Directorate of Mergers and Monopolies
The Directorate of Mergers and Monopolies (DMM) is responsible for administering provisions under Part III, specifically Section 16 and Part IV of the Competition and Consumer Protection Act No. 24 of 2010 (“the Act”) respectively. The Directorate plays a central role in the determination of industrial organisation and structure in Zambia through its interventions in mergers and abuse of dominance cases that are likely to prevent, restrict or distort competition and fair trading in Zambia. The Directorate reviews and assesses all types of mergers, that is, Horizontal, Vertical and Conglomerate mergers. The Directorate, under Part III principally investigates abuse of dominance cases identified and reported to the Commission using prescribed assessment procedures and makes recommendations to the Board, through the Executive Director. The Directorate further formulates national guidelines on Mergers and Abuse of Dominance for the better carrying out of its competition mandate. The Directorate is led by a Director who superintends the operations and management of the Directorate.
What is a Merger?
A merger as defined in the Act occurs when an enterprise, directly or indirectly, acquires or establishes, direct or indirect, control over the whole or part of the business of another enterprise, or when two or more enterprises mutually agree to adopt arrangements for common ownership or control over the whole or part of their respective businesses.
Types of mergers
- Horizontal merger - These are mergers between enterprises that operate in the same relevant market(s) at the same level of business.
- Vertical merger - These are mergers between enterprise which operate at different levels of the production or supply chain of an industry.
- Conglomerate mergers - These are mergers between undertakings in different markets, with no functional link.
What constitutes a notifiable merger?
Not all mergers are notifiable with the Commission. Thus, for a merger to be notifiable, there must be existence of the following three (3) elements;
- Change of control in the target enterprise or its assets
- Threshold - the parties to the transaction must meet the threshold of 15 million Kwacha of combined assets or turnover whichever is higher.
- Local nexus - parties to the transaction must be operating in the Zambian market directly, through a subsidiary or make sales through exports.
The Commission also inputs into merger reviews and assessments undertaken at a regional level within the COMESA Regional Block in line with Article 23(3) (a) and (b) of the COMESA Competition Regulations, a merger is notifiable with CCC if “both the acquiring firm and the target firm, or either the acquiring firm or target firm operate in two or more Member States; and the threshold of the combined annual turnover or assets provided for in paragraph 4 is exceeded”
The Notification Process
Notification entails the lodging in of all relevant documents with the Commission and the payment of a statutory notification fee (0.1% of the sum of annual turnover or assets of the merging parties, whichever is higher). Parties to a merger must fill in a Form 1 and supply relevant documents as requested in the Form 1.
The Form 1 can be obtained from either the Commission’s website, Commission’s offices or via email upon request made by the would-be Applicants.
Pre-merger Notification/Consultation
Pre-Notification Consultation – helps in determining the precise information required in a notification and to clarify whether or not a transaction is a merger and requires notification or not, or is a negative clearance. The Commission usually holds pre-merger meetings upon request by the merging parties, the consultation is free.
Investigation Timetable and Procedures
The Commission begins its merger assessment immediately notification has been completed. Notification is deemed complete upon payment of the statutory merger fees at which the clock of 90 days starts ticking. The 90 days is by statute, but however with the publication of the merger guidelines, mergers considered to have less competition concerns will be assessed and interim decision given within 45 days.
What is negative clearance and when is it obtained?
Where parties to a merger transaction are not sure whether or not they qualify for notification with the Commission, they may apply to the Commission for negative clearance (defined under Section 28 of the Act). Parties can in this case seek guidance from the Commission as to whether a transaction or proposed transaction meets the criteria for merger notification.
Negative clearance may be given for a variety of reasons, among them, that parties fail to meet the threshold, or there is no change of control etc.
Dominant position
A dominant position is defined in the Act to mean a situation where an enterprise or group of enterprises possess such economic strength in a market as to make it possible for it to operate in that market, and to adjust prices or output, without effective constraint from competitors hence enjoys market power. A dominant position exists if 30% or more of the relevant market held by one enterprise or if 60% of the relevant market is held by not more than three enterprises.
Abuse of dominance
The provision on Abuse of Dominant position of market power cases is as set out in Section 16(1) of the Act. Section 16(1) provides that; An enterprise shall refrain from any act or conduct if, through abuse or acquisition of a dominant position of market power, the act or conduct limits access to markets or otherwise unduly restrains competition, or has or is likely to have adverse effect on trade or the economy in general.”
An enterprise being dominant is not a violation, and hence there must be an act or conduct that may be exploitative or exclusionary in nature by an enterprise which is in a dominant position of market power for the Commission to investigate.
The overall goal for the enforcement of Abuse of Dominance provisions is to safeguard and promote competition and ensure that consumers are not exploited. It is generally understood that the ultimate purpose of any competition intervention by the Commission is to ensure a well-functioning market built on the principles of fair competition.
FREQUENTLY ASKED QUESTIONS
What is a Merger and how is a merger defined under the Competition and Consumer Protection Act No.24 of 2010 (CCPA)?
A merger can simply be defined as a transaction between two or more independent parties which results in one party acquiring interest in the other party. This interest maybe through shares or assets or an agreement to work together in a joint...
