18th of September, 2018
The Egyptian Competition Authority ‘ECA’ issues a new Mergers Notification Form & revised guidelines: What You Need to Know
The Egyptian Competition Authority ‘ECA’ issues a new Mergers Notification Form & revised guidelines: What You Need to Know
Keywords: Mergers & Acquisitions, Financial Institutions, Commercial
The Egyptian Competition Authority (“ECA”) issued an updated mergers notification form and guidelines. The new form and guidelines came into effect as of the 1st of September 2018. Though it appears that the ECA has yet to update its mergers notification section with the new form, the new form and guidelines were communicated via an ECA press release on the 18th of July 2018.
The new form and guidelines do not change the current procedures under the Egyptian Competition Law No. 3 of 2005 (the “Law”), with regards to merger and acquisitions. However, it may signal an interim phase before amending the Law and introducing a significant shift to a mergers review procedure.
As a background, currently, the Law does not provide for a pre-merger control regime. The Law provides only for a post-merger notification regime. The purpose of the notification is informative. ECA does not have the power to block any mergers or acquisitions. The notification procedure is, however, obligatory if the annual turnover in Egypt of the combined relevant parties in the last approved financials exceeds EGP 100 million (app. USD 5.6 million). Notification must be presented to ECA, within 30 days from the date on which the legal action giving rise to the notification became effective. Failure to notify or delayed notification raises the risk of being subject to monetary fines that could be up to EGP 500,000 (app. USD 28,011).
So, what is new?
Notification form:
In relation to the notification form, several new sections were added to the form, as ECA seeks more details on the transactions being reported. Such changes bring ECA practice closer to that of other competition authorities with a merger control regime. Examples of newly required information include:
- Identifying the relevant markets, by taking consideration of the product and geographical aspects.
- Providing approximate market shares of the relevant parties and their competitors in each of the relevant markets, prior to the notified transaction. It is also required to provide information on an approximate time-frame for a new competitor to enter any of the relevant markets.
- Information about the most important clients, distributors, and agents of the relevant parties that relate to their activities in Egypt.
- Information about the shareholding and management structure of the relevant parties.
New guidelines:
The new guidelines include several important clarifications, most notably,
- A foreign to the foreign transaction will now be notified to ECA if at least one of the relevant parties has a turnover in Egypt as per its last approved financials, which meets the reporting threshold. This is regardless of whether such party has assets or subsidiaries in Egypt (e.g. revenues could be solely generated from exporting to Egypt). Prior to the entry into force of the new guidelines and form, ECA’s position was to consider that foreign to foreign transactions do not trigger the notification obligation regardless of whether the transaction could have an impact on competition in the Egyptian market.
- Capital increase or decrease in an undertaking will be notifiable if it will lead to a change in the power to exercise decisive influence over such undertaking or lead to changes thereof (through changes in control over management and power to affect the adoption of strategic decisions).
- Internal restructuring within a group of companies will not constitute a notifiable concentration unless it leads to a direct or indirect change of control.
- The acquisition of securities by companies whose normal activities include dealing in securities will not be deemed to constitute a concentration if such an acquisition is made for reselling such securities within a one-year period, subject to the following three conditions:
(i) the acquisition will not involve acquiring the majority of the shares of such undertaking,
(ii) the acquired percentage of shares will not result in the ability to appoint a board member or manager, and
(iii) acquirer shall not exercise any voting rights or take any procedures that involve meddling in the economic decisions of such undertaking or control it directly or indirectly.
So, what can we take away from the new form and guidelines?
The post-merger notification regime still stands. A notifying party will now need to provide more information, like some of those commonly required in jurisdictions with a pre-merger control regime.
Clarifications by ECA in the new guidelines for its position on several points as discussed above may need to be considered when devising transactions that may have an Egyptian aspect to them.
It is also worth mentioning that ECA stepped up its efforts in enforcing the post-merger notification obligation, particularly since 2017. ECA’s determination to enhance enforcement of such obligation is evidenced by recent cases where ECA imposed fines for failure to comply with the obligation to notify with the 30 days’ time-frame. While the fines prescribed under the Law for violating the reporting obligation may not be of significant financial value, ECA would be expected to act in case of failure to comply with timely post-merger notifications.
In our view, these changes may present a transitional period after which a merger control regime could be rolled out in replacement of the current post-merger notification regime.
Last year, ECA shared a proposed draft amendment to the Law with stakeholders, for their commentary. The proposal included a merger control regime, which could subject global transactions to pre-merger notification obligations in Egypt. We understand that ECA is working to finalize such a draft amendment, to be presented to the Egyptian Parliament sometime soon. No firm dates as to when such amendments can be expected or the final form of the draft amendment was made by the ECA. However, there are several indications that it should be forthcoming, within the coming few months.
