What is a merger?
According to Competition and Fair Trading Act (CFTA) a merger means (a) the acquisition of a controlling interest in—(i) any trade involved in the production or distribution of any goods or services; (ii) an asset which is or may be utilized for or in connection with the production or distribution of any commodity, where the person who acquires the controlling interest already has a controlling interest in any undertaking involved in the production or distribution of the same goods or services; or (b) the acquisition of a controlling interest in any trade whose business consists wholly or substantially in— (i) supplying goods or services to the person who acquires the controlling interest; (ii) distributing goods or services produced by the person who acquires the controlling interest.
What is Controlling Interest?
Controlling interest, in relation to— (a) any undertaking means any interest which enables the holder thereof to exercise, directly or indirectly, any control whatsoever over the activities or assets of the undertaking; (b) any asset, means any interest which enables the holder thereof to exercise, directly or indirectly, any control whatsoever over the asset.
What are applicable competition laws, regulations and guidelines regarding mergers and acquisitions in Malawi?
Mergers and acquisitions are regulated under Competition and Fair Trading Act (1998). There are also Competition and Fair Trading Act Regulations (2006) and Merger Guidelines that provide more details and guide the merger assessment processes.
Who should apply for authorization of a merger?
Any person may apply to the Commission for an order authorizing that person to effect a merger or takeover.
Do you consider thresholds for a merger to be notifiable before the Commission?
The CFTA does not provide for thresholds for a merger to be notified before the Commission.
What are we expected to do when applying for merger authorization?
You are expected to fill a merger application form, which you are expected to submit together with covering letter and statement of accounts.
How much are merger application fees?
Merger application fees are calculated as 0.05% of the combined annual turnover or assets, whichever is higher.
Do we need to notify a creation of a joint venture?
Joint ventures are not notifiable under CFTA
How long shall it take to have our merger authorized?
Upon submitting the application and payment of merger application fees, the Commission will take not more than 45 days to approve your merger.
What happens when the Commission when the 45-day period expires before making a decision on the merger?
If that happens, the Commission issues an interim order or comfort letter depending on the findings of the assessments.
Is there an opportunity for public hearing in case we need to be heard further on our submissions?
Section 11 of CFTA provides for public hearings on any matters including mergers and acquisitions.
Which mergers are supposed to be notified to Competition and Fair Trading Commission (CFTC), and which ones are supposed to be notified through COMESA Competition Commission (CCC)?
- CFTC handles all mergers whose parties are domiciled in Malawi only, and they do not operate in other COMESA member states;
- CCC handles all mergers whose parties operate in more than two COMESA member states, and meet their merger notification thresholds according to their notification thresholds.
We are acquiring less than 50% shareholding in our competitor, are we still required to notify our merger?
You do not need to notify that merger. However, if the acquired stake will give you control over the target, you will be required to notify that merger.
What are consequences for not seeking authorization for a merger?
Section 35 of CFTA provides that (1) Any person who, in the absence of authority from the Commission, whether as a principal or agent and whether by himself or his agent, participates in effecting— (a) a merger between two or more independent enterprises; (b) a takeover of one or more such enterprises by another enterprise, or by a person who control another such enterprise, where such a merger or takeover is likely to result in substantial lessening of competition in any market shall be guilty of an offence. (2) No merger or takeover made in contravention to subsection (1) shall have any legal effect and no rights or obligations imposed on the participating parties by any agreement in respect of the merger or takeover shall be legally enforceable.
What does the Commission consider when assessing a merger?
The Commission considers the effect of the merger on competition and the economy in general. The Commission also considers the public concerns. Some of the economic and public concern factors the Commission considers include effect on production or distribution efficiencies, consumer prices, exports, technological advancement, employment and economic growth.
Our company is acquiring a controlling stake in a company that operates in a different market from our own, should we still notify a merger since it will not have competition effects?
If the target company operates in a market where you do not have any linkages whatsoever, you are requested to still notify the merger to establish the claim that you do not have linkages to the target or any other market. This is notified under negative clearance.
What is negative clearance?
This is the procedure whereby the Commission issues a decision at the request of an undertaking indicating that the Commission does not consider that a given proposal is prohibited by the CFTA. The applicant also fills a designated form.
What is the application fee for negative clearance?
Seven Hundred Thousand Kwacha (MK700,000.00), and the fees are subject to revision from time to time.
We have already assessed and found that our merger does not have negative effects on competition in the relevant markets, should we still apply for authorization?
Competition assessment is a reserve for the Commission. You should still apply for authorization despite your observations because apart from competition effects, the Commission considers other factors before authorizing a merger.
If a company is from another country outside COMESA region, and is acquiring a controlling stake in a Malawian company, is the transaction notifiable before the Commission, and how will you treat it if notifiable?
The transaction is notifiable before the Commission but under negative clearance.
If a Malawian company is acquiring a controlling stake in a company domiciled in a foreign country, is the transaction notifiable before the Commission?
No, it is not notifiable.
How is the Commission’s order on mergers and acquisitions enforced?
The Commission or any person in whose favour or for whose benefit an order has been made may lodge a copy of the order, certified by the Commission or a person authorized by the Commission, with the Registrar of the High Court and the Registrar shall forthwith record the order as a judgement of the High Court.
We are not satisfied with a decision you made on our merger, what should we do?
Any person who is aggrieved by a finding of the Commission may, within fifteen days after the date of that finding, appeal to a Judge in Chambers.