The Role of Supra-National Regulators and Benefits of a “One-Stop-Shop” Approach with Respect to Competition Law in Africa

Introduction

As home to 54 countries and many growing economies, Africa has over time become an attractive investment destination. Statistics show that foreign direct investments to Africa stood at $32 Billion in 2019.[1] In the same year, mergers and acquisitions deal value stood at $21 Billion and deal volume peaked at 365.[2] This commendable surge in investments rightly informs the need for an efficient competition law regime, the absence of which will result in abuse of dominant positions, unhealthy cartel behavior, and disregard for consumer welfare. On this note, many African Countries have enacted domestic competition laws and established National Competition Authorities (NCAs).[3]  While NCAs play a huge role in domestic competition regulation, their efficiency is questionable amidst the rise in cross-border transactions. Hence, supra-national organizations like COMESA,[4] WAEMU,[5] ECOWAS,[6]CEMAC,[7] and EAC,[8] now assume the responsibility of regulating cross-border competition issues affecting their member states. These organizations help in assessing cross-border mergers, investigating regional anti-competitive issues, facilitating cooperation, and even providing a framework competition policy for member states.

The Benefits of a One-Stop-Shop Approach with Respect to Competition Law in Africa

Emerging supra-national regulators in Africa affords merging parties the convenience of a one-stop-approach. This approach has many advantages not just for merging parties, but to African nations. Some of these benefits are discussed below.

  1. Lower Costs for Merging Parties

Financing a merger and saving cost are always key commercial concerns for merging parties. This is particularly so in a cross-border merger that is subject to concurrent assessment by the relevant regulators in the respective national jurisdictions. Multiple assessments imply that merging parties will incur extraneous costs associated with paying multiple filing fees and gathering information for several jurisdictions. In some jurisdictions, parties may be required to submit data that is difficult, time-consuming, and expensive to obtain.[9] Additionally, there is an increased cost associated with translation and multi-jurisdictional advisory. By single-handedly investigating such a merger on behalf of all the jurisdictions involved, a one-stop-shop facility relieves multiple cost obligations on merging parties. In many instances, committing only to the regulatory cost of a supra-national regulator will be a convenient option for the parties.[10]

  • Legal Certainty

Legal certainty is key concern to investors dealing in a multi-jurisdictional market like Africa. This certainty is less obtainable given differences in substantial merger rules of different African countries. Common differences include the factors triggering merger notification obligations, the disparity in merger review periods, and even differences in information to be submitted to national regulators.[11] Determining which jurisdictions to file notifications and their distinct legal requirements can be burdensome for merging parties.

Let us consider a hypothetical merger affecting Kenya, Zambia, and Malawi. The merging parties, in addition to complying with distinct thresholds for merger notification, will be subject to different review periods.[12] In the worst case, such uncertainty can negatively impact the transaction timeline or even heighten the possibility of non-compliance. More conveniently, the aforementioned countries being member states of COMESA can enjoy a one-stop-shop facility. This entails a defined set of rules, ease of compliance, and ultimately a boost in investors’ confidence in the African market.

  • Benefit of a ‘Single’ Decision

Unarguably, the concurrent assessment of a cross-border merger by multiple national regulators increases the possibility of different decisions. In a conceivable case, a merger can be cleared by some national regulators, and rejected by others. Issues can also arise where a merger is cleared unconditionally in some jurisdictions and subject to conditions in other jurisdictions. A one-stop-shop facility eliminates the chances of such multiple and possibly varying decisions. Here the supra-national regulator gives the final decision which represents the interest of all the affected jurisdictions. First, this is advantageous to the merging parties, as they are assured of a single decision. Secondly, with a one-stop-shop, there is little room for inconsistent treatment of similar mergers. Hence parties with similar mergers in the future can reasonably predict the outcome of merger assessments and make an informed decision to go ahead with the merger.

  • A Win for Developing African Economies

It has been observed that developing and emerging economies often lack the human and financial resources, as well as an efficient legal framework to regulate mergers.[13] Admittedly, Africa is home to many developing economies, some of which lack the resources and legal structure to efficiently regulate mergers. For instance, as of 2019, Uganda, Eritrea, Libya, and Somalia identified as countries without national competition laws.[14] However, the foregoing countries have since assented to supra-national competition regulation by COMESA. Accordingly, a one-stop-shop facility is advantageous because developing economies can delegate some regulatory responsibilities to supra-national regulators. On this note, even countries with national competition authorities can invest available time and scarce resources in solely domestic competition regulation. Such developing economies will also enjoy the revenue from supra-national regulators for filing fees relating to cross-border transactions affecting their jurisdictions.