Are all Mergers Notifiable?
Not all mergers are notifiable. Only mergers that, Meet the threshold as provided for in the Statutory Instrument No. 97 of 2011, Result in change of control as provided for under Section 24(3) of the CCPA and Have an appropriate local nexus are...
What is Negative Clearance and when is it obtained?
Negative Clearance is where parties to a merger transaction are not sure whether or not it qualifies for notification with the Commission, they may apply to the Commission for negative clearance (defined under Section 28 of the CCPA). Parties can...
What does single economic entity mean and how does the Commission use this concept in merger analysis?
Any two or more bodies corporate are treated as interconnected if one or more of them is a subsidiary or are subsidiaries of the other, or if all of them are subsidiaries of the same body corporate as provided for under Section 2 of the CCPA. For...
How does the Commission determine if parties meet the threshold?
Once the parties to a merger are identified, the regulations provide that the sum of the combined assets or combined turnovers of the parties to the merger be used. If the combined assets or turnover of the parties exceed the set threshold in the...
How does the Commission calculate merger notification fees?
To calculate the notification fee, the Commission considers either the sum of assets for the parties or the sum of turnover for the parties whichever is higher for the purposes of the notification fee. SI 97 of 2011 provides for a percentage fee of...
Who is supposed to pay the notification fee?
Parties to the merger are required to pay the notification fee. How they contribute towards the notification fee and who makes the payment is entirely up to them. The fees are paid against a raised invoice by the Commission and are payable to an...
What is the meaning of “operating” in Zambia when it comes to mergers?
Operating in Zambia means enterprises wholly domiciled in Zambia. It also means companies that are wholly domiciled outside Zambia but have a presence in the Zambian market through export sales or the presence of subsidiaries. In the case where the...
Is notification mandatory or voluntary?
Notification is mandatory according to section 26 of the CCPA for all notifiable mergers or mergers that meet the notification criteria. Notification entails the lodging in of all relevant documents with the Commission and the payment of a...
Are non-notifiable mergers reviewable?
According to Section 27 of the CCPA which states that “the Commission may, where it has reasonable grounds to believe that a merger falls below the prescribed threshold, review the merger” It is not mandatory for merging parties to notify merger...
To whom is the notification made?
The CCPA does not specify as to whom notification is to be made. However, Section 6 of the CCPA states that the Executive Director shall be the Chief Executive Officer of the Commission and shall be responsible under the direction of the Board for...
Who should notify a transaction with the Commission?
According to Statutory Instrument No. 97 of 2011 which states that “The Commission prefers a single application made jointly by all the parties to an agreement, though parties may submit separate notifications if they wish, particularly if they wish to...
What must be filed with the Commission?
A filled in Form 1, audited financial statements of the merging parties generating a turnover in Zambia, the share purchase agreement between the parties, strategic plans of the merging parties and plans for the merged entity, merging parties Board...
Is the regime for merger control in Zambia Suspensory?
Yes. The merger control regime in Zambia is suspensory which implies that the parties to the transaction are indefinitely prevented from effecting the transaction until they have received clearance from the Commission.
How long does it take for the Commission to issue a determination?
By law the Commission shall complete its assessment of a proposed merger and issue its determination within a period of ninety days from the date of full notification for authorization. However, the Commission can also extend the 90 day period for...
What process does a case under go before receiving final approval and who gives it?
The Commission conducts investigations on the merger, this also involves consultation with third parties such as customers, competitors, industry experts, sector regulators if any etc. the investigations involve competition and public interest...
What can parties to a transaction do with an interim approval?
An interim approval is given to merging parties by the Technical Committee of the Board of Commissioners. Parties can consummate the merger pending final authorisation from the full Board of Commissioners. It is a requirement that merging parties...
What are the possible outcomes of a merger notification?
Approval of the proposed merger without any conditions; Approval of the proposed merger with conditions or undertakings given by the parties to address competition concerns that may have arisen during the assessment of the proposed merger; Reject the...
Can parties contest the decisions made by the Board?
Yes, parties can contest the Board’s decision as they can appeal within 30 days from the date of receiving the Board decision to the Competition and Consumer Protection Tribunal (Tribunal).
What does the Commission mean by “merger specific” conditions in merger?
These are conditions given to a specific merger after assessment which the merging parties should adhere to.
What are the consequences of breaching Merger Conditions?
According to Section 37 of the CCPA, an enterprise that breaches merger conditions is liable to a fine not exceeding ten percent of its turnover.
What are the consequences of implementing a merger without approval from CCPC?
According to section 37 of the CCPA, the transaction is illegal and therefore all arrangements between the parties shall be null and void. Further, the Commission can charge such parties a fine of up to ten percent of their annual turnover.
When is a merger Anti-competitive?
According to Section 8 of the CCPA, a merger is anti-competitive when it has the object or effect of preventing, restricting or distorting competition to an appreciable extent in Zambia.
Should mergers that meet the “regional dimension” be notified with both COMESA Competition Commission and the Commission?
No. According to Article 23(a) and 23(b) of the COMESA Competition Regulations, a merger is notifiable with the COMESA Competition Commission if “both the acquiring firm and target firm or either the acquiring firm or target firm operate in two or...
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