From 1st of June 2024, the new regime on pre-merger clearance is applicable in Egypt. The pre-merger clearance regime was introduced in December 2022 through Law 175/2022 amending the Egyptian Competition law (3/2005). It first had been suspended due to a lack of implementing rules. On 4 April 2024, the new Executive Regulations to the Competition law were issued, providing that the pre-merger control regime is applicable from June of this year.
Prime Minister Decree 1120/2024
On 4 April 2024, Egypt activated the pre-merger control regime with the issuance of Prime Minister Decree No. 1120 of 2024 (Executive Regulations). This comes after the amendment of the Competition Law No. 3/2005 in December 2022 through Law 175/2022, which for the first time introduced a regime of substantive merger control in Egypt. In the past, there was no pre-merger clearance by the Egyptian Competition Authority (ECA), with the law providing only for a post-merger notification obligation. The issuance of the Executive Regulations was long awaited. The new regime is applied from 1 June 2024.
Economic Concentrations
As per the new Executive Regulations, the concept of “economic concentration” encompasses transactions that significantly alter the control dynamics within companies, including:
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- Mergers and Acquisitions (M&A): The combination of two or more entities into one, or the acquisition of one entity by another, resulting in a significant change in control.
- Full-Function Joint Ventures: Establishing new, independent business entities by two or more parties that perform all the functions of an autonomous economic entity.
- Changes of Control: Any changes, direct or indirect, that lead to a significant influence or control over an entity. This includes acquiring voting rights, shares, or any agreements that grant decisive influence over the company’s management decisions.
Markets and Market Dominance
The Executive Regulations further provide guidance on delineating markets and defining a market dominant position. Markets are determined both in terms of products and geographically. Market dominance is evaluated on the basis of several factors, including the market share, financial resources, access to supply or market outlets, and the presence of barriers impeding the entry for competitors.
Thresholds
Law 175/2022 determined the following thresholds for merger clearance:
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- If each party’s annual turnover in Egypt is at least EGP 200 million (approx. EUR 3 million), with a combined turnover or accumulated assets in Egypt exceeding EGP 900 million (approx. EUR 17 million); or
- If at least one party has an annual turnover or accumulated assets in Egypt of a minimum of EGP 200 million (approx. EUR 3 million), with a global combined turnover or assets exceeding EGP 7.5 billion (approx. 145 million).
The Executive Regulation now make these thresholds operable and provide guidance on how the thresholds are calculated. The basis are the consolidated financial statements of the parties relating to the business year preceding the merger. In case of an acquisition, the seller’s turnover and assets are disregarded. Any amounts in foreign currencies are converted into EGP based on the official exchange rate of the Egyptian Central Bank.
Territorial Application
The merger control regime applies to both domestic and foreign transactions provided the thresholds are met.
Filing Procedures and Fees
Entities engaged in transactions meeting the specified thresholds must file a notification with the ECA, providing a comprehensive file that includes detailed information about the transaction and its anticipated effects on competition. A structured template facilitates this submission process, ensuring that the information is consistently presented. The filing fees are proportionate to the transaction’s scale, ranging from 80,000 EGP to 100,000 EGP (approx. EUR 2,000), designed to be equitable and not to deter businesses from compliance.
The ECA initially has 30 working days to review a transaction, which can be extended by another 15 days. If no decision is made within these periods, it is automatically deemed approved. Nonetheless, the ECA can opt for a second review lasting up to 60 days, with a possible 15-day extension. Decisions on economic concentrations can be appealed within 30 days of notification.
The respective time periods only commence once the complete notification file has been submitted.
Date of Implementation
The Executive Regulations provide that the new pre-merger control regime shall enter into force on 1 June 2024. All transactions that are not completed and are still pending completion by this date will fall under the new regime and may not be consummated without ECA clearance. This gives parties a certain time frame to consummate pending transactions.
If you would like more information about this topic then please contact us.
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