In more detail

The ECA is aiming to ensure that the coming into force of the new pre-merger control regime in Egypt on 1 June 2024 will be as smooth as possible. For this reason, the ECA recently held a number of roundtables to gather views about the new regime. Baker McKenzie was selected as one of a small group of firms invited to participate in those roundtables. The ECA has taken on board a number of comments made during the roundtables and provided a number of welcome clarifications about the new regime.

These clarifications included the following;

1. The ECA is willing to engage in informal discussions before the merger parties submit their notification

The ability to request informal discussions before filing had been removed from the Executive Regulations issued earlier this year. However, the ECA has now re-introduced the opportunity for the merger parties to have informal discussions with the ECA ahead of any potential notification submission. This can be on an identified or no-names basis.

2. The global jurisdictional thresholds were narrowed

One of the Egyptian Competition Law (ECL) amendments introducing the new Egyptian merger control regime included a requirement on merger parties to notify the ECA if both parties had a combined global turnover or value of assets of EGP 7.5 billion and one of the parties had EGP 200 million turnover in Egypt.

As a result, in many instances, the buyer alone would have met the two thresholds even where the target had zero turnover or assets in Egypt. This would have meant that where firm met both thresholds, every M&A transaction, whether it is related to Egypt or not, would have needed to be notified. 

According to the latest change, the ECA now clearly states that whilst one of the parties needs to meet the EGP 7.5 billion global threshold for a filing to be made, it is the target which must have a turnover in Egypt of EGP 200 million. This means that even if buyers meet the global threshold and have EGP 200 million turnover in Egypt, they will only be required to notify their transactions in Egypt if the target meets the EGP 200 million turnover threshold in Egypt.

3. Criteria for Full Function Joint Ventures

The ECA has also provided welcome clarification as to how it will interpret the full functionality criteria set out in the ECL. The ECL states that there are three conditions for a Joint Venture (JV) to be deemed full function and thereby be notifiable (if the jurisdictional thresholds are met). It must be:

1. controlled by two or more parties as a result of an incorporation or a merger
2. independent of its parents
3. established on a lasting basis. 

In this respect, most importantly, for independence, the ECA has now set out the following;

1. the JV must carry out activities beyond one specific function for the parents, i.e., it should not be limited to an activity that is essentially auxiliary to its parents and should have its own access to or presence on the market;
2. the JV must have sufficient resources to operate independently on a market, i.e., sufficient financial resources, assets and staff to perform its business on a day-to-day basis;
3. the JV should not have extensive sale/purchase relations with its parents, i.e., the ECA requires at least 50% of the sales with third parties, otherwise, assessment will be made to decide on the impact of these relations with the JV.

Furthermore, the ECA has clarified that how the JV fulfils the requirement of being established on a lasting basis. For instance, if the relevant agreement of the JV did not provide a duration for the operation of the JV, this would be deemed to satisfy the requirement.

4. Transactions subject to simplified procedures

The ECA established a new framework for a fast-track, simplified procedure for certain transactions. These transactions will be cleared within 20 business days from the date of submission of a complete filing (instead of the standard 30 business days at Phase 1 and a simplified form requiring less data and information can be used.

The below is an exhaustive list of the transactions which can take advantage of the fast-track, simplified procedure:

1. If the merger parties have met the thresholds in the ECL¹ but their combined annual turnover or value of assets in Egypt does not exceed EGP 2 billion.
2. If the merger parties have met the thresholds in the ECL², but the annual turnover or the value of assets of the target in Egypt does not exceed EGP 500 million.
3. If the parties are establishing or acquiring a JV with commercial activities outside of Egypt.
4. If the parties are acquiring or establishing a JV with commercial activity in Egypt but only in markets which do not have any vertical or horizontal relationship or are not related in other ways to the markets where the parents are active.
5. If the transaction is between merger parties in markets that are not horizontally or vertically related or otherwise related to each other.
6. If the transaction is an acquisition of a sole control where the acquirer(s) already have a joint control.

5. When will the clock start ticking?

As stated in the ECL, the clock will start ticking once a complete notification is submitted. The ECA has now clarified further that once a notification is submitted, it will have 5 business days to review the filing and say whether it is complete or not. If the filing is complete, the ECA will then issue a receipt confirming the complete submission of the file. If not, the parties will be required to work further in the filing and re-submit it. It is noteworthy that upon re-submission of the missing information, the ECA will then have an additional 5 business day period to review the newly submitted data to confirm the completeness of the filing or request further information .

6. Publication Fees

In addition to the notification fees set out in the ECL which are up to EGP 100 thousand, the ECA has stated that on filing, the merger parties will be required to submit a certified cheque with an advance payment of EGP 50,000 to cover publication fees in addition to giving an undertaking to settle any other pending amounts.

7. Scope of data required in the Notification Form

The ECA in the notification form differentiates between the relevant parties to a transaction and the "parties to the economic concentration". Most of the information is required is from the parties to the economic concentration which are the signatories of the transaction. However, information is also required from the relevant parties to the transaction which meaning the entire economic unit/group company of the parties to the economic concentration.

8. Other clarifications

1. Commercial mortgage agreements are not notifiable.
2. Bank loans are not notifiable unless they result a change in control of or material influence over the borrower. 
3. The requirement to provide an Arabic translation for documents submitted in foreign language has been changed so that the ECA will request a translation of only some documents. For other documents, only an Arabic summary will be required.
4. Foreign-to-foreign transactions are notifiable in Egypt if they meet the revised jurisdictional thresholds.

Conclusion

The ECA's latest clarifications are very welcome. Companies should immediately review the ECA's now published notification form and the Q&As in order to prepare to comply with the newly established regime from 1 June 2024.
The ECA has yet to publish its guidelines on its new merger control regime. However, for the time being, the Q&As address the most pressing queries. We expect that guidelines will emerge in due course in light of the ECA's emerging enforcement practice.

1 If the combined turnover or value of assets, whichever is higher, of the parties in Egypt exceeds EGP 7.5 billion globally and the turnover of the target in Egypt exceeds EGP 200 million.

2 If the combined turnover or value of assets, whichever is higher, of one of the parties exceeds EGP 7.5 billion globally and the target has turnover in Egypt that exceeds EGP 200 million.

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