Multijurisdictional Merger Filings - April 2014

Cross-border mergers frequently trigger pre-closing antitrust reviews. Such reviews are complex and can be fraught with risk. With more than 90 countries now having obligatory premerger filing requirements, different substantive and procedural regimes can make a multijurisdictional transaction an expensive and time-consuming process.

It is common these days, in both developed and emerging market economies, to have merger control laws. Additionally, national competition authorities around the world are moving closer to a ''common competition culture." Now that doing business often means doing business globally, preparation for multijurisdictional filings should be a routine part of the overall business strategies developed by companies and their advisers. As a result, organizations involved in mergers and acquisitions need to be aware of new developments taking place in the various merger regimes around the world.

COMESA: Upcoming Clarification on the Scope of COMESA Merger Control?

The COMESA Competition Commission (CCC), the new supranational merger control authority of 19 Member States,1 started operating in Africa now more than one year ago, on the basis of jurisdiction thresholds calling for future clarification.

Indeed, "the direct or indirect acquisition or establishment of a controlling interest by one or more persons in the whole or part of a business, where both the acquiring firm and target firm or either the acquiring firm and target firm operate in two or more Member States and where the relevant turnover or asset threshold test has been exceeded" has to be filed to the CCC. However, the relevant turnover or asset threshold above-mentioned is so far set at zero.

Several notifications have already been handled and a set of Draft Merger Guidelines was published in April 2013, although the final version is still expected. These draft guidelines import a number of EU law principles regarding the delineation of product and geographic markets, the concept of exercising decisive influence, the treatment of joint ventures and assessment criteria.

However, further clarification is still needed on at least three key issues:

Zero threshold: the draft guidelines fail to provide more clarification on cases where a notification is required. CCC has pointed to the different levels of economic development of Member States in the COMESA region and to the need to acquire experience. However, companies need more legal certainty on whether transactions are likely to trigger the threshold. Limited local nexus: the COMESA merger rules only require that at least one of the parties to a transaction operates in two or more COMESA Member States. The draft guidelines adopts a definition of the term "operate" that includes "being directly domiciled in a Member State," "having operations through exports, imports, subsidiaries etc, in a Member State" but also "deriving turnover in a Member State." This definition is too broad to provide adequate clarification as to the local nexus required. Allocation of jurisdiction: at the end of August 2013, the COMESA Court of Justice issued a ruling in the case of Polytol v. Mauritius about the applicability of the COMESA Treaty within COMESA Member States. The COMESA Court of Justice rejected the view that transactions notifiable to the CCC must also be notified to the national authorities where requirements are triggered. However, some Member States, such as Kenya, Mauritius and Zambia have not yet transposed the COMESA Regulation into national law. As a result, it remains unclear if CCC has an exclusive jurisdiction or if transactions notifiable to CCC shall also be notified to national authorities. Proposed amendments of the COMESA merger rules are currently being discussed and are expected to come into force after COMESA Council of Ministers' approval. An extraordinary session of the Council could take place in April or May 2014. http://www.comesa.int/

China: MOFCOM Publishes Simple Merger Review Rules

On 11 February, the Ministry of Commerce of the People's Republic of China (MOFCOM) published the final text of its Interim Provisions on the Standards that Apply to Simplified Cases of Concentrations of Undertakings (the Interim Provisions). Initially published for public comment in draft in April of last year, the Interim Provisions came into force on 12 February.

The Interim Provisions clarify the standards MOFCOM will use to distinguish simple cases from other cases meriting a more detailed review, and in that respect the rules draw heavily on the European Commission's 2005 Notice on a simplified procedure.2 That said, the Interim Provisions are a "work-inprogress" as they do not stipulate a simplified procedure as such - they clarify what a simple case is but they do not provide a framework for the notification and assessment of simple cases. It is understood that procedural regulations of this kind will be introduced by MOFCOM at a later stage.

The Interim Provisions identify six categories of simple case:

Horizontal concentrations where the aggregate market share of the parties in all horizontal markets is less than 15 percent; Vertical concentrations where the aggregate market share of the parties in all vertically related markets is less than 25 percent; Concentrations without any horizontal or vertical relationship between the parties ("conglomerate cases") where the aggregate market share of the parties in each market is less than 25 percent; Concentrations which involve the establishment of a joint venture outside China, where the joint venture does not conduct economic activities in China. In this context one might compare the corresponding EU rule which provides that a joint venture that has no, or negligible, actual or foreseen activities within the territory of the European Economic Area is eligible for simplified treatment; Concentrations which involve an acquisition of the equity or assets of a foreign enterprise, where the foreign enterprise does not conduct economic activities in China; and Concentrations which entail a change of control in respect of an existing joint venture where, post-transaction, the joint venture will be controlled by one or more of the parties who jointly controlled the joint venture before the transaction. As with the EU rules, MOFCOM retains a high level of discretion in treating cases falling within these categories as non-simple in certain circumstances under the new rules...