In a landmark development for Egypt’s competition policy, Law No. 175/2022 introduced pre-merger control to the Egyptian Competition Law (ECL). This marks a significant milestone, bringing Egypt closer to global best practices in regulating economic concentrations, a concept that goes beyond traditional M&As. Although M&As play a pivotal role in driving foreign direct investment (FDI) and fostering economic growth, they can still have anti-competitive effects, particularly by creating dominant undertakings, raising barriers to market entry by new competitors, etc. For these reasons, the amendments primarily aim to address potential anti-competitive risks while promoting pro-competitive investments.
In this article, we break down the key features, implications, and challenges of this new regime, which entered into full force and effect on 1 June 2024, following the enactment of the Executive Regulations (“ER”) by Prime Ministerial Decree 1120 of 2024.
Table of content:
Why Pre-Merger Control?
Key Features of the New Regime
Procedural Framework: What Businesses Need to Know
Why Pre-Merger Control?
For years, Egypt lacked a dedicated pre-merger control system, relying instead on the substantive provisions of Law No. 3 of 2005 on the Protection of Competition and the Prohibition of Monopolistic Practices (the Egyptian Competition Law “ECL”) to oversee mergers. This reactive approach left gaps for several reasons: first, the Egyptian Competition Authority (“ECA”) lacked legal basis for its intervention ex-ante to control M&As. Additionally, the ECA could not block harmful transactions and was only allowed to accept the transaction upon binding parties to the transaction by commitments proposed by them and approved by the ECA. Moreover, lack of the obligation to notify a transaction resulted in several transactions escaping the ECA’s scrutiny including but not limited to “killer acquisitions”. Recognizing these shortcomings, the pre-merger control regime was introduced to oversee transactions before they materialize.
Drawing inspiration from the European Union’s competition framework, the ECA’s new regime aims to prevent anticompetitive market structures while ensuring efficiency gains and consumer welfare.
The new law also reflects the ECA’s proactive stance in addressing anticompetitive risks in mergers and acquisitions (M&As). This comes back to the fact that, by introducing pre-merger control, the ECA aims to prevent transactions that are likely to distort competition if they are consummated, bringing the framework closer to international standards.
However, the success of these amendments depends heavily on the clarity, transparency, and efficiency of their implementation — areas where challenges remain.
Key Features of the New Regime
1. Economic Concentration: Expanding the Scope
The law defines an “Economic Concentration” as any change in control or material influence over one or more entities. This includes:
- Acquisition of Control: Transactions involving the acquisition of the majority of voting rights or veto rights.
- Acquisition of Material Influence: Investments or minority stakes capable of shaping strategic or commercial decisions, particularly those facilitating coordination between
2. The Notification and Standstill Obligations
Transactions meeting the following financial thresholds must be notified to the ECA before their consummation:
- Local Turnover: Combined turnover exceeding EGP 900 million, with at least two parties generating EGP 200 million each in Egypt.
- Global Turnover: Worldwide turnover exceeding EGP 7.5 billion, with at least one-party generating EGP 200 million in Egypt.
Non-compliance with the notification process exposes the breaching undertakings to severe penalties.
Below threshold jurisdiction: The ECA reserves the right to review, ex officio, mergers that do not meet the above thresholds if they are likely to give rise to competition concerns.
3. Remedies to Address Competition Concerns
The ECA can impose:
Behavioral Remedies: Conditions on future conduct to maintain competitive markets.
Structural Remedies: Divestments or restrictions on certain activities.
Procedural Framework: What Businesses Need to Know
The new law outlines a two-phase review process:
- Phase One: A preliminary 30-day review, extendable by 15 days if commitments are offered.
- Phase Two: Referral of the transaction to a 60-day in-depth investigation for complex cases that raise competition concerns, with an additional 15-day extension if commitments are submitted.
These timelines ensure thorough yet timely assessments. However, ambiguities around “stop-the-clock” provisions and due process rights raise concerns about procedural clarity.
Challenges and Uncertainties
Despite its strengths, the new regime faces several challenges:
1. Overlapping Jurisdictions
The jurisdiction of the Financial Regulatory Authority (FRA) for the examination of transactions in the non-banking financial markets creates uncertainty for entities with mixed activities. For example, fintech companies offering both regulated and unregulated services may face jurisdictional ambiguity, as both the ECA and the FRA may appear to be competent.
2. Limited Transparency
The law remains silent on due process rights for parties undergoing merger reviews. Without guarantees of access to case files or clear timelines for decision-making, the regime risks being perceived as opaque and unpredictable. This could deter investment and undermine the law’s objective of fostering a competitive business environment.
3. Uncertainties for Economic Efficiencies Consideration
Requiring cabinet of minister’s approval for economic efficiency defenses introduces a political layer for approval for what is ought to be an economic evaluation, potentially delaying approvals and undermining business confidence.
Penalties: A Strict Deterrent
Non-compliance with the new requirements incurs heavy penalties, as follows:
Monetary Fines: 1-10% of the violating company’s turnover or a fixed range of EGP 30-500 million for:
- Failing to notify the ECA or FRA.
- Providing misleading information to one of these authorities.
These provisions aim to prevent both procedural and substantive forms of “gun jumping”, safeguarding market competition during and after the execution of transactions. Nevertheless, standstill may escape prohibition in certain circumstances.
Balancing Progress and Practicality
While the law marks a significant step forward in modernizing Egypt’s competition framework, its shortcomings cannot be overlooked. Key issues, such as overlapping jurisdictions, vague provisions on penalties, and limited transparency risk turning the regime into a bureaucratic hurdle rather than a business enabler.
Given the said complexities of the new regime, businesses should adopt a proactive approach by conducting the following:
Tailored Structuring: Structure joint ventures and investments to minimize risks of material influence or competition law violations under substantive provisions.
Pre-Transaction Assessment: Evaluate competition risks early to determine notification requirements.
Voluntary Notifications: For non-notifiable transactions with potential competition concerns, voluntary filings can provide legal certainty and preempt ECA intervention.
