Kenya seeks new rules for mergers

Monday July 21 2014

The Competition Authority of Kenya (CAK) director general Mr Wang’ombe Kariuki during a workshop in Nairobi on May 12, 2014. PHOTO | SALATON NJAU | FILE

The Competition Authority of Kenya (CAK) director general Mr Wang’ombe Kariuki during a workshop in Nairobi on May 12, 2014. PHOTO | SALATON NJAU | FILE NATION MEDIA GROUP

By MUTHOKI MUMO
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Kenya is pushing for companies that derive most of their revenue from local markets to be exempted from regional merger approval regulations.

The Competition Authority of Kenya (CAK) director general, Mr Wang’ombe Kariuki, said the country was lobbying to have firms that raise at least 67 per cent of their turnover locally excused from filing merger applications with the Common Market for Eastern and Southern Africa Competition Commission.

“We are insisting that companies that get much of their revenue from one country should have their mergers reviewed at the national level if it is less than 67 per cent from one country and the rest is spread throughout the region, then they can go to the commission,” Mr Kariuki said in a telephone interview.

At the same time, according to him, officials from Comesa are pushing for a higher threshold of at least 80 per cent turnover derived from one country before a company is exempted from the regulations.

The commission, which is an organ of Comesa, began operations last year and quickly came at logger-heads with national antitrust watchdogs that questioned the body’s wide mandate.

According to Comesa regulations, the unit is charged with vetting any mergers and acquisitions that have a “regional dimension” within the regional economic bloc. There have been concerns over how widely the regulations cast the net.

FILING FEES

Although the law makes provisions for the Competition Commission to set merger notification thresholds in terms of turnover or assets, no such yardsticks have been set yet.

This means that very small businesses carrying out cross-border merger transactions could theoretically be required to notify it. Further, the filing fees charged could be as high as Sh44 million ($500,000).

Facing complaints from national competition watchdog and business lobbies, the Comesa commission decided to review its regulations in August last year.

The commission is responsive to regional trends in which African companies are growing beyond national borders. According to Mr Kariuki, 69 per cent of all mergers filed with the CAK as of June 2014 had an “international dimension”.