Egypt Merger Control Regime: Wave of Change
Similar to the Gulf Cooperation Council (“GCC”) countries, the EU and USA, the Egyptian legislator implemented with the start of 2023, the new ex ante merger control regime that will be applied by the Egyptian Competition Authority (“ECA”). This change came after long discussions, deliberations involving market operators, Egyptian Parliament representatives and competent authorities. It was only on 6 December 2022, after extensive deliberation, that the Egypt’s House of Representatives approved the legislation, which would introduce several amendments to the Competition Law No. 3 of 2005 (“Competition Law”) as amended by Law No.175 of 2022 (the “Amendments“).
In this article, we tackle the key changes that have been stipulated in the Amendments, including the merger control clearance procedure, the notice period, the jurisdictional threshold, the filing fees before the ECA and the penalties that will be applied in the event of breach or violation.
For the time being, as practitioners we are still in the wait for the Egyptian government to issue new implementing regulations that will came in action with more extensive details and clarifications. The question that remains in place is whether by the issuance of the executive regulations, the new regime will come into display to the transactions that are in action now. ECA representatives clarify that most effectively and probably the Amendments would have immediate effect and apply to transactions that are not yet closed before the publication of the Amendments.
We highlight below some of the key features of the Amendments and the key takeaways undertaken more thoroughly in our guide on Merger control regime in Egypt.
When does the pre-closing clearance apply?
The Amendments provide for a pre-closing clearance for any transaction that would fall under the definition of “Economic concentration”. The definition of economic Concentration is prescribed in the Amendments as any “change of control or material influence over one or several entities,” as a result of any merger, acquisition or joint venture. Further, an ECA filing will only be required for transactions that would result in a change of control or material influence or create joint control over entities or target business entities that conduct their business in an independent and permanent manner.
What are the turnover thresholds?
It is provided under the Amendments that a transaction would trigger an ECA approval in the following contexts:
- the parties’ combined turnover in Egypt last year exceeds 900 million Egyptian Pounds (approx. US$ 36 million), and the turnover of at least two parties exceeds 200 million Egyptian Pounds (approx. US$ 8 million) each in Egypt during the last fiscal year; or
- the combined turnover or assets of all parties worldwide exceeds 7.5 billion Egyptian Pounds (approx. US$ 300 million), and the turnover in Egypt of at least one party exceeds 200 million Egyptian Pounds (approx. US$ 8 million) during the last fiscal year.
It is clear that under the first scenario, it is required that at least two parties to have turnover in Egypt, under the second scenario and threshold, the filing can be triggered even if only one of the parties has turnover in Egypt.
When does the clock start?
The ECA shall have 30 working days from the date of receiving the complete file to issue a decision on the proposed transaction. The timeline could be extended as per the Amendments by 15 working days. The decision issued by the ECA would be deciding that the transaction limits, prevents and harms the competition in the country. The ECA has the authority to submit the transaction file to a second review stage, that may take up to 75 working days for the ECA to issue a decision. In principle, it is provided that it can last up to 60 working days, which may be subject to a potential extension by 15 working days.
When does an applicant get a fine and what are the penalties?
The Amendments provide for certain remedial measures under the Amendments, in the event the parties fail to abide by such measures, it will constitute a breach, to which the ECA can impose a fine ranging between 1% and 10% of the value of parties’ global turnover or combined assets whichever is higher in value at the time, or a fixed amount ranging between 30 million EGP to 500 million EGP (approximately US$ 1.2 million to US$ 20.3 million). The fixed amounts are addressed and used in the event the value of turnover or assets cannot be calculated.
The same thing applies in the event of breach of one of the parties of duty of transparency, whereas incorrect information has been provided before the ECA. This particularly serves the purpose behind the ECA long standing wars against the submission of incorrect information, in an aim to enforce credibility, transparency and validity.
The long-anticipated Amendments to the Competition Law bring significant changes to the country’s merger control regime. The Amendments constitute radical change in the system and are drawn to prepare the market for investment. The Amendments take part in the mega changes that are being examined now in the country, allowing for investors either foreign or domestic to have a competitive playing field by ensuring that same rules and regulations apply to all market players as opposed to harming exiting competitors by creating economic concentrations.