Mozambican merger control regulation takes effect

Article by Telmo Ferreira of CGA Associados – Mozambique

Resolution no. 37/2007, of 12 November approved Mozambique’s competition policy and provided for the creation of a competition authority, responsible for implementing competition law and the prevention, control and elimination of anti-competitive practices, particularly in the context of: (i) restrictive competition agreements (horizontal and vertical), (ii) mergers, and (iii) abuse of a dominant position.

After five years, Law no. 10/2013, of 11^th April was approved and established a formal competition regime (“Competition Law”).  The required regulation was approved by Decree no. 97/2014, 31^st December (“Regulation”). The Competition Law grants the powers of supervision, regulation and sanctioning to the competition regulatory authority, the Autoridade Reguladora da Concorrência (“ARC”), whose organic statute, regulating the respective legal regime, was approved by Decree no. 37/2014, of 1^st August.

In terms of Article 23 of the Competition Law, ARC supervises the merger of companies that consists of the acquisition of (i) all or part of the share capital; (ii) property, use or fruition rights over all or part of a company’s assets; and/or (iii) rights or execution of contracts that confer a predominant influence on the composition or resolutions of the board and other management bodies of a company.

Article 11 of the Regulations provides that mergers that meet one of the following conditions are subject to prior notification, by submitting a specific form to the ARC:

• the transaction results in the acquisition, creation or reinforcement of a share equal to or above 50% of the national market for the given goods or service;
• the transaction results in the acquisition, creation or reinforcement of a share equal to or above 30% and less than 50% of the national market for the given goods or service, and each of at least two of the merging undertakings achieved a turnover of at least 100 million Meticals (about USD 1.6 million at current exchange rates) in Mozambique in the preceding year;
• the combined turnover of all the merging undertakings in Mozambique in the preceding year is equal to or exceeds 900 million Meticals (about USD 14.4 million at current exchange rates).

According to Ministerial Diploma no. 79/2015, of 5^th of June, the following fees are applied by ARC (the current exchange rates is about USD1:0.016 Meticals):

ARC was established, with the appointment of the Chairman of the ARC board, Mr. Júlio João Pio, on 21^st April of 2020, but, due to delays in the appointment of the remaining board members, remained inoperative until December 2020.

In March 2021 and in terms of Resolution no. 01/2021 of the ARC, the forms of merger notification were approved. Since then, all notifiable mergers must be submitted to ARC.

In view of the fact that the approved merger notification fee of 5% of the turnover is manifestly higher than those practiced in other countries, the Confederation of Economic Associations (CTA), together with other interested parties including law firms, are interacting with ARC, as well as the Ministry of Industry and Commerce and the Ministry of Economy and Finance, in order to change the fee to avoid it constituting an obstacle to the normal functioning of the market as well as national and foreign investment in Mozambique as this could contribute to the diversion of merger activity to other jurisdictions.

As a result of the aforementioned interactions, a proposal for a Ministerial Diploma was prepared and is currently under consideration.  It should result, soon, in a change in the merger notification fee for companies to be more in line with fees paid in jurisdictions neighboring Mozambique and with legislation similar to Mozambique.