Tarek Badawy
Tarek Badawy
Partner
Salma Abdelaziz
Salma Abdelaziz
Senior Associate

The Egyptian Competition Authority (the “ECA”) has traditionally been known for its aggressive stance towards historically tolerated anti- competitive acts. To live up to its slogan, “a stronger economy…for a better life”, it recently began shifting its focus to awareness-raising (in parallel with enforcement), a much-needed step in a market plagued by anti-competitive behavior. This is evidenced by the ECA’s introduction of its 2021-2025 Strategy (the “Strategy”) in 2021.

The Strategy was advanced by the Chairman of the ECA during his participation in the third edition of the Egypt Economic Summit, where he pointed out that one of the main objectives of ‘Egypt’s Vision 2030’ is to have a strong and competitive economy. The Strategy was naturally linked to Egypt’s Vision 2030, along with the sustainable development goals, which include (i) raising awareness of the culture of competition and fighting anti- competitive practices; (ii) enhancing the efficiency of the national economy; (iii) removing obstacles to entry and growth of markets by securing a free competitive climate; and (iv) boosting investor confidence and protecting consumers.

Action under the Strategy

Wasting no time, the ECA put its Strategy into action and commenced a relentless enforcement campaign, while increasing its involvement in training and education. In the past year alone, the ECA engaged several activities, including:

1. Investigating 360+ cases of suspected breaches spanning various sectors and markets, with a focus on strategic and consumer service.

Three examples stand out:

Manufacturing sector: In September 2023, the ECA initiated criminal proceedings by referring fourteen (14) aluminum companies for prosecution for their alleged involvement in price fixing. The ECA’s investigation revealed that several companies collectively conspired to raise and fix the price of aluminum in Egypt in breach of Article 6(a) of Law No. 3 of 2005 on the Protection of Competition and the Prohibition of Monopolistic Practices (the “Competition Act”).

(a) Education sector: 2023 saw increased scrutiny of the education sector, whereby the ECA found multiple violations in the way schools imposed certain uniform and supply stores on consumers, leading the ECA to rule that (i) parents may not be forced to buy school uniforms or supplies from a specific outlet; and (ii) all schools must announce the specifications of their uniforms on a regular basis so that parents and industry employees may make economically suitable This comes against the background of the ECA’s findings that various educational institutions had abused their dominant position in the market by limiting the manufacturing and distribution of school uniforms and restricting their sale through exclusive outlets, which foreclosed the market to competing companies in breach of Article 8(a) and (d) of the Competition Act. In relation to schoolbooks, the ECA found that several schools had agreed amongst themselves to “miscalculate” the foreign exchange rate against the Egyptian pound (by deviating from the rates set by the Egyptian Central Bank), which naturally led to an increase in the prices of schoolbooks, increasing the financial burden on consumers. This was found to be a breach of the provisions against price fixing (not to mention banking legislation).

(b) Energy sector: As part of the framework of the ECA implementing the Strategy to combat collusive operations by persons competing in contracts concluded with government agencies, in January 2023 the ECA found companies conspiring among themselves against the electricity distribution companies through the exchange of confidential information and collusion in tenders. Unfortunately, these violations led to an unjustified increase in financial burdens on electricity distribution In response to these harmful practices, the ECA established a specialized department under the name “Combat Collusion in Contractual Agreements”. The department examines all tenders and auctions that take place within Egypt. In addition, the ECA engaged in training for government employees and parties involved in government tenders to ensure compliance with competition law and avoid the commission of offences. Additionally, to educate companies, the ECA published a guide on the ‘know- how’ of complying with the provisions of the Competition Act on its website.

2. Hosting a conference on ‘impartial competition’ during which the ECA advised on 21 bills and draft regulations to ensure the alignment of economic laws with the competition policies.

3. Increasing its regional footprint by hosting African Dialogue Events for Heads of Competition Agencies, the second conference of the Arab Competition Network, and signed memoranda of understanding and cooperation agreements with the COMESA Competition Commission and a number of Arab and African competition regulators

4. Contributing to the education of university students through active participation; in cooperation with other Arab competition authorities, the ECA held the first model of the ‘Arab Competition Authoritie’s’ for law and economics students in Arab universities.

5. Pushing for the amendment of the Competition Act to introduce a pre-merger control regime, which finally took place in December 2022.

6. Issuing two draft guides on ‘relevant market’ and ‘dominant position’ and presenting them to the public to initiate dialogue and encourage stakeholders to comment on them.

Reality Check

Despite the ECA’s salutary efforts, the new amendments to the Competition Act failed to address the treatment of large scale cross-border transactions that affect competition in more than one jurisdiction and which can trigger various questions, including: (i) Whether notifications must be filed in each jurisdiction; (ii) How to ensure harmony between the jurisdictions that follow pre- and post-merger notification regimes; and (iii) Whether there is a need to notify in more than one COMESA jurisdiction, given the introduction of a “one-stop-shop” merger control regime by the COMESA Competition Regulations.

Moreover, until the executive regulations are issued, the amendments to the Competition Act introducing the ‘pre-merger control regime’ will remain nothing but colorful ink on paper, leaving businesses in limbo, especially given the complete overhaul of the notification system (e.g., from post- to pre- notification, difference in notification thresholds depending on the scope of the intended transaction, and the current absence of an updated notification form that reflects these changes).

To remedy this unorthodox situation, the ECA encourages parties to engage in pre-notification discussions with its Mergers and Acquisitions team, in order to assess the effects of the transaction on the market even in the case of non-notifiable economic concentrations. While these discussions have no legal implications, they are intended to familiarize businesses with the process in anticipation of the imminent implementation of the regulations.

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