Conclusion

Unarguably, the adoption of a one-stop-shop approach is an efficient way to regulate competition in Africa, amidst increased cross-border transactions and the emergence of the Africa Continental Free Trade Area. For instance, between 2013 and 2019, COMESA had assessed hundreds of cross-border mergers, clearing 170 unconditionally and 21 on conditions.[15] However, this approach is not without challenges in Africa. A pertinent concern is when member states of a supra-national regulator refuse to recognize such supra-national regulator as a one-stop-shop.[16] African countries are thus encouraged to assent to supra-national competition regulation and importantly adopt same as a one-stop-shop facility. To achieve regulatory efficiency, supra-national regulators must understand the practicalities of the different jurisdictions and work closely with NCAs. Operational concerns like funding and man-power must be duly addressed. Particularly, man-power must be adequate, reflective of the diverse jurisdictions and inclusive.  Indeed, it will take a while for Africa to maximize the benefits a one-stop-shop. In the interim, bilateral cooperation should be encouraged among countries, to complement any inefficiencies of a one-stop-shop facility.

About the Author


Abasi-Akara Edet is a final year law student of the Faculty of Law, University of Nigeria. He is a corporate law enthusiast and has developed significant interests in corporate finance, competition, intellectual property and energy. He recently completed an international clerkship with magic circle law firm, Linklaters, London. He has also had internships with top tier Nigerian law firms, Banwo & Ighodalo, and Olaniwun Ajayi LP.

[1]AfricaNews, ‘Africa’s 13% boost in FDI Flow: South Africa, Ghana, Ethiopia Big Winners’ [13 June 2019] <https://www.africanews.com/amp/2019/06/13/africa-13-percent-boost-in-fdi-flow-south-africa-ghana-ethiopia-big-winners/> accessed 30 December 2020. 

[2]Mon Van der Merwe, ‘Africa M&A Value Up 32%’ [26 July 2019] <https://iclg.com/alb/9896-african-m-and-a-value-up-32> accessed 30 December 2020. 

[3]Over 26 African Countries have since implemented domestic competition law regimes. See ‘The Big Picture: AAT History- Maturing Competition- Law Regimes in Africa’ <africanantitrust.com/2014/05/30/the-big-picture-aat-history-maturing-competition-law-regimes-in-africa/amp/> accessed 31 December 2020.

[4]The Common Market for Eastern and Southern Africa (COMESA) is comprised of 21 African countries. COMESA regulates competition through the COMESA Competition Commission (CCC). 

[5]The West African Economic Monetary Union (WAEMU) is comprised of 8 African Countries.

[6]The Economic Community of West African States (ECOWAS) is comprised of 15 States. ECOWAS regulates competition through the ECOWAS Regional Competition Authority (ERCA). 

[7]The Economic and Monetary Community of Central Africa (CEMAC) is comprised of 6 African countries. CEMAC regulates competition through the CEMAC Competition Commission. 

[8]The East African Community is comprised of 6 African countries. EAC regulates competition through the East African Competition Authority (EACA). 

[9]ICN, ‘Reports on the Costs and Burdens of Multi jurisdictional Merger Review’ [November 2004] <https://centrocedec.files.wordpress.com/2015/07/report-on-the-costs-and-burdens-of-multijurisdictional-merger-review-2004.pdf> accessed 1 January 2021. 

[10] For instance, under Rule 55(5) of COMESA Competition Rules 2004, merger notification fee is set at 0.1% of combined annual turnover or assets up to maximum $200,000. This can in certain circumstances be a preferable option to multiple national notification costs. If parties consider the supra-national cost to be higher, they can apply for a comfort letter to proceed with national notifications.

[11]Deloitte, ‘Competition Law in Africa: Maximizing Competitor Advantage: Consumer Value Chain Spotlight’<https://www2.deloitte.com/content/dam/Deloitte/za/Documents/risk/ZA_Competition_Law_in_Africa_RA_071116.pdf> accessed 1 January 2021. 

[12]Review period of 60 days in Kenya, 90 days in Zambia, and 45 days in Malawi, which can be extended by national authorities. Under section 44 of the Competition Act of Kenya 2010, section 32 of the Consumer and Protection Act of Zambia 2010, and Section 39 of the Competition and Fair-Trading Law of Malawi 2000.

[13]OECD, ‘Cross Border Merger Control: Challenging for Developing and Emerging Economies’ [2011] <http://www.oecd.org/daf/competition/mergers/50114086.pdf> accessed 3 January 2021. 

[14]Xinhua, ‘COMESA Urges Members to Enact Competition Laws to Promote Consumer Interests’ [9 September 2019] <http://www.xinhuanet.com/english/2019-09/09/c_138378873.htm> accessed 3 January 2021. 

[15]CCC, ‘Merger Statistics’ <https://www.comesacompetition.org/?p=2546#more-2546> accessed 4 January 2021. 

[16] For instance, Kenya, a member of COMESA, has consistently rejected the notion that COMESA is a one-stop-shop. Gomelomo Kekesi, ‘A Practitioner’s Critique: the One-Stop Shop Regime of the COMESA Competition Commission’ [November 2018] <https://repository.up.ac.za/handle/2263/70119> accessed 5 January 2021.