COMESA's Draft Regulations propose significant changes, including new powers for the Commission and a shift in merger control to a suspensory regime.
The Draft Regulations proposes the introduction of new powers to the Commission in an attempt to address some of the practical challenges previously faced by the Commission in the enforcement of its Regulations in the Common Market. In this regard, the Regulations as they stand entrusted the Commission with the following powers:
In addition to said powers, the Draft Regulations proposes significant amendments to the Regulations. The points below shed the light on the key proposed amendments:
The addition of the term “substantial part of the Common Market”: the proposed Draft Regulations introduced a new term “substantial part of the Common Market”, which mean that any restrictive business practices that impacts a significant part of the common Market will fall under the authority of the Commission. It is not clear however how would this definition change the jurisdiction of the commission which is not triggered unless the business of the person under investigation is affecting two or more member states.
The introduction of a presumption of dominance: Under the proposed Draft Regulations 30% market share have been determined for a presumption of dominance. In Other words, if an undertaking possesses 30% market share, it will be presumed to be in a dominant position. This assumption shall result in shifting the burden of proof from the Commission to the person under investigation to prove that he is not in a dominant position though exceeding 30% market share. This is questionable in jurisdictions like Egypt where the competition law violations are of criminal nature hence putting the burden of proof on the investigating authority in compliance with the established principal “the person is innocent until proven guilty”.
The addition of a criteria for dominance in Digital Markets: Under the proposed Draft Regulations; data quantity, accessibility and control, and network effects will be considered as criteria for determining whether a company holds a dominant position in Digital Markets. This is considered a progressive development in assessing market shares in a digital market place.
The clarification of Criteria regarding an exemption of the application of the Regulations: Under the proposed Draft Regulations, the criteria that the Commission will take into consideration when considering an exemption have been amended to include environmental protection, sustainability and innovation as criteria to be taken into consideration. This goes in line with the SDG goals adopted by the international community.
The introduction of abuse of economic dependency: Under the proposed Draft Regulations, abuse of economic dependency has been added as a new restrictive practice. Thus, if an undertaking is in a position of relative strength from an economic perspective whereas the other party is economically dependent on him such position may be considered in violation of the Competition Regulations in the Common Market. Though said idea is applicable in a number of jurisdictions, still it requires a lot of economic analysis to be proved. Therefore, the Commission is required to have qualified and well trained staff to handle such matters.
The introduction of “per se” restrictive business practices: Under the proposed Draft Regulations, some restrictive business practices have been defined as “per se” violations. In Other words, if the Commission finds an undertaking committing any of these practices, this undertaking will be considered in violation of the COMESA Competition Regulations without looking at the effect of this practice on the markets where he operates.
The introduction of a leniency program: Under the proposed Draft Regulations, the Commission may grant immunity from all or part of an administrative penalty that would otherwise be imposed when an undertaking voluntarily discloses the existence of an agreement, decision or concerted practice that is prohibited and fully cooperates with the Commission in the investigation. This is expected to encourage whistle blowers to report any violations to the Regulations to the Commission.
A change in the request for authorisation program: Under the proposed Draft Regulations, the Commission may, upon application by or on behalf of an undertaking, grant an authorisation to the undertaking to enter and/or give effect to agreements even if they are considered anticompetitive if these agreements have an environmental protection, sustainability or innovation effect.
The switch to a suspensory merger regime: Under the proposed Draft Regulations, The Comission approval is required for the implementation of a notifiable merger. This would be a switch from the current non-suspensory regime, thus would also introduce a gun jumping violation.
The addition of a notification for Joint venture: Under the proposed Draft Regulations, a Joint Venture is notifiable if it is intended to operate in two or more Member States. It is worth noting that this may create confusion with M&As process of notification and has to be handled diligently in order not to affect business activities negatively when it comes to getting into a joint venture to perform a specific project. Moreover, a joint venture is seen in many jurisdictions as a standalone entity which is not subject to any notification requirement.
The Introduction of specific criteria for the Digital Markets mergers: The Draft Regulations have introduced a specific mechanism for the Digital Markets mergers. A merger in these markets become notifiable if at least one of the parties to the merger has operations in at least two or more Member States; and the merger meets the prescribed transaction value.
Broadening the definition of Control: Under the Draft Regulations, the scope of Control broadened to include the ability to influence the policy of the undertaking in a manner comparable to a person who, in ordinary commercial practice, can exercise an element of control referred to or has the ability to veto (i.e. the appointment of the majority of directors and senior management; or the determination of the strategic commercial policy of the undertaking, or strategic use of the asset concerned.
A shift towards to the term “material influence”: Under the proposed Draft Regulations, the concept of “material influence’” will be used for purposes of establishing control, rather than the currently used one of “decisive influence”. It is expected however that the Commission issue guidelines to explain the meaning of material influence and how it differs from decisive influence.
The introduction of a cap for fines: Under the proposed Draft Regulations, fines for violations of the Regulations are capped at a maximum of 10% of the parties’ annual turnover.
