Kenya Revises Merger Notification

Kenya has enacted new Competition (General) Rules, 2019 (the Rules) which came into force on 6 December 2019.

The Rules introduce changes to the merger notification thresholds, requirements and filing fees and clarify certain procedural aspects of Kenya’s competition law regime relating to merger control, restrictive trade practices (block exemptions) and consumer welfare.

We have set out some of the key changes to merger control below and will in subsequent communication highlight the changes relating to other areas of competition regulation.

Summary of key changes

1. Value of assets (and not just turnover) to be considered in determining whether a transaction is notifiable and nature of filing required.
2. Merger filing thresholds have been revised.
3. Merger filing fees have been revised upwards in some cases.
4. Relatively small transactions falling below the thresholds are now excluded (no longer require any merger approval or exclusion).
5. Most transactions notified to the COMESA Competition Commission will not require simultaneous approval from the Competition Authority of Kenya (the CAK).

Value of assets (not just turnover) to be considered

The test on whether and what form of merger notification is required for a transaction is now based on the higher of the combined turnover or value of assets of the merging parties in Kenya. This is a departure from the previous requirements where the value of assets was only considered where the merging parties did not have any turnover in Kenya.

This change may lead to merger filings being required for transactions that would otherwise not have been caught based on turnover alone.

Block exemption of mergers

The following transactions will not require notification to the CAK:

1. Transactions which are wholly outside Kenya with no local nexus. However, it remains unclear whether the local nexus requires the parties to have subsidiaries or branches in Kenya or whether merely deriving turnover and/or having assets in Kenya with no physical presence will suffice.
2. Where the higher of the combined turnover or value of assets of the merging parties in Kenya is KES 500 million (approx. USD 5 million) or less. The block exemption for small transactions is long overdue and will provide significant respite for small investments in Kenya.
3. Where a COMESA merger filing has been made and at least two-thirds of the higher of the turnover or value of assets is not derived from Kenya. Parties are now required to only inform the CAK within fourteen days of submitting a COMESA merger filing. This is a welcome change as it removes the previous mandatory requirement for dual-notification of the same transaction to the CAK and COMESA and promotes the COMESA Competition Commission’s objective of being a one-stop-shop for regional competition matters.

Extension of merger notification forms

The merger notification forms have been amended with merging parties now required to provide additional information including:

1. details of previous merger filings made by the merging parties and their affiliates;
2. other entities where directors of the merging parties hold the positions of directors and/or shareholders; and
3. nationalities of the directors of the merging parties.

The Rules have been long overdue and will play a critical role in the interpretation and implementation of the Competition Act, 2010.

A client alert on changes to restrictive trade practices, consumer protection and other changes in the law will follow.