More than seven years after the Mozambican Competition Act has entered into force, everything points to 2021 being the year in which the Competition Regulatory Authority (CRA) will become fully operational as the entity responsible for the enforcement of competition law in Mozambique.
Despite being formally established in 2014, for several years there were no major developments regarding the start of the CRA’s activity. An amendment made last February to its Statute, together with an indication that all members of the Board of Directors have already been appointed, the move to its own facilities and the recruitment of some staff, suggest that the Authority may already be fully operational. This has important practical implications for all companies active in Mozambique, national and foreign, considering the broad investigative and sanctioning powers that are attributed to the CRA.
In addition to its regulatory and supervisory powers, the CRA is responsible for investigating and deciding on sanctioning procedures in relation to practices which restrict competition. These include collusive conduct such as price-fixing or market-sharing cartels, distribution agreements with foreclosure effects, or abusive behaviour by dominant companies. All these behaviours subject the companies involved to high risks, and particularly to fines which can reach up to 5% of their annual turnover.
The CRA’s enforcement efforts are expected to gradually evolve and in the long-term may represent a significant part of its activity. In the immediate future, however, the area of competition law with the greatest practical relevance will most likely be that of merger control, as it only depends on the pace of economic activity and not on the CRA’s investigative efforts.
As in many other countries, Mozambican competition law states that concentrations of undertakings meeting the notification criteria are subject to mandatory notification to the CRA and cannot be implemented before clearance from the CRA has been obtained. The notification thresholds are relatively low (e.g., all concentrations in which the combined turnover of participating companies in Mozambique exceeds 900 million meticais annually are subject to mandatory filing), which means that an important part of corporate and M&A transactions with impact in Mozambique will be covered by the obligation of prior notification to the CRA.
It is uncertain whether the CRA will require the payment of the 5% turnover filing fee, as it would clearly be unconstitutional
Notifications must be submitted using a form, still to be published, and are also subject to payment of a filing fee. There is, however, a great deal of uncertainty as to the applicable fee since the publication of Ministerial Order no. 97/2014, pursuant to which the value of the merger filing fee is formally set at “5% of the turnover of the year preceding that of the request for the review of the transaction”.
This is certainly an error, for it is a value without any correspondence with the costs incurred by the CRA in the assessment of concentrations, being five times higher than the maximum amount of the fine applicable to the breach of the duty to submit prior notification (set at 1% of turnover), and equal to the maximum amount of the fine applicable to the most serious infringements of competition law (which cannot exceed 5%).
For example, a concentration where the combined turnover of the parties in Mozambique is USD 15 million will be subject to payment of a fee of USD 750,000; if the combined turnover of the parties is USD 50 million, the notification fee will be USD 2,5 million… These values have no parallel to those practiced in the countries closest to Mozambique, nor, as far as we know, in any other country in the world.
Indeed, in four southern African countries close to Mozambique with concentration control regimes (South Africa, Namibia, Kenya and Tanzania) filing fees, which also vary depending on the complexity of the operation, never exceed the equivalent of USD 45,000, and in Portugal, where competition legislation is very similar to that of Mozambique, the maximum notification rate never exceeds USD 30,000.
It is uncertain whether the CRA will require the payment of the 5% turnover filing fee, as it would clearly be unconstitutional. However, if Ministerial Order no. 97/2014 remains in force unaltered it may, in practice, have harmful effects for the CRA, as it may dissuade companies from submitting merger filings. For, when faced with a filing fee that is effectively five times the maximum amount of the fine that they would have to pay for breaching the notification duty, many of the companies that carry out concentrations with effect in Mozambique may choose not to notify the operations and, instead, risk paying the fine, or even may even decide to abandon the transaction.
With the entry into operation of the CRA, it is therefore essential to urgently change the notification fee to figures corresponding to the actual costs incurred by the CRA in the analysis of operations. It is also important that in any case these do not deviate significantly from the notification fees charged in jurisdictions which are closest to Mozambique from an economic or legal perspective, such as South Africa or Portugal.
Otherwise, many transactions may end up not being pursued at all, which would be very damaging, both for the CRA’s activity that is now starting and for the future development of the Mozambican economy.
