Egypt: Pre-closing Merger Control Regime

user Yasmin Yasser calender 10 Jun 2024 views 71 Views
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 The Prime Minister’s Decision No. 1120 of 2024 amending some provisions of the Executive Regulations of the Non- Competition Law and the Monopolistic Practices.

In a significant development for competition policy in Egypt, the legislator recently introduced amendments by virtue of the Prime Minister’s Decision No. 1120 of the year 2024 to the Executive Regulations of the Competition Protection and Anti-Monopolistic Practices Law No. 1316 of 2005. A key focus of these changes is strengthening the framework for regulating mergers and acquisitions that could lead to excessive economic concentration in the market.

At the beginning of 2024, the Prime Minister’s issued decree to amend Decision No. 1316 of 2005 have introduced more robust merger control provisions aimed at preventing the creation or reinforcement of dominant market positions. This is a crucial step in safeguarding competition and protecting consumer welfare in the Egyptian economy.

Expanded Notification Thresholds:

One of the central changes is the lowering of merger notification thresholds. Companies engaged in mergers, acquisitions, or other concentrative transactions must now notify and obtain approval from the Egyptian Competition Authority (ECA based on the combined global turnover or assets of the parties involved in the transaction. Specifically, any merger, acquisition, or concentration must be notified if the combined global turnover of the parties exceeds EGP 1 billion (approximately $50 million), or if their combined global assets exceed EGP 500 million (around $25 million). Additionally, the regulations now mandate notification for transactions where one party has a market share of 25% or more, even if the financial thresholds are not met. This aims to capture deals that could still impact competition through the acquisition of significant market influence. Whereas, the regulations now require notification for transactions involving the acquisition of minority shareholdings that may still confer significant influence over the target company. This closes a potential loophole and allows the ECA to scrutinize deals that could lead to anticompetitive structural changes in the market. This helps the ECA identify and review a wider range of deals that could potentially harm competition.

Comprehensive Review Process:

The amended regulations outline a comprehensive process for the ECA’s review of notified transactions. This includes strict timelines for the authority to assess the competitive effects and decide whether to clear, conditional clear, or prohibit the proposed concentration. The review criteria have also been expanded to consider a broader range of factors, such as the parties’ market shares, the degree of market concentration, the likelihood of the deal creating or strengthening a dominant position, and the potential impact on consumers and smaller competitors.

The ECA’s review process has been designed to be thorough and time-bound. However, the authority must complete the initial assessment within 60 calendar days and render a final decision within 120 calendar days. This empowers the ECA to make more informed and nuanced decisions.

Importantly, the regulations empower the ECA to take into account any potential efficiencies or pro-competitive benefits that may arise from the transaction. This allows for a more nuanced and balanced assessment.

Remedies and Enforcement:

In case the ECA determines that the transaction is likely to significantly impede effective competition, it can impose remedies to address the concerns before clearing the deal.

If the ECA finds that a merger or acquisition is likely to significantly impede effective competition, it can impose remedies to address the competition concerns. These may include structural remedies, such as the divestiture of certain assets or businesses, or behavioral commitments from the merging parties.

Crucially, the amended regulations have increased the applicable fines and penalties for failure to notify a reportable transaction or for completing a deal in violation of the ECA’s prohibition. This strengthens the enforcement mechanisms and serves as a powerful deterrent against anti-competitive consolidation in the market.

Fines and Penalties:

The amended regulations have significantly increased the applicable fines and penalties for failure to notify a reportable transaction or for completing a deal in violation of the ECA’s prohibition.

Overall, the changes to Egypt’s competition regulations reflect a concerted effort to strengthen the country’s merger control regime and address concerns around economic concentration. By expanding the notification requirements, enhancing the review process, and bolstering the enforcement tools, Egypt aims to create a more level playing field and safeguard consumer welfare in the long run.

Alignment with Global Best Practices:

The enhancements to Egypt’s merger control regime align the country’s competition framework with international standards and best practices. This includes adopting a more effects-based approach to assessing the competitive impact of concentrations, as opposed to relying solely on market share thresholds.

By strengthening the merger review process, Egypt is sending a clear signal that it is committed to preventing excessive economic concentration and protecting the competitive dynamics of its markets. This is a significant development that is likely to have far-reaching implications for companies operating in or considering investments in the Egyptian economy.

This alignment with global norms helps to create a more predictable and transparent competition environment for companies operating in or considering investments in the Egyptian market.

Overall, the amendments to Egypt’s competition regulations represent a significant strengthening of the country’s merger control regime. The enhanced notification requirements, comprehensive review process, and robust enforcement mechanisms underscore Egypt’s determination to address concerns around economic concentration and safeguard consumer welfare.