News Alert: Merger Control Regime Amendments in Egypt

LEGAL UPDATE – 2 JANUARY 2023 

We would like to announce that the law amendments to the Egyptian Competition Law (“ECL”) no. 3 of the year 2005 in relation to the Merger Control regime (the “Amendments”) have been enacted officially by virtue of the law no. 175 of the year 2022 and published officially in the Official Gazette on 29^th of December 2022. The Amendments have entered into force the following day of its publication in the Official Gazette (i.e., 30^th of December 2022). The issuance provisions of the Amendments do not provide for a transitional or a grace period. The executive regulations of the Amendments (“Executive Regulation”) and the notification form template and guidelines are expected to be issued soon.   

The Amendments aim to place mergers and acquisitions under the supervision of the Egyptian Competition Authority (“ECA”) in an effort to protect ex-ante competition in the relevant market(s). Unlike the old regime where the parties notify the ECA on the transaction post-closing, the Amendments introduce a prior-approval regime of mergers, acquisitions, and joint ventures that qualify as an economic concentration, whereby economic concentrations must be approved by the ECA prior to their implementation.

In this regime, any transaction that fulfills a set of requirements becomes a notifiable transaction to the ECA, except for the companies conducting activities subject to the regulatory supervision of the Financial Regulatory Authority (“FRA”). The latter must notify their transaction to the FRA to seek its prior approval, and the FRA shall procure the opinion of the ECA before issuing its approval.

It should be noted that transactions occurring in the banking sector are already exempted from the ECL and fall under the jurisdiction of the Central Bank of Egypt.

The Amendments introduces, inter alia, the following amendments:

1. an obligation on the parties of the transaction to obtain the prior approval of the ECA on any transaction that satisfies the following requirements:
   • the transaction involves an Economic Concentration. The Amendments provides for a definition of “economic concentration” which details the definition of “Control” and “Material Influence” as the main criteria for establishing an economic concentration. Please note that Control is defined broadly to include the capacity of a person(s) to exercise effective influence on another party by guiding the economic decisions of the said party either based on the majority of the voting rights or based on the capacity of the controlling person to prevent another person from taking an economic decision (veto rights), or any other method, including any event, agreement or ownership of shares (regardless of the number of owned shares) that results in the effective control of the management or decision making of another person.
   • a set of financial thresholds based on the combined turnover and asset value of the parties of the transaction must be satisfied. The Executive Regulation – when issued – will clarify the method of calculating the above annual turnover and the combined assets.
2. Below these financial thresholds, the ECA can interfere with economic concentrations, which have been implemented within one year from their implementation, without being able to unwind such concentrations, but it has the power to impose behavioural remedies on these concentrations.
3. an obligation to perfect the payment of filing fees up to EGP100,000 to the ECA for the evaluation of any notifiable transaction;
4. vesting the ECA or FRA with the power to approve (either unconditionally or conditionally subject to behavioral and/or structural remedies) or block any notifiable transaction;
5. Failure to notify ECA or obtaining its clearance will subject the parties to a penalty of a fine not less than 1% and not exceeding 10% of the total annual turnover, the asset value of the concerned parties or the transaction value, whichever is higher. If the percentage cannot be calculated, the penalty shall be a fine of not less than EGP 30 million and not exceeding EGP 500 million;
6. The information and documents required for the filing are expected to be set forth under the Executive Regulation and the notification form template to be issued by the ECA;
7. The review process of the filing is divided into phase (1) and phase (2) reviews. The ECA must issue its decision during following time-limits:
   • 30 business days from the date of complete filing date (subject to 15 business days extension in case of submission of commitment offer) in case of phase (1) review; and
   • 60 business days (subject to 15 business days extension in case of submission of commitment offer) from the referral decision of the filing to phase (2) review.
8. Filing to the ECA does not replace, as a general rule, the filing to the COMESA Competition Commission. However, it is still unclear whether filing to the COMESA Competition Commission would be considered a one-stop shop replacing filing to the ECA.

For any questions or inquiries, please feel free to contact: