Egypt is getting closer to adopting a new merger control regime that would transform the system from a post-closing to a pre-closing filing regime. The Egyptian Council of Ministers has approved a draft proposal to amend Egypt's antitrust legislation accordingly. If enacted, the amendments would likely have significant implications for transactions involving parties with business in Egypt.
On November 25, 2020, the Egyptian Council of Ministers announced that it has approved a draft proposal to amend the Law on Protection of Competition and Prohibition of Monopolistic Practices No. 3 of 2005 ("Competition Law").1 Two years after the Egyptian Competition Authority (the "ECA") presented its draft proposal for amending the Competition Law (see Egypt's Competition Authority Seeks Active Merger Control), the Egyptian Prime Minister has presented the proposal to the Council of Ministers and secured the Council’s approval to present the draft to the Egyptian Parliament.
"Economic Concentration" Filing Condition. The proposed amendments to Egypt's Competition Law have not been published yet, so the details remain unclear. However, press statements by the Egyptian Government indicate that filing requirements would continue to apply to transactions that qualify as an "Economic Concentration"—defined as any full or partial merger, acquisition of shares or assets, or joint venture that results in a change of control of an entity or material influence over such entity.2 As such, non-controlling minority acquisitions would be excluded from this filing requirement.
Local Egyptian Nexus. The amendments will likely include a local-nexus test that limits the filing requirements to Economic Concentrations that could have a potential competitive effect in Egypt, but public statements to date have not disclosed any details as to what this test would look like.3 The ECA previously expanded its jurisdictions in 2018 to include (post-closing) merger review of foreign-to-foreign transactions where the parties had a combined turnover in Egypt exceeding EGP 100 million (approximately USD 6.3 million)4—a very modest amount given the size of the Egyptian market. The relatively low, single-trigger threshold resulted in a spike of filing obligations for many global transactions that had limited or no connection to Egypt, including where the acquired business or relevant industry was not active in Egypt at all. The ECA has not announced whether it will continue to apply the 2018 threshold under the new amendments, or revise the threshold to limit the number of reportable transactions.
Authority to Block Transactions. Under the new regime, the ECA will get to assess each reportable transaction prior to closing to decide whether to clear it or not. The ECA will have the authority to block a transaction that may result in "limiting, restricting, or harming competition," including (i) establishing or reinforcing a dominant position in the market, or (ii) facilitating any violation of the Competition Law.5 In undertaking its assessment, the ECA will consider any defenses submitted by the parties, including whether economic efficiencies resulting from the transaction are likely to outweigh any potential negative impacts.6
Timing. The Egyptian Government has not announced when the draft amendments will be made public or scheduled for discussion by the Parliament. Once presented to Parliament, legislative negotiations might also lead to additional revisions of the draft, which could further prolong its adoption into law. Accordingly, the proposed amendments are not expected to come into effect for at least several months, and for that reason it is unlikely that the amendments will impact ongoing or imminent transactions.
Although the details and scope of the draft amendments are not yet public, the Egyptian Government’s approval of a pre-merger notification requirement is already a significant step in reforming Egypt’s merger control regime, particularly after a two-year pause that suggested it might not happen. It remains to be seen whether the draft will also amend the turnover thresholds in a way that could lead to fewer filings for transactions that clearly do not have any meaningful impact on the Egyptian market.
White & Case will continue to monitor the progress of these amendments closely and publish updates as more details become available. In the meantime, parties contemplating future transactions that may involve businesses with revenues in Egypt should consult with antitrust counsel to ensure compliance with the latest merger control requirements.
1 Press Release, Egyptian Council of Ministers Meeting No. 119 (November 25, 2020) (in Arabic), available at: https://cabinet.gov.eg/Arabic/MediaCenter/Pages/default.aspx ("Council Press Release").
2 Press Release, Egyptian Competition Authority (November 25, 2020) (in Arabic), available at: http://www.eca.org.eg/ECA/News/List.aspx ("ECA Press Release").
3 See, e.g., Council Press Release; ECA Press Release.
4 Based on a foreign currency exchange rate of EGP 1.0 = USD .006 as of December 5, 2020. See White & Case Client Alert, Egypt's Competition Authority Seeks Active Merger Control (September 27, 2018).
5 See ECA Press Release.
6 See ECA Press Release.
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