COMESA’s proposed regulations could lead to a dramatic increase in African competition enforcement

Proposed changes to the competition and consumer protection regulations for the Common Market for Eastern and Southern Africa (COMESA) – Africa’s largest market for trade and investment – could greatly expand the enforcement powers of COMESA’s Competition Commission (CCC, or the Commission) by the end of 2024. Looking ahead to these changes, the Chief Executive Officer of the Commission recently previewed that the new regulations would be a “springboard” for significantly increased continental competition enforcement, promising specifically to ramp up cartel enforcement and oversight of digital markets.

Businesses operating within any of the 21 member states that comprise COMESA should be aware of the potential impacts of these likely, forthcoming changes.

Background: COMESA and competition enforcement

COMESA is a regional economic and trade organization for Eastern and Southern Africa. It was established by a 1994 treaty that had the primary objectives of overcoming barriers faced by individual member states and facilitating prosperity throughout the regional community. COMESA’s member states have agreed to “co-operate in developing their natural and human resources for the good of all their people” by promoting integration across the region, which is home to over 640 million people, spreads across nearly two-thirds of the land area of Africa, has a GDP of $1 trillion, and does approximately $383 billion in annual export or import trade, with over $10 billion in US goods exported to COMESA in 2022.

Pursuant to the COMESA treaty, COMESA’s Council of Ministers originally promulgated competition regulations in 2004. These regulations create a legal framework that governs competition across the common market. Like all COMESA regulations, they are binding on member states, which must take steps to facilitate the objectives of the regulations and abstain from acting in ways that would contravene them.

The CCC was created in 2013 to enforce COMESA’s competition regulations. The CCC has authority to monitor and investigate anticompetitive practices, and it mediates disputes between member states that implicate competition concerns. Findings of investigations are reported to its Board of Commissioners, which has the authority within COMESA to decide cases and mandate remedies for any violations of the competition regulations.

Proposed new regulations

Prompted by challenges that the CCC has faced under the existing 2004 regulations, COMESA published and invited comment on a proposed draft of new competition and consumer protection regulations in January 2024. If enacted, these new regulations would replace the 2004 regulations.

The comment period closed on March 14, 2024. Following several intermediate procedural steps, the proposed revisions are expected to go to COMESA’s Council of Ministers for final approval in November or December, 2024.

If approved by the council, the new regulations would dramatically increase the CCC’s enforcement powers. These changes cover several areas of antitrust and competition concern. They include:

• Leniency program for cartel offenses: The proposed regulations, for the first time, would allow the CCC – which to date has never successfully prosecuted an antitrust cartel – to grant leniency to companies that self-report per se violations and cooperate with the CCC’s investigations. (The new regulations would also expand COMESA’s concept of per se violations – conduct condemned as inherently anticompetitive – to include not just price fixing, market allocation, and bid rigging, but also “absolute territorial protections,” “passive sales,” and “minimum resale price maintenance.”)

Leniency programs have been developed and used by competition authorities around the world for several decades, and they are widely regarded as one of the most effective tools for the investigation of cartel offenses.

• Raids: The new regulation would grant the CCC the authority to enter and search any physical premises, including private dwellings, where the Commission reasonably suspects that information or documents relevant to its investigations will be found. The CCC would be able to take, examine, or seal any business records – in whatever form – that it deems necessary for its investigation. Additionally, the CCC would be able to interrogate individual representatives of the company during the raid. The regulations notably would not impose on the CCC the requirement of first obtaining a judicial warrant before conducting a raid.

Similar to leniency, raids and premises searches have been used by other competition authorities as a key investigative tool for many years.

• Mergers: The draft regulations would require that reportable mergers obtain the CCC’s approval before they close – a marked move away from COMESA’s current regulations, which allow mergers to proceed before the Commission approves them. The proposed regulations also would allow the CCC to consider public interest factors including the effect on employment, ability of small and midsize enterprises to compete, the ability of the common market to compete with international markets, environmental protections, and sustainability considerations when evaluating mergers.


• Digital markets: Mergers involving digital markets would be subject to special treatment under the draft regulations. These include a transactional value threshold that accounts for considerations of data, accessibility and control, and network effects. The draft regulations also would prohibit the abuse of economic dependence by designated gatekeepers. While the new regulations do not define “gatekeeper,” these provisions appear to target digital platforms and mirror similar provisions in the EU.


• Abuse of dominance: The proposed regulation would create a presumption of market dominance where a company has a market share of 30 percent.


• Market inquiries: The new regulations would grant the CCC the power to conduct market inquiries, including the abilities to compel any person to furnish the CCC with information relevant to its inquiry, and to remedy structural issues that it identifies without first finding an infringement. Based on the outcome of these market inquiries, the CCC may also initiate investigations, make policy recommendations, or perform any other act within its power.


• Settlements: Under the proposed regulations, COMESA would be authorized to negotiate binding settlement agreements with parties.

Conclusion

COMESA’s proposed competition regulations may take effect as soon as December 2024, and could significantly change the enforcement risks faced by companies doing business in or with COMESA member states. Companies are encouraged to review their key business practices throughout the common market in light of these proposed changes, assess their potential impacts, and prepare now to make the changes necessary to remain compliant with all applicable competition regulations that may come into effect later this year.

For more information, please contact any of the authors of this article or your DLA Piper relationship attorney.