1. ‘COMPETITION REGULATION IN THE COMON MARKET‘ Willard Mwemba Mergers and Acquisitions COMESA Competition Commission

2. The COMESA Competition Commission law is contained in Chapter six, under Article 55 of the COMESA Treaty. Hence, the binding nature of the Competition Regulations is imposed on all Member States by virtue of their membership to the Treaty. The Treaty itself imposes severe penalties on Member States found wanting in complying with the Treaty.

3. COMESA Members  Burundi*  Comoros *  Congo  Djibouti*  Egypt *  Eritrea  Ethiopia*  Kenya*  Libya  Madagascar*  Malawi*  Mauritius*  Rwanda*  Seychelles*  Sudan*  Swaziland*  Uganda  Zambia*  Zimbabwe* 3  8 COMESA Countries are part of SADC and  4 part of EAC (Kenya, Uganda, Rwanda and Burundi).  A tripartite Taskforce has been setup to harmonize their programmes and the overall regional integration process for the three Regional Economic Communities. *Member States with National Competition Laws.

4. Having regard to Article 55 (1) of the COMESA Treaty: “ … To this end, the Member States agree to prohibit any agreement between undertakings or concerted practice which has its objective or effect the prevention, restriction or distortion of competition within the Common Market”  Article 55 (3): “The Council shall make regulations to regulate competition within the Member States”.  The Regulations were ratified by the Council of Ministers on 17 th December, 2004. 4

5. Effect of Regulations Article 10 (2) of the Treaty : “ A Regulation shall be binding on all the Member States in its entirety “ Entry into Force of Regulations Article 12 (1) of the Treaty : “ Regulations shall be published in the Official Gazette of the Common Market and shall enter into force on the date of their publication or such later date as may be specified in the Regulation”. COMESA Gazette Volume 9 No. 2; Decision No. 43 in Notice No.2 of 2004 5

6.  Article 5 of the Regulations:  Article 5 of the Regulations: Pursuant to Article 5(2)(b) of the Treaty :Member States shall abstain from taking any measure which could jeopardize the attainment of the objectives of these Regulations.  Article 5 (2) (b) of the Treaty : “Each Member State shall take steps to secure the enactment of and the continuation of such legislation to give effect to this Treaty and in particular : to confer upon the Regulations of the Council the force of law and the necessary legal effect within its territory “. 6

7.  A question is always asked, why do we need a regional competition regime? Simply stated, the benefits of competition can be so substantial for every sector in our societies – whether public, private or civil. Better enforcement of competition law can foster improved governance and social accountability. It can make service delivery more efficient and equitable. It can increase the participation of the private sector, and it can build the capacities of all stakeholders. In doing all this, effective enforcement of competition policy at both national and regional level can promote national competitiveness and boost economic development.  7

8.  The Commission is clearly continuing on its growth path. Looking at its three years of its operations, it is important to recognise that it is no small feat to establish such an institution from scratch, more so at regional level and in the environment where the competition and compliance culture is still lacking.  Since the Commission commenced its operations, it has changed the way of doing business in the Common Market. The response by the business community, Trade and professional bodies has been sharp and positive. It has become a highly respected institution responding effectively to the challenges of the local and international business environment. 8

9.  Firstly, the introduction of a ‘One Stop Shop’ for the notification of cross border transactions thereby easing the cost of doing business in the Common Market given that such transactions shall no longer need to be notified in each of the Member States, where the transaction is taking place;  Secondly, the Commission also provides the only and most extensive network of national competition authorities and more.  Thirdly, there has been an evident increase in the number of legal practitioners specializing in competition law, in almost each of our Member States. We thank the network created by yourselves, the Africa Legal Network; and  Fourthly, and most importantly, it creates a regional platform for conflict resolution in matter involving restrictive business practices and unfair trading practices. 9

10.  The Competition Regulations were adopted in December 2004 but only came into force on the 14 th of January, 2013 ; To deal with the gaps - :  October, 2014 Publication of the Merger Assessment Guidelines  Set out the Commissions approach to the type of transactions that are notifiable under the Regulations,  Provide procedural obligations that apply and the substantive assessments to be made by the Commission when reviewing mergers  Offers guidance to the question What kind of transaction constitutes a notifiable merger 10

11.  The Competition Regulations were adopted in December 2004 but only came into force on the 14 th of January, 2013 ; To deal with the gaps - :  October, 2014 Publication of the Merger Assessment Guidelines  Set out the Commissions approach to the type of transactions that are notifiable under the Regulations,  Provide procedural obligations that apply and the substantive assessments to be made by the Commission when reviewing mergers  Offers guidance to the question What kind of transaction constitutes a notifiable merger 11

12.  In March 2015 the Commission addressed the most controversial question of Merger notification thresholds and the merger filing fees. 12

13.  When the Commission commenced its operations, all mergers were notifiable regardless of size or whether any of the parties carried out substantial operations in the Common Market.  The notification thresholds were set at Zero and the obligation to notify extended to instances where a party to the transaction would not have operations or substantial operations in the Common Market. 13

