The Common Market for Eastern and Southern Africa (COMESA) seeks to advance economic integration through trade and investment in Eastern and Southern Africa (the “Common Market”).
It is composed of 19 member states, namely, Burundi, Comoros, the Democratic Republic of Congo, Djibouti, Egypt, Eritrea, Ethiopia, Kenya, Libya, Madagascar, Mauritius, Malawi, Rwanda, Seychelles, Sudan, Swaziland, Uganda, Zambia and Zimbabwe. South Africa is however not a member of COMESA.
The COMESA Competition Commission (the Commission) derives its power from the Treaty establishing COMESA and the COMESA Competition Regulations (the Regulations).
It is tasked with fact-finding, taking action against infringements of the law including consumer protection violations, approving mergers or acquisitions with a regional element, granting individual exemptions and imposing penalties under the Regulations.
The Commission became operational on 14 January 2013 and immediately began receiving applications and notifications in relation to mergers and acquisitions, among others.
Under the Regulations, the general understanding of mergers remains unchanged. Therefore, mergers may occur horizontally between firms that produce and sell the same or similar products, specifically between competing firms.
Vertical mergers occur between firms operating at different stages of production. Conglomerate mergers, on the other hand, occur between firms in unrelated business such as between a food-processing firm and a clothing manufacturing firm.
An important aspect of the Regulations is the provision for the compulsory notification of mergers in which either the acquiring firm, or the target firm, or both, operate in two or more member states.
All mergers require notification to the Commission within 30 days of the parties’ decision to merge regardless of the size of the parties or the transaction.
Where member states have domestic competition laws, the Regulations will have primary jurisdiction where the matter affects competition in more than one member state. This essentially allows the Regulations to prevail over the domestic competition merger-control law of member states.
However, having attained knowledge of a merger notification submitted to the Commission, member states may invite the Commission to investigate a proposed merger under their domestic competition law where the proposed merger has the potential to lessen competition unduly within the member state.
In such a case, the Commission has discretion as to whether to refer the merger to the competent authority of the member state concerned or deal with the case itself.
COMESA has therefore become a significant consideration in relation to the rules on anti-competitive practices affecting the common market. Companies with interests in member states will need to evaluate their business operations and compliance programmes in order to align them with COMESA’s competition requirements.
Written by Molisa Cheda.