- The regional competition authority for the Common Market for Eastern and Southern Africa (COMESA), the COMESA Competition Commission (CCC), imposed its first merger-related fine on 3 September 2021. The fine was imposed in respect of the proposed acquisition by Helios Towers Limited (Helios Towers) of the shares in Madagascar Towers S.A. and Malawi Towers Limited, owing to the parties’ failure to notify the transaction within the prescribed time period.
- Significantly, Article 24(1) of the COMESA Competition Regulations, 2004 (Regulations) prescribes that parties to a merger which has both a regional dimension and which meets the applicable thresholds must notify the CCC in writing of the proposed merger as soon as practicable but in no event later than thirty days of the parties’ decision to merge.
- Should parties to a notifiable merger fail to comply with Article 24(1) of the Regulations, the merger shall have no legal effect and no rights or obligations imposed on the parties by any agreement entered into in respect of the transaction shall be legally enforceable within the Common Market. In addition, the CCC may impose a sanction for failing to give notice of the transaction.
- In terms of the relevant transaction, the parties entered into a Share Sale and Purchase Agreement which was executed on 23 March 2021. The transaction, however, was only notified to the CCC on 2 July 2021 following the CCC’s intervention on 4 May 2021 regarding the non-notification. In terms of Article 24(1), the parties ought to have filed the relevant merger notification by 22 April 2021.
- Having concluded that the parties filed the merger notification more than thirty days after they formed the decision to merge, in contravention of Article 24(1) of the Regulations, the CCC observed that it may impose a penalty which may not exceed ten per cent of either or both of the parties’ annual turnover in the Common Market for the preceding financial year.
- In acknowledging the objective of deterrence against future violations, the CCC considered the applicable factors to be evaluated when determining an appropriate penalty. In this regard, the CCC accepted the parties’ contentions that the breach was not intentional, that they had cooperated with the CCC following their initial engagement and that the breach did not result in any harm to the applicable market.
- Despite commenting that the maximum penalty of 10 per cent was not appropriate in the circumstances, the CCC nevertheless concluded that a fine of 0.05 per cent of the parties’ combined turnover in the Common Market (amounting to USD102,101,765) ought to be levied. It was contended that this would “achieve the desired deterrence effect, while not imposing a disproportionate burden on the parties relative to the breach.”
- This decision is the first instance in which the CCC has issued a merger-related fine for breaching the Regulations. Prior to the imposition of this fine, the CCC’s regulatory approach was characterised by ‘soft enforcement’. Coupled with the cautionary notice on restrictive business agreements which the CCC published on 25 February 2021, this appears to signal a definite shift in the manner in which the CCC engages with non-compliant businesses in the Common Market.
- To this end, the CCC’s Registrar, Ms. Meti Disasa, commented that, “the fine was the first of a kind for breach of the Regulations. The Commission therefore wishes to remind Undertakings in the Common Market to be cautious of the prescribed timeline for notifying mergers under Article 24(1) of the Regulations.” The Registrar further cautioned businesses operating within the Common Market to comply with the Regulations in their entirety as the CCC would not readily overlook any contraventions thereof.
- In light of these developments, businesses ought to be vigilant to ensure that their operations are compliant with the CCC’s merger control regime and with the provisions regulating anti-competitive conduct.
For more information, please contact Nick Altini, Jean Meijer, Natasha Rachwal and Luke Smith or your usual Herbert Smith Freehills contact:
Partner, Competition - Johannesburg
+27 83 327 3386
Partner, Competition - Johannesburg
+27 83 556 5223
Associate Designate, Competition - Johannesburg
+2710 500 2670
Candidate Attorney, Competition - Johannesburg
+27 10 500 2610