Merger means the acquisition of shares, business or other assets whether inside or outside the Community resulting in the change of control of a business, part of a business or an asset of a business in the community in any manner and includes a take-over. While some mergers can bring benefits to the economy, some combinations reduce competition and risk harming customers.
Through combining the activities of different companies that may allow them to develop new products more efficiently or to reduce production or distribution costs, consumers may benefit from higher-quality goods or services. However, some mergers may reduce competition in a market, notably by creating or strengthening a dominant player. This is likely to harm consumers through higher prices, reduced choice or less innovation. But mergers that do not impede competition in the community are welcome.
The objective of examining proposed mergers is to prevent harmful effects on competition in the Community. According to section 11 of the Act, all mergers that have cross-border effect are notifiable - brought to the attention of the Authority. Mergers with cross border effect are those where both the acquiring firm and the target firm or either the acquiring firm or target firm operate in two or more EAC Partner States. The notification should be made upon the conclusion of the agreement in respect of the merger, by the undertaking acquiring control through the merger.
The notification should be made by the undertaking acquiring control through a merger or acquisition.
The undertaking completing the notification is responsible for the correct and accurate information it provides.
Any notifiable merger or acquisition carried out without notifying the Authority shall have no legal effect and shall be void.
Mergers procedures
What needs to be notified
It is mandatory for all merger and acquisition transactions that affect at least two EAC Partner States and meet the thresholds prescribed by Council under subsection (4) of the Act to be notified to the Authority. Such mergers shall not be implemented either before its notification or until it has been declared compatible with the common market pursuant to an Authority decision.
Approval or Rejection of a proposed merger
In assessing proposed mergers, the Authority considers whether they can be expected to substantially lessen competition in the relevant market within the community. If they do not, they are approved unconditionally. If they do, and no commitments suitable to remove the impediment are proposed by the merging parties, problematic mergers must be prohibited to protect businesses and consumers from higher prices or a more limited choice of goods or services. Proposed mergers may be prohibited, for example, if the merging parties are major competitors or if the merger would otherwise significantly weaken effective competition in the market, in particular by creating or strengthening a dominant player.
Approvals of a proposed mergers with conditions
Most problematic mergers are nevertheless approved, with specific conditions. In the course of the merger review process, merging parties have the opportunity to propose and negotiate solutions with the Authority. Therefore, even if the Authority finds that a proposed merger could distort competition, the parties may commit to acting to try to correct this likely effect. They may commit, for example, to sell part of the combined business or to license technology to another market player. If the Authority is satisfied that the commitments would maintain or restore competition in the market, thereby protecting consumer interests, it gives conditional approval for the merger to go ahead. It then monitors whether the merging companies fulfill their commitments and may intervene if they do not.
Revocation of approved mergers
The Authority may revoke any approval if: the approval was based on incorrect, false or misleading information for which a party to the merger is responsible; the approval was obtained by deceit; or the undertaking concerned has breached an obligation attached to the approval.
