The Egyptian Competition Authority (ECA) serves as the main protector of fair market practices and economic efficiency in this key market. Established under Law No. 3 of 2005, the ECA is the regulatory body responsible for enforcing competition law in the country. The ECA is tasked with investigating anti-competitive behavior, reviewing merger and acquisition proposals, and ensuring that businesses comply with the legal framework designed to prevent monopolies and anti-competitive practices.
The ECA’s pivotal role goes beyond mere market oversight. The authority further shapes business transactions, acquisitions, and market competition throughout Egypt through its evolving merger control mechanisms and regulatory powers. Recent changes in merger control regulations have prompted companies to adapt their approaches in the Egyptian market.
To navigate these changes effectively, stakeholders must have a clear understanding of these regulatory requirements. This piece explores the ECA’s regulatory framework, merger control procedures, and their effect on business operations.
Evolution of ECA's Regulatory Framework
Egypt’s competition landscape has gone through a significant transformation. The country shifted from protectionism in the 1950s to an open-door policy in the late 1960s. This development created the foundation for modern competition regulations in Egypt.
Years later, the Law on Protecting Competition and Preventing Monopolistic Practices promulgated by Law No. 3 of 2005 (the “ECL”) became the cornerstone of Egypt’s competition framework in 2005. This legislation regulates economic activities and curbs anti-competitive practices. The introduction of the law came at a critical time, as the country was transitioning toward a free-market economy. Previously, during decades of centrally planned economic policies, the public sector accounted for over 70% of GDP.
Historical Key Legislative Changes and Amendments
The ECL has undergone several significant amendments that have strengthened its regulatory framework:
- 2010 Amendment: Introduced ex-post merger notification regime for transactions exceeding EGP 100,000,000 in turnover.
- 2014 Amendment: Implemented leniency programs for cartel cases, enacted mandatory state consultation, limited exemptions for public utilities, expanded ECA’s powers to review state measures impacting competition, and introduced new provisions for economic efficiency-based exemptions.
- 2022 Amendment: Established pre-merger control system requiring pre-implementation notification of mergers and acquisitions exceeding certain financial thresholds.
In addition, the 2014 constitutional amendments contributed to strengthening the ECL regime by emphasizing economic prosperity through eco-friendly development and social justice.
Transition From Post-closing to Pre-merger Control
December 2022 marked the most transformative change in ECL. Egypt amended its Competition Law to establish a mandatory and suspensory pre-merger control regime. This fundamental change requires companies to obtain merger clearance before implementing transactions if they meet certain financial thresholds. These thresholds, outlined below, include specific criteria turnover and assets both within Egypt and internationally.
The new regime enhances the ECA’s oversight of economic concentrations meeting these thresholds. Taking effect from June 1, 2024, this transition marks a significant development from the previous post-closing notification system. As a result, Egypt’s competition framework now lines up more closely with international standards.
New Merger Control Powers and Procedures
Economic Concentration | Thresholds and Requirements
The ECA’s mandatory notification system now operates under two distinct thresholds to determine whether an economic concentration requires approval:
- Domestic Threshold: Transactions must be notified if, in the previous fiscal year, the combined Egyptian turnover or asset value of all involved parties exceeded EGP 900 million. Additionally, at least two parties must each have generated an Egyptian turnover above EGP 200 million.
- International Threshold: For global transactions, notification is required if the combined worldwide turnover or asset value of all parties surpassed EGP 7.5 billion during the last fiscal year. Furthermore, at least one party must have recorded an Egyptian turnover exceeding EGP 200 million.
Reviews and Decision-making Process
The ECA’s evaluation of economic concentrations follows a two-phase review process. The initial Phase 1 consists of 30-working-day review period, which may be extended by an additional 15 days. If competition concerns are identified, Phase 2 is initiated, extending the review by 60 working days with the possibility of a further 15-day extension.
As part of the new merger control regime, once a transaction is notified, the parties cannot implement the transaction until the ECA has reviewed it. If the ECA does not decide within the prescribed timelines, the merger is automatically considered approved, allowing the transaction to proceed.
Enforcement Mechanisms and Penalties
Substantial penalties are in place for non-compliance with the ECL rules. The ECA may impose fines for violations, including “gun-jumping” (implementing a transaction before clearance), failure to notify, or submitting false information. Specifically, parties that fail to notify or comply with remedies can face fines ranging from 1% to 10% of their turnover or asset value. If turnover calculations are not feasible, penalties are set between EGP 30 million to EGP 500 million.
It is also important to note that the ECA retains the authority to intervene in non-notifiable transactions within one year of their implementation. While it cannot reverse the transaction, it can impose behavioral commitments to address competition concerns.
Impact on Business Operations
Egypt’s new merger control regime requires businesses to make major operational changes when they combine economic interests in the Egyptian market.
Compliance Requirements for Different Sectors
Each sector is subject to its own specific regulatory requirements. Transactions in the financial sector must obtain clearance from both the ECA and the Financial Regulatory Authority (FRA) prior to signing contracts. Similarly, telecom transactions require additional approval from the National Telecommunications Regulatory Authority (NTRA), while banking deals necessitate approval from the Central Bank of Egypt.
Transaction Planning and Implementation Strategies
The new regime requires a comprehensive planning approach to ensure compliance:
- Pre-notification Consultation: Companies have the option to engage with the ECA to address concerns before formally submitting their documents.
- Documentation Requirements: Parties involved in the transaction must submit:
- Corporate documents
- Financial statements
- Board resolutions
- Power of attorney (with specific authentication requirements)
Transaction fees are calculated based on the combined turnover, capped at a maximum of EGP 100,000.
Risk Mitigation Approaches
To reduce regulatory risks, companies can adopt the following strategies:
- Structural Planning: Design joint ventures and investments to minimize material influence risks.
- Early Assessment: Conduct an early evaluation of competition risks to determine whether a transaction requires notification.
- Voluntary Notifications: For the transactions below the thresholds, consider voluntary filings if there are potential competition concerns.
