By virtue of CCC Notice 4 of 2023, the Comesa Competition Commission (CCC) in March 2023 issued a revised Practice Note to guide the interpretation of the term “operate” under the COMESA Competition Regulations, 2004 (the “Regulations”) and the COMESA Competition Rules, 2004 (the “Rules”). This was precipitated by several queries having been received by the CCC from merging parties, their legal representatives and other stakeholders in relation to the application of certain merger control provisions,
Regarding the definition of the definition of the term “Operate”, the revised practice note disapplies the definition of the term ‘operate’ under paragraph 3.9 of the COMESA Merger Assessment Guidelines, 2014 (the “Merger Guidelines”). Notably, Article 23 of the Regulations establishes the jurisdiction of the CCC to assess mergers having a regional dimension i.e., where both the acquiring firm and target firm or either the acquiring firm or target firm operate in two or more Member States. Whilst the Regulations have not defined the term ‘operate’, paragraph 3.9 of the Merger Guidelines provides that for purposes of Article 23 (3)(a) of the Regulations, an undertaking is considered to operate in a Member State if its operations in that Member State are substantial enough for a merger to have an appreciable effect on trade between Member States and restrict competition in the Common Market. Further, the provision state that “…an undertaking operates in a Member State if its annual turnover or value of assets in that Member State exceeds US$ 5 million…”.
Importantly, in the revised practice note, CCC notes that at the time the Merger Guidelines became applicable, the prescribed merger notification thresholds envisaged under Article 23(3)(b) of the Regulations, were set at US$ 0, meaning that all merger transactions satisfying the regional dimension requirement of the Regulations were required to be notified to the CCC, irrespective of the magnitude of the merging parties. However, following the enactment of the Rules on the Determination of Merger Notification Thresholds in 2015. the definition of the term ‘operate’ under paragraph 3.9 of the Merger Guidelines is no longer applicable. Hence for the purpose of determining whether or not a merger is notifiable or whether an undertaking operates in the Common Market, the extent and magnitude of the turnover derived by or value of assets of the undertaking in a Member State is immaterial and the CCC now only bases its decision on Rule 4 of COMESA Competition Rules which provides that:
“Any merger where both the acquiring firm and target firm, or either the acquiring or the target firm, operate in two or more Member States, shall be notifiable if:
a) the combined annual turnover or combined value of assets, whichever is higher in the Common Market of all parties to a merger equals to or exceeds US$50 million; and
b) the annual turnover or value of assets, whichever is higher, in the Common Market of each of at least two of the parties to a merger equals or exceeds US$10 million,
unless each of the parties to a merger achieves at least two-thirds of its aggregate turnover or assets in the Common Market within one and the same Member State.”