The Federal Competition and Consumer Protection Commission (the Commission), the Nigerian competition authority, has taken a number of measures to implement the Nigerian merger control regime. In particular, in late 2019, the Commission adopted thresholds as well as taking the relatively unusual step of implementing an expedited and simplified procedure for foreign-to-foreign mergers. While the impact of these measures must be monitored, they already raise material questions about key aspects of the Nigerian merger control regime, such as its potential extra-territorial reach and high filing fees.
The Nigerian merger control regime was introduced through the enactment of the Federal Competition and Consumer Protection Act (FCCPA) in January 2019. Prior to the adoption of the FCCPA, there was only a securities-based regulation of mergers and acquisitions in Nigeria under the Investment and Securities Act (ISA). The Commission and the Securities and Exchange Commission announced in May 2019 that the ISA regime would continue to apply for a transitional period until the new regime had been implemented through regulations and guidelines.
In September 2019, the Commission adopted thresholds for the new regime with the effect that transactions are notifiable if one of the following legs are satisfied:
- Combined leg - where the parties have combined turnover of NGN 1bn (approx. USD 2.8m) or more in Nigeria; or
- Target leg - where the target has turnover of NGN 500m (approx. USD 1.4m) or more in Nigeria.
The structure of the thresholds as alternatives immediately raises the question as to the potential extra-territoriality of the Nigerian merger control regime. The lack of a requirement for target presence in the combined leg means that it could, in principle, be triggered by a transaction involving an acquirer (whether local or international) with relatively small Nigerian operations even if the target has no presence in Nigeria. While the scope of the FCCPA appears to be limited to changes of control of a business or part of a business in Nigeria, any uncertainty in thresholds is undesirable.
The scope of the Nigerian merger control regime is not clarified by the Commission’s publication in November 2019 of the Guidelines on Simplified Process for Foreign-to-Foreign Mergers with Nigerian Component (the Guidelines). Although not defined in the Guidelines, the concept of a foreign-to-foreign merger is well-established in international competition law and deals with where the merging parties are not domiciled in the jurisdiction in question. While a foreign-to-foreign merger could trigger both legs of the thresholds, the Guidelines do not clarify the necessary jurisdictional nexus to trigger the combined leg.
The Guidelines are novel in African competition law with no other authority implementing a specific procedure for foreign-to-foreign mergers. While they are, in principle, welcome in seeking to reduce the burden for these mergers, the Guidelines are difficult to evaluate in isolation as the procedure for other mergers is yet to be published. That said, the Guidelines set out relatively routine requirements in relation to the information required in the merger filing as well as the necessary supporting documents.
There are however material questions arising from the following filing fees for foreign-to-foreign mergers:
- Combined leg - NGN 3m (approx. USD 8,400) or 0.1% of combined turnover (whichever is higher); and
- Target leg - NGN 2m (approx. USD 5,600).
At the outset, it is not yet clear how these filing fees compare to the fees for other mergers, which have not yet been announced. In any event, the lack of a cap for the ad valorem fees under the combined leg raises immediate questions. Parties only require a seemingly modest Nigerian turnover of NGN 3bn (approx. USD 8.4m) in order for the ad valorem fee to become applicable. It will need to be monitored whether the ad valorem fees will start approaching the level of fees that are so often the scorn of investors in other African jurisdictions.
The Guidelines also set out that the parties can pay an additional fee of NGN 5m (approx. USD 14,000) in order for the Commission to expedite its review and issue a decision within 15 business days. There is no mention of the envisaged timetable for the review of non-expedited foreign-to-foreign mergers. Equally, it is not clear whether all foreign-to-foreign mergers qualify for the expedited review period as conceivably even such mergers may still warrant a more in-depth review.
While the Commission’s apparent willingness to reduce the burden on merging parties is welcome, there are fundamental questions surrounding the Nigerian merger control regime that must be urgently addressed. The Commission will be mindful that other nascent merger control regimes in Africa have struggled to overcome initial controversy regarding extra-territoriality and high filing fees. In as much as regulations remain outstanding on domestic mergers, key questions on the steps taken so far (including the thresholds and Guidelines) must also be reconsidered.
The author would like to thank Michael Balie, Candidate Attorney, for his assistance with this blog.