Economic Concentration Control in Egypt: Another Step Towards Healthy Competition?
A recent amendment of Egypt’s Competition Law has introduced a new merger control system but a few loose ends remain, as Nisreen Al Karyouti from AMERELLER explains.
Nisreen Al Karyouti
In 2005, Egypt issued its first Law on Competition Protection and Prevention of Monopolistic Practices (the “Competition Law”). In addition to its focus on horizontal and vertical agreements that might impact the freedom of competition, the Competition Law introduced an obligation of post-merger notification on mergers affecting or related to the Egyptian market.
Towards the end of 2022, an amendment to the Competition Law (“the Amendment”) was enacted to introduce a new control system for economic concentrations, replacing the post-merger notification. With the exception of intra-group restructuring, the Amendment entitles the Egyptian Competition Authority (ECA) to investigate and approve economic concentrations resulting from mergers, acquisitions and change of control prior to their consummation.
Which Economic Concentrations Are Addressed by the Amendment?
Subject to the thresholds provided under the Amendment, clearance is required for economic concentrations that result in:
- a direct or indirect change of control by the person(s), whether in relation to economic decisions or voting rights; or
- a direct or indirect material influence on policy, strategic decisions, or commercial objectives.
Economic concentrations in which the parties involved exceed certain thresholds need to be cleared by the ECA. Notably, the economic concentration will require ECA clearance if:
- each party to the transaction has an annual turnover in Egypt of EGP200 million, with combined annual turnover or accumulated assets for all parties in Egypt exceeding EGP 900 million; or
- at least one party’s turnover or accumulated assets in Egypt is a minimum of EGP200 million, with combined annual turnover or accumulated assets for all parties globally exceeding EGP7.5 billion.
The thresholds are calculated for the financial year preceding the concentration. The calculation methods and the exchange rate applied, among other details, are expected to be elaborated on in an amendment to the Executive Regulation of the Competition Law.
How Long Can It Take to Consummate a Transaction?
Under the new system, parties to transactions that fulfil the thresholds may not consummate the transaction prior to ECA clearance. The ECA has an initial period of 30 working days in which to review and decide on the transaction, with the possibility of an extension by 15 working days. The eligibility criteria for this extension are not addressed by the Amendment. Although an absence of a decision within the foregoing timeframes would be deemed an approval, the ECA is entitled to refer the case to a second review with a timeline of 60 working days (and a possibility of extension by 15 working days). The ECA decision on economic concentrations is subject to appeal within 30 days once the decision has been notified to the concerned party.
In transactions that do not meet the above-mentioned thresholds, the ECA is exceptionally entitled to investigate such transactions within one year following consummation if there are indications or evidence that it limits or harms the freedom of competition. The ECA would be entitled to a post-closing investigation based on the following indications:
- the limitation of technological invention or development;
- price control in the market;
- decrease of product quality; or
- hurdles to market entry or expansion.
If the transaction is found to harm competition, the ECA may impose certain measures on the parties to minimise such harm.
Does the Amendment Leave Any Loose Ends?
The Amendment, which entered into force on 30 December 2022, has introduced a comprehensive economic control system. Nevertheless, the provisions of the Amendment contain loose ends that keep its implementation hostage to a subsequent amendment of the Executive Regulation of the Competition Law.
Among the main issues that need to be further detailed in the Executive Regulation are:
- the criteria for extending the review period or referring the transaction to a second review;
- the competent body to examine appeals against the ECA decisions and its modus operandi;
- the timeframe for post-merger investigation of transactions that do not meet the thresholds; and
- the detailed fees for the clearance application.
What Is the Current Status of Egyptian Merger Control?
In its announcement on 4 January 2023, the ECA clarified that the Amendment will not be effectively implemented until the Executive Regulation of the Competition Law is updated but did not set a date for such issuance. At the time of writing (September 2023), businesses and legal practitioners are still anticipating the issuance of the amendment to the Executive Regulation.
As a result, and until clear implementation tools and criteria are in place, transactions executed after 30 December 2022 are not subject to the old post-merger notification regime. However, they are not enabled to comply with the new pre-merger clearance system either.
AMERELLER
