There has been a strong move to establish national competition authorities across Africa and now, regional competition authorities. The disconnect between national competition laws and regional competition laws as well as the possibility of member states being affiliated with more than one regional economic community raises difficult issues for firms doing business in Africa.
The Common Market for Eastern and Southern Africa (“COMESA”) comprises nineteen member states spanning Africa from Egypt to Swaziland. COMESA was the first regional economic community to develop and implement competition law with the COMESA Competition Commission beginning operations in early 2013. The main criticisms of the COMESA Competition Regulations are that they set the monetary thresholds for notification of mergers at zero and impose filing fees of up to USD500,000.
The East African Community (“EAC”) is another, smaller, regional economic community that also has a competition law in place, although not yet in operation. Kenneth Bagamuhunda, the Director of Customs at the EAC, has indicated that the EAC competition authority should be in place by July 2015. The burning question is: what does this mean for businesses investing in Africa?
All EAC member states, apart from Tanzania, also belong to COMESA. Willard Mwemba, head of mergers and acquisitions at COMESA is of the view that forum shopping for the most economically efficient process will not be possible for businesses. Both the COMESA Competition Regulations and the EAC Competition Act make it mandatory to notify a merger if the monetary thresholds are met. This could lead to the absurd and both administratively and financially burdensome situation where merging parties may have to notify to more than one regional authority. The problem is exacerbated in member states such as Kenya, where a filing with the national authority continues to be required even if the merging parties are obliged to file with the COMESA Competition Commission. Negotiations are allegedly underway to resolve the problem with dual-notification in Kenya and COMESA.
There are also enforcement issues which arise due to, amongst other things, (i) a lack of domestication of regional laws and (ii) member states having young competition authorities or no competition authorities in operation.
According to Kenneth Bagamuhunda EAC laws are automatically domesticated when they come into force. The COMESA treaty obliges member states to take steps to confer the force of law upon the regulations. To date, this process has not been completed by any member state. Some countries in Africa do not even have national authorities to enforce regional decisions or, if they do have national authorities, they are still inexperienced and focused on developing a competitive culture in their national market. The lack of funding and technical capacity is an additional obstacle to effective enforcement.
Regional competition authorities should also be equipped to deal with cross-border anti-competitive conduct such as cartels. Aside from the issue of domestication, a further issue inhibiting regional authorities from prosecuting these kinds of activities is the significant membership gaps in the regional economic communities. For instance, how would a cross-border East African cartel be effectively prosecuted if Tanzania is not a member of COMESA?
The Southern African Development Community (“SADC”) is yet another regional economic community with members who may belong to more than one community. Although the focus of SADC remains on technical assistance and capacity building in member states, establishing a regional competition authority is not off the table.
Tripartite free trade negotiations aimed at achieving regional economic integration are underway between the three regional economic communities, namely, SADC, EAC and COMESA. It is believed that the next round of negotiations places competition policy on the agenda which may provide fertile ground to discuss the issues that arise from multiple regional authorities and the lack of harmonization between national laws and regional laws. However, reaching consensus particularly within a large regional economic community may be challenging.
Regional competition authorities aim to reduce the burden on parties who would ordinarily have to notify a cross-border merger with the national authorities affected. They should also be able to prosecute cross-border anti-competitive activities; something which an individual national authority would not be able to do. However, the multiplicity of regional authorities and the lack of harmonization and domestication of regional laws may defeat these objectives.
Written by Sandhya Naidoo, Associate, Bowman Gilfillan Africa Group