These are interesting times for merger control given the recent trends in the enforcement of merger control rules in both the EU and non-EU jurisdictions. Aurora Muselli from Hogan Lovells and Victoria Ezekiel-Anuri from Templars, Nigeria, highlight some changes in Nigeria.
In the European Union, it all started with the enactment of theGuidance on the Application of Article 22 of the Merger Regulation on 26 March 2021. Article 22 enables the European Commission to review below-threshold mergers upon referral from one or more member states, when the concentration is capable of affecting intra-EU trade and could significantly affect competition within the territory of the member state/s making the request.
Historically, Article 22 was introduced to allow member states without a national merger control regime to refer particularly troublesome concentrations to the Commission. Since then, member states have progressively introduced national merger control regimes. As a result, the Commission discouraged referral requests under Article 22. However, the subsequent development of the market, especially in the digital and health sectors, saw an increase in the number of concentrations involving operators with high innovative value paired to a small (below EU and national thresholds) turnover. In light of this, the Commission encouraged member states to make use of the provision again.
In addition to the Commission enforcing Article 22, companies must be aware that their below-threshold transaction could be investigated by national competition authorities when the concentration does not impact intra-community trade. This power was recently introduced in Italy by the Annual Competition Law, and other jurisdictions have done the same.
Interestingly, new trends of enforcement in the merger space do not only concern EU jurisdictions, and companies involved in concentration increasingly have to consider the challenges stemming from relatively new regimes and competition authorities in other climes. The competition regime in Nigeria presents a very good example of this.
The Nigerian competition authority, theFederal Competition and Consumer Protection Commission (FCCPC), was established by the Federal Competition and Consumer Protection Act (FCCPA) in 2018 to, among other things, regulate merger transactions and other competitive practices in Nigeria. The FCCPA applies to all undertakings and commercial activities within or having an effect in Nigeria. The FCCPC Merger Review Guidelines 2020 further provide that it applies to foreign companies (though not registered in Nigeria) which produce goods and services sold into Nigeria.
In the exercise of its merger control powers, the FCCPA provides that the FCCPC’s prior approval is required for the implementation of a qualifying merger. Two mutually inclusive conditions trigger a requirement to obtain this merger approval: (i) revenue-based threshold, and (ii) acquisition-of-control test. The FCCPA therefore regulates transactions involving the acquisition of direct or indirect control over the whole or part of the business of an undertaking by another undertaking – including offshore transactions that have effect within Nigeria – where the revenue-based threshold is met. In this respect, there is no foreign-to-foreign exception.
Similar to what is now occurring at the EU level, the FCCPC retains the power to review below-threshold transactions where it considers they will likely hinder competition based on an analysis of the target market.
Currently, the FCCPC reviews mergers under: (a) the general merger review procedure, which applies to general mergers with notable competition concerns; (b) the simplified procedure which applies to mergers which, although notifiable, do not occasion material competition concerns; or (c) the negative clearance procedure which applies to mergers which are not notifiable but where parties to a transaction are uncertain as to whether it constitutes a relevant merger.
There is also a pre-notification consultation regime in Nigeria, by which parties to a proposed merger transaction may clarify matters such as whether a merger is required to be notified; the calculation of annual turnover; the value of assets; the market shares; the merger notification filing fee; information on the market where the markets are novel or complex; whether a simplified or expedited procedure is merited; and any other substantive matter. Though the pre-notification service is offered free of charge, the direction provided by the FCCPC is merely indicative and the Commission reserves the right to review any directions, once it is provided with additional information on the proposed transaction.
Nigeria’s merger control regime has certain peculiarities. For instance, merger filing fees are based on the assessed value and are therefore particularly high compared to others on the continent. In addition, whilst the FCCPC has jurisdiction to regulate mergers occurring in virtually all sectors in Nigeria (except the banking sector), the FCCPC appears to pay particular attention to the fast-moving-consumer-goods, healthcare, oil and gas, telecommunications, manufacturing, ICT and energy sectors.
In relation to the risks of enforcement, and given that the merger review process requires self-reporting, the FCCPC tends to rely on announcements published post-completion, or a report filed by any third party, to detect violations. In other instances, the FCCPC may become aware of a past transaction which had required its approval prior to implementation from subsequent filings on future transactions. Where the parties to a notifiable transaction fail to notify the FCCPC of a notifiable merger prior to its implementation, the FCCPA deems such a merger transaction void.
In summary, assessing filing duties in the so-called multi-jurisdictional merger control analysis is a necessary step when companies decide to engage in M&A activity. The recent tendency of the European Commission to review below-threshold transactions under the heading of Article 22 means going a step further and carrying out a substantive assessment of the transaction at a preliminary stage to try and anticipate a possible interest, by the authority, in reviewing the transaction despite the turnover of the parties.
In addition to this, companies need to thoroughly consider a possible duty to also notify in jurisdictions, such as Nigeria, where the FCCPC is becoming more and more active and ready to heavily enforce any failure to notify.
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