The Republic of Tunisia and the Federal Republic of Somalia have joined the Common Market for Eastern and Southern Africa (COMESA) after being admitted as member states during the COMESA Heads of States and Governments Summit held on 18 and 19 July 2018 in Lusaka, Zambia. COMESA’s membership has now increased to 21 member states namely: Burundi, Comoros, Democratic Republic of Congo, Djibouti, Egypt, Eritrea, Ethiopia, Kenya, Libya, Madagascar, Malawi, Mauritius, Rwanda, Seychelles, Somalia, Sudan, Swaziland, Tunisia, Uganda, Zambia and Zimbabwe.
COMESA is a regional trade bloc aimed at, among other things, establishing a free trade area by removal of all tariff and non-tariff barriers and enabling free movement of human capital and investment in the COMESA market.
COMESA’s Competition Regime and the Impact on Ongoing Transactions
COMESA has an active competition-law regime which was introduced in 2013 and is enforced by the COMESA Competition Commission (the Commission). It regulates mergers, restrictive business practices (such as exclusive distributorship agreements and price-fixing), abuse of dominance and consumer protection in the COMESA market.
The competition regime will now apply in Tunisia and Somalia with immediate effect according to the notice published by COMESA on 23 July 2018. In effect, the two jurisdictions should be considered in evaluating whether a cross-border merger is notifiable to the Commission. However, it is unclear how this will impact ongoing transactions where parties had agreed to merge and had already conducted an analysis without taking into account Tunisia and Somalia.
At present, mergers or take-overs taking place in the COMESA common market are mandatorily notifiable to the Commission if the following tests are met:
a) at least one merging party (either the buyer or target) operates in two or more COMESA member states;
b) the annual turnover or value of assets of each of the buyer and the target in COMESA exceeds USD 10 million and their combined annual turnover or value of assets exceeds USD 50 million; and
c) the transaction does not meet the two-thirds rule, that is, it is not the case that more than two-thirds of the annual turnover or turnover in the Common Market of each of the merging parties (the acquirer and target) is achieved or held within one and the same Member State.
Parties are required to notify the Commission within 30 days of signing legally binding agreements failure to which could result in penalties and/or invalidation of the underlying transaction. There is a filing fee of up to USD 200,000 payable.
We will keep you updated on any developments on the application of the competition regime in light of the new COMESA member states.
The content of this alert is intended to be of general use only and should not be relied upon without seeking specific legal advice on any matter.