COMPETITION REGULATION IN THE COMON MARKET Willard Mwemba

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

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.

COMESA MEMBER STATES COMESA Members Burundi* Comoros * Congo Djibouti* Egypt * Eritrea Ethiopia* Kenya* Libya Madagascar* Malawi* Mauritius* Rwanda* Seychelles* Sudan* Swaziland* Uganda Zambia* Zimbabwe* 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. 3

TREATY PROVISIONS 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” Ø Article 55 (3): “The Council shall make regulations to regulate competition within the Member States”. Ø The Regulations were ratified by the Council of Ministers on 17 th December, 2004. 4

EFFECT OF THE REGULATIONS ON MEMBER STATES 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

OBLIGATIONS OF MEMBER STATES Ø Ø 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

WHY DO WE NEED A REGIONAL COMPETITION REGIME 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

WHY DO WE NEED A REGIONAL COMPETITION REGIME 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

BENEFITS OF THE REGIONAL COMPETITION REGIME 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

“WHAT ARE THE MAJOR DEVELOPMENTS ” he Competition Regulations were adopted in ecember 2004 but only came into force on the 4 th of January, 2013 ; To deal with the gaps - : ctober, 2014 Publication of the Merger ssessment Guidelines t out the Commissions approach to the type of ansactions that are notifiable under the egulations, ovide procedural obligations that apply and e substantive assessments to be made by the ommission when reviewing mergers ffers guidance to the question What kind of ansaction constitutes a notifiable merger 10

“WHAT ARE THE MAJOR DEVELOPMENTS ” he Competition Regulations were adopted in ecember 2004 but only came into force on the 4 th of January, 2013 ; To deal with the gaps - : ctober, 2014 Publication of the Merger ssessment Guidelines t out the Commissions approach to the type of ansactions that are notifiable under the egulations, ovide procedural obligations that apply and e substantive assessments to be made by the ommission when reviewing mergers ffers guidance to the question What kind of ansaction constitutes a notifiable merger 11

“WHAT ARE THE MAJOR DEVELOPMENTS ” ØIn March 2015 the Commission addressed the most controversial question of Merger notification thresholds and the merger filing fees. 12

“WHAT ARE THE MAJOR DEVELOPMENTS ” ØWhen 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. ØThe 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

“WHAT ARE THE MAJOR DEVELOPMENTS ” ØThis became a burden on both the workflow of the Commission and the parties. ØConsequently, the Commission adjusted the zero notification threshold requirement, to make only those transactions which had substantial effect on the market to be notifiable. ØThis resulted into small or insignificant transactions not to be notifiable 14

“WHAT ARE THE MAJOR DEVELOPMENTS ” response to a public outcry, especially the usiness community - : ith effect from March 2015, filing fees were duced from 0. 5% to 0. 1% of the merging arties’ combined turnover or combined value of sets, Whichever is higher, in the Common arket. urther, the maximum filing fee payable was duced from a cap of 500 000 USD to a cap of 00 000 USD. 15

“WHAT ARE THE MAJOR DEVELOPMENTS ” he Regulations provided that merger ansactions where notifiable where either the rget firm or the acquiring firm had operations two or more Member States. his meant that mergers were notifiable to the ommission even when the target firm had no perations in the Common Market as long as the quiring firm had operations in two or more ember States. 16

“WHAT ARE THE MAJOR DEVELOPMENTS ” o address this situation, the Commission rough the COMESA Merger Assessment uidelines defined the meaning of the term perate’ under Article 23 of the Regulations. order to operate in a Member State, an ndertaking needed to derive a turnover or value assets of USD 5 000 in that Member State. 17

“WHAT ARE THE MAJOR DEVELOPMENTS ” he meaning of ‘days’ was also not clearly efined in the Regulations. This caused a lot of ncertainty especially to the business and legal ommunity. he COMESA Merger Assessment Guidelines have nce clarified that all the ‘days’ in the egulations are calendar days as opposed to orking days. 18

“WHAT ARE THE MAJOR DEVELOPMENTS ” he Commission through amendments to the OMESA Competition Rules prescribed the OMESA merger notification form 12. he prescribed form 12 had more clarity and ade it easier for the parties to submit the formation requested by the Commission. he prescribed form 12 also made it easier for e Member States to submit their views to the ommission on a merger because the form ontained particular information specific to an fected Member State. 19

“WHAT ARE THE MAJOR DEVELOPMENTS ” he Commission has developed cooperation greements with Member States. Malawi was the st to sign on 4 September 2015. waziland, Kenya and Zambia are expected to gn soon. Swaziland may sign as early as April 015 he Commission has also promulgated uidelines regarding the assessment of antiompetitive practices and also the leniency ogram. 20

“WHAT ARE THE MAJOR DEVELOPMENTS ” he Commission is in the process of perationalizing the COMESA Competition etwork, an institution similar to the European ompetition Network. he Commission has also established a robust formal network. he Commission’s focus this year is on strictive business practices and consumer olations. he Commission has done enough advocacy. It as now switched gears to enforcement. 21

MAJOR ELEMENTS OF THE COMESA COMPETITION REGULATIONS Anti-competitive Business Practices : Ø Vertical Restraints { Rule of Reason Approach} ØHorizontal Restraints { Per se prohibition} ØAbuse of Dominance Mergers and Acquisitions ØNO Pre- merger notification requirement Consumer Protection/Welfare 22

INSTITUTIONAL ARRANGEMENTS The Regulations provide for three institutions namely - : COMESA Court of Justice : Receives appeals against the decisions of the 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

SCOPE OF APPLICATION: I 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

DISPUTE RESOLUTION MECHANISM • • • 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

CHALLENGES 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

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