The issue of changes to merger control under the Law and ECA’s practice is a developing topic. We will continue to monitor developments on this front. If you are contemplating a transaction with an Egyptian aspect, these changes may affect you. Please feel free to reach out to us to discuss the concerns you may have in this regard.
As a background, currently, the Law does not provide for a pre-merger control regime. The Law provides only for a post-merger notification regime. The purpose of the notification is informative. ECA does not have the power to block any mergers or acquisitions. The notification procedure is, however, obligatory if the annual turnover in Egypt of the combined relevant parties in the last approved financials exceeds EGP 100 million (app. USD 5.6 million). Notification must be presented to ECA, within 30 days from the date on which the legal action giving rise to the notification became effective. Failure to notify or delayed notification raises the risk of being subject to monetary fines that could be up to EGP 500,000 (app. USD 28,011).
So, what is new?
Notification form:
In relation to the notification form, several new sections were added to the form, as ECA seeks more details on the transactions being reported. Such changes bring ECA practice closer to that of other competition authorities with a merger control regime. Examples of newly required information include:
- Identifying the relevant markets, by taking consideration of the product and geographical aspects.
- Providing approximate market shares of the relevant parties and their competitors in each of the relevant markets, prior to the notified transaction. It is also required to provide information on an approximate time-frame for a new competitor to enter any of the relevant markets.
- Information about the most important clients, distributors, and agents of the relevant parties that relate to their activities in Egypt.
- Information about the shareholding and management structure of the relevant parties.
New guidelines:
The new guidelines include several important clarifications, most notably,
- A foreign to the foreign transaction will now be notified to ECA if at least one of the relevant parties has a turnover in Egypt as per its last approved financials, which meets the reporting threshold. This is regardless of whether such party has assets or subsidiaries in Egypt (e.g. revenues could be solely generated from exporting to Egypt). Prior to the entry into force of the new guidelines and form, ECA’s position was to consider that foreign to foreign transactions do not trigger the notification obligation regardless of whether the transaction could have an impact on competition in the Egyptian market.
- Capital increase or decrease in an undertaking will be notifiable if it will lead to a change in the power to exercise decisive influence over such undertaking or lead to changes thereof (through changes in control over management and power to affect the adoption of strategic decisions).
- Internal restructuring within a group of companies will not constitute a notifiable concentration unless it leads to a direct or indirect change of control.
- The acquisition of securities by companies whose normal activities include dealing in securities will not be deemed to constitute a concentration if such an acquisition is made for reselling such securities within a one-year period, subject to the following three conditions:
(i) the acquisition will not involve acquiring the majority of the shares of such undertaking,
(ii) the acquired percentage of shares will not result in the ability to appoint a board member or manager, and
(iii) acquirer shall not exercise any voting rights or take any procedures that involve meddling in the economic decisions of such undertaking or control it directly or indirectly.
So, what can we take away from the new form and guidelines?
The post-merger notification regime still stands. A notifying party will now need to provide more information, like some of those commonly required in jurisdictions with a pre-merger control regime.
Clarifications by ECA in the new guidelines for its position on several points as discussed above may need to be considered when devising transactions that may have an Egyptian aspect to them.
It is also worth mentioning that ECA stepped up its efforts in enforcing the post-merger notification obligation, particularly since 2017. ECA’s determination to enhance enforcement of such obligation is evidenced by recent cases where ECA imposed fines for failure to comply with the obligation to notify with the 30 days’ time-frame. While the fines prescribed under the Law for violating the reporting obligation may not be of significant financial value, ECA would be expected to act in case of failure to comply with timely post-merger notifications.
In our view, these changes may present a transitional period after which a merger control regime could be rolled out in replacement of the current post-merger notification regime.
Last year, ECA shared a proposed draft amendment to the Law with stakeholders, for their commentary. The proposal included a merger control regime, which could subject global transactions to pre-merger notification obligations in Egypt. We understand that ECA is working to finalize such a draft amendment, to be presented to the Egyptian Parliament sometime soon. No firm dates as to when such amendments can be expected or the final form of the draft amendment was made by the ECA. However, there are several indications that it should be forthcoming, within the coming few months.
The issue of changes to merger control under the Law and ECA’s practice is a developing topic. We will continue to monitor developments on this front. If you are contemplating a transaction with an Egyptian aspect, these changes may affect you. Please feel free to reach out to us to discuss the concerns you may have in this regard.
