Egypt is in the final stages of amending its Competition Law, which will require transaction parties to obtain merger control clearance prior to closing. Once they come into effect, the amendments will overhaul the current post-closing notification regime, including with the introduction of new turnover thresholds, merger review timeline, focus on the notion of "change of control", and heightened gun-jumping fines.
Background
Egypt's current merger control regime has been in place since 2005, when the country adopted Law No. 3 of 2005 on the Protection of Competition and Prohibition of Monopolistic Practices (the "Competition Law"). While merger control laws in most jurisdictions authorize premerger review with suspensory effect, under Egypt's existing regime, parties are only required to notify certain transactions to the Egyptian Competition Authority ("ECA") within 30 days after closing.
The ECA has been advocating for years to transform this regime in order to provide it with jurisdiction to review transactions prior to closing.1 It was not until 2020 that the Egyptian Cabinet approved a draft legislation to be submitted to the Egyptian Parliament for consideration. On 6 December 2022, after extensive deliberation, Egypt's House of Representatives approved the legislation, which would introduce a number of amendments to the Competition Law (the "Amendments").2
However, the Amendments must be ratified by the President of Egypt and published in the Official Gazette before they come into force. The Egyptian government would then need to issue new implementing regulations to provide the details and mechanics for how the new rules are to operate. The ECA would likely also issue a new notification form along with new filing instructions and merger review guidelines. It is currently unclear whether the new regime will apply to ongoing transactions when it comes into force.
We highlight below some of the key features of the proposed Amendments to Egypt's Competition Law.
Narrower Economic Concentration Definition
The Amendments will require pre-closing clearance for any transaction that constitutes an "Economic Concentration" between parties that exceed the turnover thresholds (more on that below). As defined, an Economic Concentration is any "change of control or material influence" over one or several entities," as a result of any merger, acquisition or joint venture.3
As in the EU, only joint ventures that conduct their business in an "independent and permanent manner" (i.e., full-function joint ventures) would qualify as Economic Concentrations.4 Further, the Amendments exclude from the definition of Economic Concentration the temporary acquisition of securities (to be resold within one year) and any internal restructuring within the same corporate group.
Therefore, under the new regime, similarly to the EU, an ECA filing will be required only for transactions that would result in a change of control or material influence or create joint control over a full-function target business. This includes any change in the ability to influence the strategic decisions or business objectives of such target entity. This will be a significant change from the existing regime where an acquisition of any interests or rights, regardless of control, could trigger an ECA filing requirement.
Higher Turnover Thresholds
The new notification thresholds will require significantly higher turnover amounts than under the current regime. Currently, a transaction would trigger an ECA notification if the parties' combined turnover in Egypt last year exceeded EGP 100 million (approximately US$ 4 million).5 Given the low threshold, many global transactions with no nexus to Egypt frequently trigger a filing requirement in Egypt, even when there is no actual or potential nexus to Egypt.
The Amendments will increase that threshold amount and add new conditions, which should make it less likely for transactions to have to file in Egypt unless the parties have significant business there. Under the new rules,6 a transaction will trigger a filing requirement if:
(i) the combined turnover or assets of all parties in Egypt exceeds 900 million Egyptian Pounds (approx. US$ 36 million), and the turnover of at least two parties exceeds 200 million Egyptian Pounds (approx. US$ 8 million) each in Egypt during the last fiscal year; or
(ii) the combined turnover or assets of all parties worldwide exceeds 7.5 billion Egyptian Pounds (approx. US$ 300 million), and the turnover in Egypt of at least one party exceeds 200 million Egyptian Pounds (approx. US$ 8 million) during the last fiscal year.
While the first threshold requires at least two parties to have turnover in Egypt, thereby making it more likely for the transaction to have a potential local nexus, under the second threshold it is still possible to trigger a filing even when only one of the parties has turnover in Egypt. It remains to be seen whether the ECA will also apply a separate local nexus test in addition to the threshold triggers to exclude foreign-to-foreign transactions based on lack of local effects, or will look only to the turnover thresholds as the means to determine whether there is a potential local nexus.
Defined Merger Review Process and Timeline
The Amendments include a new timeline for the ECA's merger review process, which will include two phases, as well as the introduction of a filing fee, which shall not exceed EGP 100,000 (approx. US$ 4,000).7
Upon receiving the complete filing, the ECA will have 30 working days, subject to a potential extension by 15 working days, to decide whether the proposed transaction "would result in limiting competition, restricting it, or harming it."8 The elements to evaluate this standard will be provided in the forthcoming implementing regulations. If the transaction raises anticompetitive concerns, the ECA can refer the file to a second review phase, which can last up to 60 working days (also subject to a potential extension by another 15 working days).9
Following the ECA's review, the ECA can either approve the Economic Concentration, reject it, or approve it subject to certain remedies, which can be structural or behavioral measures. In the event the ECA rejects the Economic Concentration, it is possible to appeal the decision within 30 days.
Higher Gun Jumping Fines
The Amendments will significantly increase the potential liability for companies that fail to comply with the new regime. Failure to notify a reportable transaction would be subject to a fine between 1% and 10% of the value of parties' turnover or assets (whichever is highest), or a fixed amount between EGP 30 million to 500 million (approx. US$ 1.2 million to US$ 20.3 million) if the value of turnover or assets cannot be calculated.10 The fines would apply also for failure to comply with the ECA's remedial measures, or if false information is provided.
Conclusion
The long-anticipated Amendments to Egypt's Competition Law will bring significant changes to the country's merger control regime. While it remains to be seen how the ECA will apply some of the changes in practice, the Amendments show promising signs that there is a concerted effort to streamline the process with other jurisdictions like the EU, provide more transparency, and try to avoid delays. A potential promising result of the Amendments is that foreign to foreign transaction with no nexus to Egypt may not be notifiable and the ECA can focus on transactions that may have a potential effect on competition on the Egyptian market.
1 See White & Case Client Alert: "Egypt Considers Premerger Notification" (August 2017); White & Case Client Alert: "Egypt's Competition Authority Seeks Active Merger Control" (September 2018); White & Case Client Alert: "Egypt Pursues Innovative Alternatives to Merger Control" (August 2019); White & Case Client Alert: "Egyptian Cabinet Approves Its First Pre-Merger Notification Regime" (December 2020).
2 This article is based on press coverage of the proposed text of the Amendments, which is subject to confirmation after the government publishes the official version.
3 See Competition Law Amendments, Article 2 bis (g). The Amendments exclude from its jurisdiction entities that fall under the supervision of the Financial Regulatory Authority (the "FRA"), but the FRA must seek the opinion of the ECA prior to granting its own approval for Economic Concentrations. See Competition Law Amendments, Article 19 bis (e). The ECA then has 30 days to analyze the file submitted by the FRA and to provide its decision. Competition Law Amendments, Article 19 bis (f).
4 See Competition Law Amendments, Article 2 bis (g).
5 Foreign exchange rates provided in this article are approximate and calculated based on the rates of 8 December 2022.
6 See Competition Law Amendments, Article 19 bis.;
7 See Competition Law Amendments, Articles 18, 19 bis (c-d).
8 See Competition Law Amendments, Article 19 bis (c).
9 See Competition Law Amendments, Article 19 bis (d).
10 See Competition Law Amendments, Article 22 bis (d).
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