14.  This became a burden on both the workflow of the Commission and the parties.  Consequently, the Commission adjusted the zero notification threshold requirement, to make only those transactions which had substantial effect on the market to be notifiable.  This resulted into small or insignificant transactions not to be notifiable 14

15.  In response to a public outcry, especially the business community - :  With effect from March 2015, filing fees were reduced from 0.5% to 0.1% of the merging parties’ combined turnover or combined value of assets, Whichever is higher, in the Common Market.  Further, the maximum filing fee payable was reduced from a cap of 500 000USD to a cap of 200 000 USD. 15

16.  The Regulations provided that merger transactions where notifiable where either the target firm or the acquiring firm had operations in two or more Member States.  This meant that mergers were notifiable to the Commission even when the target firm had no operations in the Common Market as long as the acquiring firm had operations in two or more Member States. 16

17.  To address this situation, the Commission through the COMESA Merger Assessment Guidelines defined the meaning of the term ‘operate’ under Article 23 of the Regulations.  In order to operate in a Member State, an undertaking needed to derive a turnover or value of assets of USD 5 000 000 in that Member State. 17

18.  The meaning of ‘days’ was also not clearly defined in the Regulations. This caused a lot of uncertainty especially to the business and legal community.  The COMESA Merger Assessment Guidelines have since clarified that all the ‘days’ in the Regulations are calendar days as opposed to working days. 18

19.  The Commission through amendments to the COMESA Competition Rules prescribed the COMESA merger notification form 12.  The prescribed form 12 had more clarity and made it easier for the parties to submit the information requested by the Commission.  The prescribed form 12 also made it easier for the Member States to submit their views to the Commission on a merger because the form contained particular information specific to an affected Member State. 19

20.  The Commission has developed cooperation Agreements with Member States. Malawi was the first to sign on 4 September 2015.  Swaziland, Kenya and Zambia are expected to sign soon. Swaziland may sign as early as April 2015  The Commission has also promulgated guidelines regarding the assessment of anti- competitive practices and also the leniency program. 20

21.  The Commission is in the process of operationalizing the COMESA Competition Network, an institution similar to the European Competition Network.  The Commission has also established a robust informal network.  The Commission’s focus this year is on restrictive business practices and consumer violations.  The Commission has done enough advocacy. It has now switched gears to enforcement. 21

22.  Anti-competitive Business Practices :  Vertical Restraints { Rule of Reason Approach}  Horizontal Restraints { Per se prohibition}  Abuse of Dominance  Mergers and Acquisitions  NO Pre- merger notification requirement  Consumer Protection/Welfare 22

23. The Regulations provide for three institutions namely - :  COMESA Court of Justice : Receives appeals against the decisions of the Board of Commissioners.  Board of Commissioners :A non- executive Board consisting of 9/13 Members appointed by Council from the Member States. Determines cases it receives from the Commission. The Chairman shall assign three of the Commissioners to be full time members of the Board to be carrying out initial determination of the cases.  Commission : Enjoys international legal personality and in in the territory of each Member States the legal capacity required for the performance of its functions, Headed by the Director, responsible for the development of the regional competition policy and its responsibility extends to fact-finding, taking action against infringements of the law, imposing penalties and granting exemptions under the Regulations. 23

24. Scope of Application (Art. 3) :  “…apply to all economic activities whether conducted by private or public persons within, or having an effect within, the Common Market…”  “…apply to conduct covered by Parts 3, 4, and 5 which have an appreciable effect on trade between Member States and restrict competition in the Common Market”  “…shall have primary jurisdiction over an industry or a sector of an industry which is subject to the jurisdiction of a separate regulatory entity…”  “… does not apply to conduct expressly exempted by national legislation” 24

25. The main dispute resolution mechanism under the COMESA Treaty is the COMESA Court of Justice. The Court Consists of two chambers these being the Court of First Instance and the Appellate Division; The main function of the COMESA Court of Justice is to ensure adherence to law in the interpretation and application of the Treaty; Its jurisdiction is to adjudicate upon all matters referred to it under the COMESA Treaty; References to the Court can be by Member States, the Secretary General, legal and natural persons. The Commission can refer a matter to the CCJ for either guidance or interpretation of the law. 25

26. Matched against the success are setbacks still been experienced by the Commission:  The lack of understanding of the regional regime by our stakeholders still remains a concern. Some stakeholders wrongly consider the Commission as a stumbling block to their national competition efforts;  The skills pertaining at national level still remain very low, hence coherence between the Commission and National Competition Authorities in enforcement has remained a challenge;  The business environment has continued to exhibit a very low level culture of compliance with the competition rules both at national and regional level.  The different legal systems of the Member States has slowed the domestication of the Regulations at national level.  26

27. THANK YOU Any comments to:- Willard Mwemba Mergers and Acquisitions COMESA Competition Commission Lilongwe, Malawi wmwemba@comesa.int@comesa.int 27