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Mergers and Acquisitions under ECOWAS Competition Law

Competition law and policy have increasingly influenced the structure of the industry with the aim of achieving industry structures that catalyze competitiveness. A monopoly, duopoly or highly concentrated oligopoly are not desirable industry structures. Therefore, through application of competition law, it is expected that this would contribute to the free market economy by ensuring and provoking open and fair markets e.g., by, inter alia, questioning & scrutinizing market agreements, and reviewing commercial & administrative barriers to regional and domestic trade. The underlying theory of harm is that markets are susceptible to be captured by greedy business entrepreneurs to the detriment of other possible beneficiaries hence the need for a system to “monitor” and “control” anti-competitive agreements in the market.

ECOWAS Competition Law

The Economic Community for West African States (ECOWAS) adopted in 2008 the Supplementary Act A/SA.2/06/08 on the Establishment, and Function of the Regional Competition Authority for ECOWAS. Article 3[b] thereof mandates the competition authority to carry out on its own initiative or at the request of private persons or government officials from the Member States or of the Community Court of Justice, such investigations in relation to the conduct of business in the Common Market as will enable it to determine whether any enterprise is engaging in business practices in contravention of the Supplementary Act adopting the Common Competition Rules.

The competition concerns

Article 4 of Supplementary Act A/SA.1/12/08 “Adopting Community Competition Rules and the Modalities of their Application within ECOWAS [“Competition Rules”], sums up the competition concerns. It provides that the Supplementary Act (SA) applies to agreements, practices, mergers, and distortions caused by Member States which are likely to have an effect on trade within ECOWAS. The Competition Rules under the SA concern notable acts, which directly affect regional trade and investment flows and/or conduct that may not be eliminated other than within the framework of regional cooperation.

Mergers and Acquisitions

Inevitably, one of the key roles for competition law and policy is the regulation of mergers and acquisitions that are implemented in commerce and industry.  The word “merger” is ordinarily generically used in many jurisdictions to refer to all forms of amalgamations which include takeovers, acquisitions, joint ventures or other forms of control.

Article 1[a] of the said SA’s Competition Rules, define ‘acquire’ as: in relation to:

  • goods: means to obtain by way of gift, purchase or exchange, lease, hire or hire purchase;
  • services: means to accept benefit from or to perform the service;
  • intellectual property rights: means to obtain by license, assignment or government grant;

Interestingly, Article 3 of the Supplementary Act A/SA.2/06/08 on the Establishment, Function of the Regional Competition Authority for ECOWAS does not have a provision on the functions of the ERCA to include review of mergers but this may be captured under “agreements”.

Mergers in a Single Economic Unit

From best practice, a merger occurs between independent enterprises and not those that fall within the same shareholding structures [e.g, a holding company and its subsidiaries or between “interconnected” enterprises – these are a Single Economic Unit [or single economic enterprise]

Article 1[2] and [3] of the Competition Rules provide some insight that any two companies are to be treated as interconnected companies if one of them is an affiliate of the other or both are subsidiaries of the same company; and a group of interconnected companies shall be treated as a single economic unit. It goes further to state that for purposes of the SA, a company is a subsidiary of another company if it is controlled by that other company. Mergers occurring within a single economic unit are not a competition concern.

Consideration of Control of another Enterprise

Mergers leading to control of another enterprise, a product or market are often a concern for competition authorities.  Article 1[1][i] of the Competition Rules, provide that “control” in relation to a company means the power of a physical or moral person to secure by means of

  • The holding of shares or the possession of voting power in relation to that company; or
  • Any other power conferred by the company’s constituent documents or other documents regulating the company;
  • The effective exercise of power of decision within the company; so that the company’s business is conducted in accordance with that individual’s wishes.

Merger Assessment Guidelines

Merger guidelines are under preparation by the ECOWAS Competition Authority [ERCA]. These will expand on the merger assessment criteria as well as the mod