COMESA: THE COMESA COMPETITION COMMISSION CLARIFIES THE JURISDICTIONAL REQUIREMENTS FOR MERGER NOTIFICATION

By Xolani Nyali Monday, February 15, 2021
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The COMESA Competition Commission (Commission) published a Practice Note (Practice Note) on 11 February 2021 clarifying the ‘regional dimension’ requirement for the notification of mergers in terms of the COMESA Competition Regulations, 2004 (Regulations).

Aside from the requirement that a transaction constitute a merger for purposes of the Regulations, the Regulations also require that 'both the acquiring firm and target firm or either the acquiring firm or target firm operate in two or more Member States’ (i.e. the Regional Dimension Test), and that the financial thresholds for mandatory notification be met (i.e. the Thresholds Test), for mandatory merger notification obligations to apply.

In its Practice Note, the Commission clarifies the meaning of the word ‘operate’ for purposes of the Regional Dimension Test. The need for the clarification stems from earlier guidelines published by the Commission in relation to merger control (Guidelines).

In terms of the Guidelines, the Commission considers undertakings to operate in a COMESA Member State if the undertaking’s annual turnover or value of assets in that Member State exceeds USD 5 million.

The Practice Note clarifies that the value of USD 5 million ceased to be a consideration for purposes of the Regional Dimension test in 2015 when the Commission published its Rules on the Determination of Merger Notification Thresholds and Method of Calculation, setting out the current thresholds on merger notifiability.

The Practice Note explains that the Regional Dimension Test would be satisfied in any one of the following instances, where:

  • both the acquiring firm and target firm operate in at least two Member States;
  • the acquiring firm operates in at least two Member States, while the target firm operates in only one Member State; or
  • the target firm operates in at least two Member States, while the acquiring firm operates only in one Member State.

Once the Regional Dimension Test is met, the next and final step in the inquiry is whether the Thresholds Test is also met. Briefly, the Threshold Test will be satisfied where:

  • the combined annual turnover or combined value of assets in the Common Market, whichever is higher, of each of at least two parties to the merger, equals or exceeds USD 50 million; and
  • the annual turnover or value of assets in the Common Market, whichever is the higher, of each of at least two parties to the merger equals or exceeds USD 10 million, unless each of the parties to the merger achieves at least two-thirds of its aggregate turnover or assets in the Common Market within one and the same Member State (in which case national merger control obligations may apply).

Although in practice, most practitioners were already interpreting the Regional Dimension Test as is set out in the Practice Note, the clarification from the Commission is welcome.