On November 25th, 2020, The Egyptian cabinet of ministers (the “Cabinet”) approved a new set of amendments (the “Amendments”) to the Protection of Competition and Prohibition of Monopolistic Practices Law No. 3 for the Year 2005 (the “Competition Law”), as reported by news and media. The Amendments, if enacted, will grant the Egyptian Competition Authority (“ECA”) broader supervisory powers on mergers and acquisitions in order to limit monopolistic and anti-competitive practices.
The Amendments are yet to be referred to Parliament. Once discussed, and if approved, the Amendments will be enacted into law.
We guide you through the key highlights of the legislation as follows:
Definition of Economic Concentration
The Amendments aim to add a new definition under the Competition Law, namely that of economic concentrations. Under the Amendments, economic concentrations mean essentially changes of controls of or material impact on one or more persons resulting from mergers, acquisitions, or the establishment of new entities. The Amendments provide examples of transactions that would be considered or would be conducive to an economic concentration.
Pre-Merger Control
If enacted, the Amendments would put in place an official pre-merger control system for the first time in Egypt under the Competition Law.
Under the current provisions of the Competition Law, entities are required to notify the ECA of mergers and acquisitions within 30 days of the closing of the transaction.
However, the Amendments specifically mandated the ECA with the power to supervise and control mergers and acquisitions. Under the Amendments, entities intending to undertake mergers or acquisitions within the definition of economic concentrations must notify and obtain the ECA’s pre-approval thereof.
It is not clear yet if the Amendments will be applicable to a minimum threshold of market share or annual turnover of the parties involved with the transaction in question. The Amendments do not, and were not expected to, regulate the application thereof on offshore transactions with Egyptian nexus. It is, however, expected that if the Amendments are enacted, this would be the subject of new guidelines by the ECA.
The Amendments prohibit economic concentrations if these restrict, limit or competition, specifically if the same would facilitate the commitment of breaches under the Competition Law or create or increase a dominant position.
The Amendments would further give the ECA the discretion make exceptions for certain economic concentrations if their prohibition would lead to the exit of any players from the market, or if their economic benefits outweigh the impact to competition.
Market Reaction
The Amendments were presented several times to the Cabinet for consideration in the past few years, however, were never approved by the Cabinet. The former head of the ECA, when discussing the amendments in December 2019 stated, as part of his announcement of the ECA’s approval of the acquisition of Careem by Uber, that “the expected amendments to the law will include a new chapter regulating mergers and acquisition, in addition to the ECA’s role in this respect. These amendments would ensure the effectiveness of the ECA to combat monopolies resulting from mergers and acquisitions and to protect competition within the market”.