The Egyptian Competition Authority ‘ECA’ issues a new Mergers Notification Form & revised guidelines: What You Need to Know
18th of September, 2018
Keywords: Mergers & Acquisitions, Financial Institutions, Commercial
The Egyptian Competition Authority (“ECA”) issued an updated mergers notification form and guidelines. The new form and guidelines came into effect as of the 1st of September 2018. Though it appears that the ECA has yet to update its mergers notification section with the new form, the new form and guidelines were communicated via an ECA press release on the 18th of July 2018.
The new form and guidelines do not change the current procedures under the Egyptian Competition Law No. 3 of 2005 (the “Law”), with regards to merger and acquisitions. However, it may signal an interim phase before amending the Law and introducing a significant shift to a mergers review procedure.
As a background, currently, the Law does not provide for a pre-merger control regime. The Law provides only for a post-merger notification regime. The purpose of the notification is informative. ECA does not have the power to block any mergers or acquisitions. The notification procedure is, however, obligatory if the annual turnover in Egypt of the combined relevant parties in the last approved financials exceeds EGP 100 million (app. USD 5.6 million). Notification must be presented to ECA, within 30 days from the date on which the legal action giving rise to the notification became effective. Failure to notify or delayed notification raises the risk of being subject to monetary fines that could be up to EGP 500,000 (app. USD 28,011).
So, what is new?
Notification form:
In relation to the notification form, several new sections were added to the form, as ECA seeks more details on the transactions being reported. Such changes bring ECA practice closer to that of other competition authorities with a merger control regime. Examples of newly required information include:
- Identifying the relevant markets, by taking consideration of the product and geographical aspects.
- Providing approximate market shares of the relevant parties and their competitors in each of the relevant markets, prior to the notified transaction. It is also required to provide information on an approximate time-frame for a new competitor to enter any of the relevant markets.
- Information about the most important clients, distributors, and agents of the relevant parties that relate to their activities in Egypt.
- Information about the shareholding and management structure of the relevant parties.
New guidelines:
The new guidelines include several important clarifications, most notably,
- A foreign to the foreign transaction will now be notified to ECA if at least one of the relevant parties has a turnover in Egypt as per its last approved financials, which meets the reporting threshold. This is regardless of whether such party has assets or subsidiaries in Egypt (e.g. revenues could be solely generated from exporting to Egypt). Prior to the entry into force of the new guidelines and form, ECA’s position was to consider that foreign to foreign transactions do not trigger the notification obligation regardless of whether the transaction could have an impact on competition in the Egyptian market.
- Capital increase or decrease in an undertaking will be notifiable if it will lead to a change in the power to exercise decisive influence over such undertaking or lead to changes thereof (through changes in control over management and power to affect the adoption of strategic decisions).
- Internal restructuring within a group of companies will not constitute a notifiable concentration unless it leads to a direct or indirect change of control.
- The acquisition of securities by companies whose normal activities include dealing in securities will not be deemed to constitute a concentration if such an acquisition is made for reselling such securities within a one-year period, subject to the following three conditions:
(i) the acquisition will not involve acquiring the majority of the shares of such undertaking,
(ii) the acquired percentage of shares will not result in the ability to appoint a board member or manager, and
(iii) acquirer shall not exercise any voting rights or take any procedures that involve meddling in the economic decisions of such undertaking or control it directly or indirectly.
So, what can we take away from the new form and guidelines?
The post-merger notification regime still stands. A notifying party will now need to provide more information, like some of those commonly required in jurisdictions with a pre-merger control regime.
Clarifications by ECA in the new guidelines for its position on several points as discussed above may need to be considered when devising transactions that may have an Egyptian aspect to them.
It is also worth mentioning that ECA stepped up its efforts in enforcing the post-merger notification obligation, particularly since 2017. ECA’s determination to enhance enforcement of such obligation is evidenced by recent cases where ECA imposed fines for failure to comply with the obligation to notify with the 30 days’ time-frame. While the fines prescribed under the Law for violating the reporting obligation may not be of significant financial value, ECA would be expected to act in case of failure to comply with timely post-merger notifications.
In our view, these changes may present a transitional period after which a merger control regime could be rolled out in replacement of the current post-merger notification regime.
Last year, ECA shared a proposed draft amendment to the Law with stakeholders, for their commentary. The proposal included a merger control regime, which could subject global transactions to pre-merger notification obligations in Egypt. We understand that ECA is working to finalize such a draft amendment, to be presented to the Egyptian Parliament sometime soon. No firm dates as to when such amendments can be expected or the final form of the draft amendment was made by the ECA. However, there are several indications that it should be forthcoming, within the coming few months.
The issue of changes to merger control under the Law and ECA’s practice is a developing topic. We will continue to monitor developments on this front. If you are contemplating a transaction with an Egyptian aspect, these changes may affect you. Please feel free to reach out to us to discuss the concerns you may have in this regard.
As a background, currently, the Law does not provide for a pre-merger control regime. The Law provides only for a post-merger notification regime. The purpose of the notification is informative. ECA does not have the power to block any mergers or acquisitions. The notification procedure is, however, obligatory if the annual turnover in Egypt of the combined relevant parties in the last approved financials exceeds EGP 100 million (app. USD 5.6 million). Notification must be presented to ECA, within 30 days from the date on which the legal action giving rise to the notification became effective. Failure to notify or delayed notification raises the risk of being subject to monetary fines that could be up to EGP 500,000 (app. USD 28,011).
So, what is new?
Notification form:
In relation to the notification form, several new sections were added to the form, as ECA seeks more details on the transactions being reported. Such changes bring ECA practice closer to that of other competition authorities with a merger control regime. Examples of newly required information include:
- Identifying the relevant markets, by taking consideration of the product and geographical aspects.
- Providing approximate market shares of the relevant parties and their competitors in each of the relevant markets, prior to the notified transaction. It is also required to provide information on an approximate time-frame for a new competitor to enter any of the relevant markets.
- Information about the most important clients, distributors, and agents of the relevant parties that relate to their activities in Egypt.
- Information about the shareholding and management structure of the relevant parties.
New guidelines:
The new guidelines include several important clarifications, most notably,
- A foreign to the foreign transaction will now be notified to ECA if at least one of the relevant parties has a turnover in Egypt as per its last approved financials, which meets the reporting threshold. This is regardless of whether such party has assets or subsidiaries in Egypt (e.g. revenues could be solely generated from exporting to Egypt). Prior to the entry into force of the new guidelines and form, ECA’s position was to consider that foreign to foreign transactions do not trigger the notification obligation regardless of whether the transaction could have an impact on competition in the Egyptian market.
- Capital increase or decrease in an undertaking will be notifiable if it will lead to a change in the power to exercise decisive influence over such undertaking or lead to changes thereof (through changes in control over management and power to affect the adoption of strategic decisions).
- Internal restructuring within a group of companies will not constitute a notifiable concentration unless it leads to a direct or indirect change of control.
- The acquisition of securities by companies whose normal activities include dealing in securities will not be deemed to constitute a concentration if such an acquisition is made for reselling such securities within a one-year period, subject to the following three conditions:
(i) the acquisition will not involve acquiring the majority of the shares of such undertaking,
(ii) the acquired percentage of shares will not result in the ability to appoint a board member or manager, and
(iii) acquirer shall not exercise any voting rights or take any procedures that involve meddling in the economic decisions of such undertaking or control it directly or indirectly.
So, what can we take away from the new form and guidelines?
The post-merger notification regime still stands. A notifying party will now need to provide more information, like some of those commonly required in jurisdictions with a pre-merger control regime.
Clarifications by ECA in the new guidelines for its position on several points as discussed above may need to be considered when devising transactions that may have an Egyptian aspect to them.
It is also worth mentioning that ECA stepped up its efforts in enforcing the post-merger notification obligation, particularly since 2017. ECA’s determination to enhance enforcement of such obligation is evidenced by recent cases where ECA imposed fines for failure to comply with the obligation to notify with the 30 days’ time-frame. While the fines prescribed under the Law for violating the reporting obligation may not be of significant financial value, ECA would be expected to act in case of failure to comply with timely post-merger notifications.
In our view, these changes may present a transitional period after which a merger control regime could be rolled out in replacement of the current post-merger notification regime.
Last year, ECA shared a proposed draft amendment to the Law with stakeholders, for their commentary. The proposal included a merger control regime, which could subject global transactions to pre-merger notification obligations in Egypt. We understand that ECA is working to finalize such a draft amendment, to be presented to the Egyptian Parliament sometime soon. No firm dates as to when such amendments can be expected or the final form of the draft amendment was made by the ECA. However, there are several indications that it should be forthcoming, within the coming few months.
The issue of changes to merger control under the Law and ECA’s practice is a developing topic. We will continue to monitor developments on this front. If you are contemplating a transaction with an Egyptian aspect, these changes may affect you. Please feel free to reach out to us to discuss the concerns you may have in this regard.
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