’s activities were limited to a national market within Zimbabwe but the acquirer had diverse/non-related activities in other COMESA member states, the CCC’s practice is consult with authorities in these additional COMESA member states.

Mr Mwemba clarifies that the breadth of the consultation does not, in practice, delay the approval of COMESA mergers. He states that ‘In most cases, though we write to all the Member States where the acquirer has operations, we proceed without their comments in an event that they do not respond within the 30 days deadline we give in our letter. Therefore, this scenario has never delayed the Commission's assessment of the merger as the weight is mostly given on Member States where the target has operations. With Member States where the target has operations, we have no option but to get that information.’

The necessity to obtain feedback from the authorities in the target’s jurisdictions is compounded by the fact that there is no legislative timetable in which they must respond to the CCC. In practice, according to Mr Mwemba, the CCC gives these authorities a period of four weeks to respond before proceeding, however, in our experience, the CCC is reticent to proceed with the approval of even a non-problematic merger without the input of a national authority.

The delays in the provision of member state feedback is seemingly best addressed by the imposition of a binding timetable on national authorities. In agreement with this suggestion, Mr Mwemba adds ‘It would be good to legislate for this binding timeline to avoid unnecessary disputes and discretion. However, a safeguard should be provided to address unforeseen circumstances such as COVID otherwise we may find ourselves in legal drama where there is such an occurrence.’

While the CCC’s intent is welcome in tackling the challenges arising from the Covid-19 pandemic, there is a need for a broader review of the COMESA merger control regime. Given that this regime has remained relatively untouched since becoming operational in January 2013, there needs to be a constructive assessment of what has worked well and what needs to improve. As more countries join the COMESA trading bloc and the CCC plays a more assertive role, this assessment becomes all the more important.

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