Companies looking to expand through acquisitions have won a reprieve from a regional competition watchdog that had sought to impose a $500,000 fee for approving mergers.

The Competition Commission of the Common Market for East and Southern Africa Secretariat confirmed this week that it had revised its rules so that the fee would only apply to mergers that affect at least two of the 19 markets and for firms with a combined turnover of $5 million.

That means mergers involving small companies with no cross-border operations will only be required to pay the fee charged by national competition authorities such as the Competition Authority of Kenya, which had sought a legal opinion on the suitability of the Comesa charges for fear that they would hinder consolidation in the region.

Under the new guidelines, any party interested in merging with or acquiring another within Comesa will now be required to notify the commission of the transaction four months prior to the completion of the deal so as to allow the commission to assess the planned merger or acquisition.

However, if the Commission is not able to complete the scrutiny within the time frame, it can seek an extension of up to 30 days.

“All levels of businesses should be included in the new guidelines, not just the big companies with a high turnover,” East African Business Council chairman Andrew Luzze said, adding that it will be difficult for countries that do not have national competition authorities to approve mergers for small or medium companies.

In East Africa, only Kenya and Tanzania have national competition authorities. In Rwanda, Uganda and Burundi, merger processes are approved by their trade ministries.

The EAC, meanwhile, is in the process of constituting its regional competition authority, expected to be set up next year.

READ: EAC law to regulate trade coming in Dec

“The new guidelines do not reflect the EAC guidelines being drawn up; Comesa should consider putting in place a consultation framework to address this,” said Mr Luzze, adding, “what we expect here is total confusion for the businesses since they will have the EAC Competition Authority then the Comesa commission and their respective national authorities.”

According to the Competition Authority of Kenya director-general Wang’ombe Kariuki, although the release of the new guidelines is a positive move as it clarifies which companies are required to pay the merger fee, the $500,000 charged is very high and the $5 million turnover threshold is very low.

“Mergers should be pegged on cost analysis and not as a means of revenue generation,” said Mr Kariuki, adding that the timelines should be brought down to about 60 days and not the four months given.

“We shall advocate a review of the guidelines so that the merger fee is lowered to $10,000 as per international standards,” he added.

He said that the authority will also request a revision of the $5 million threshold to go up and that the commission set up a information framework where views can be exchanged among the national competition authorities.

The CAK does not charge for application for M&As and it only takes 60 days to finalise such transactions.

The CAK was last year given the go-ahead by Attorney-General Githu Muigai to clear local mergers and acquisitions so as to protect local companies as opposed to the Comesa commission’s move to do so in all its member states.

Vimal Shah, chairman of the Kenya Private Sector Alliance, said that although the process being put in place by Comesa for mergers was well and good, the new guidelines constitute a tariff barrier and will hamper mergers across the region.

“The merger cost is way too high for businesses; this will kill mergers in the region as there will be no incentive,” said Mr Shah, adding that the fee should be a flat rate of $5,000 for merger approval.

Willard Mwemba, head of mergers and acquisitions at the Comesa Competition Commission, however said that with the new guidelines, companies with a cross-border presence are now expected to become more efficient, by reducing production or distribution costs.

“Increasing efficiency and innovation can lead to more competitive markets, a reduction in consumer prices and higher quality goods,” he said, adding, “The new merger guidelines will help to free up the resources of the Commission to investigate and sanction only those mergers having a significant impact on the market as well as investigating anti-competitive behaviour, such as cartels and abuse by dominant firms.”

He said the purpose of the guidelines is to create a framework to be applied by the commission when determining whether a merger is likely to substantially prevent or lessen competition.

“The adoption of the Merger Assessment Guidelines marks the culmination of a period of close engagement and consultation with the private sector and member state authorities on the region’s merger control regime,” said Mr Mwemba.

Catherine Masinde, head for East and Southern Africa trade and competitiveness at the World Bank Group, said Comesa would benefit from reviewing the remaining challenges such as the merger notification thresholds and the seemingly high notification fees.

The World Bank and the commission, she said, have begun revising the principal regulations to further strengthen the merger control regime.