PROTECTION OF THIRD PARTIES’ INTERESTS IN MERGERS AND ACQUISITIONS IN TANZANIA
A merger means an acquisition of shares, a business or other assets, whether inside or outside Tanzania, resulting in the change of control of a business, part of a business or an asset of a business in Tanzania. This definition is provided for under Section 2 of the Fair Competition Act, 2003.
Mergers and acquisitions have significant impact on the economy. This is because certain mergers may prevent, restrict and distort competition in the market. That being the case, in most economies mergers are regulated and controlled in order to ensure a level-playing field in competition and the economy at large.
1.1 The Law and Enforcing Authority
In Tanzania mergers are regulated by the Fair Competition Commission (‘the FCC’). The laws applicable include the Fair Competition Act, 2003, Fair Competition Commission Procedure Guidelines 2013 and the Fair Competition (Threshold for the Notification of a Merger) Order, 2006.
The Fair Competition (Threshold for the Notification of a Merger) Order, 2006 sets out the threshold amount providing that a merger has to be notified to the FCC if the combined assets of the entities involved in the transaction (Merger, that is) is above the prescribed threshold amount of TZS 800,000,000. Additionally, a merger is notifiable if it has a resultant effect of change of control by the merging parties.
2.0 Protection of Third Parties’ interests
Once the FCC is notified of an intended merger; it examines the same whether there is a likely effect of preventing, distorting and restricting competition in the market. Once the preliminary investigation is made by the FCC and there is no likely harm to competition; then a public notice is issued inviting third parties to make written submissions to the FCC on how they are likely to be affected by the proposed merger.
For purposes of merger determination third parties include:
iv. Members of the administrative or management bodies of the firms concerned or the recognized representatives of their employees; and
v. Consumer associations, where the proposed merger concerns products or services used by the final consumer.
Third parties, through their submissions, must provide reasons for or against the proposed merger. The reasons are based on the likely effect resulting from the proposed merger on the third parties’ business, interests and rights. The FCC, in reaching a decision to approve or disapprove a propose merger, considers among other reasons the likely effect on third parties depicted from their submissions.
2.1 Written submissions and oral Submissions
The FCC may require third parties to make oral submissions in addition to their written submissions. During oral submissions the FCC may request parties to make clarification based on their written submissions. They are also required to provide more information on their written submissions and any other information requested by the FCC. This information is expected to guide the FCC before reaching a decision to approve or disapprove the merger.
It is important to note that interested third parties are at liberty to appear for oral submissions when requested by the FCC. They may choose not to appear before the Commission for making oral submissions. The Commission will therefore consider only written submissions from interested third parties.
In their submissions, third parties have to elaborate the pre-merger situation and post – merger situation of the merging parties and third parties. They should show how they will be affected in the post merger position. Finally, third parties propose remedies for approval or disapproval of the proposed merger. Some of the remedies include divestiture and approval of a major subject to conditions which will enhance continued competition in the market.
2.2 Decision on the Merger Application
When the FCC completes investigation and consideration on the merger application, it may
a. Approve the merger; or
b. Approve the merger subject to conditions; or
c. Declare the merger prohibited.
The FCC’s decision will be based on the investigation made as to whether the intended merger is likely to harm competition in the market. The FCC will also make consideration on how the intended merger will have an effect on third parties. In so doing, the FCC ensures that the interests of third parties are protected.
In addition the FCC may approve the merger with conditions so as to ensure there is no harm to competition between the merging parties and interested third parties. Moreover, the FCC may prohibit the merger in the event there is a likely effect on competition in the market.
2.3 Right of Appeal against the decision of the Commission
Any person, including interested third parties, has the right to appeal to the Fair Competition Tribunal once they are not satisfied with the decision of the FCC to approve or disapprove the proposed merger. This has to be done within 28 days from the date of the FCC’s decision. The procedure for appeal is laid down under the Fair Competition Tribunal Rules, 2012.
In any merger application, the FCC ensures that rights and interests of third parties are wholly protected as well as the effect of the merger in the market. The invitation of third parties to make submissions to the FCC (both oral and written) is a clear manifestation of the FCC’s enhancement of protection of the third parties’ rights and interests against the proposed merger.
It is upon third parties to exercise their right once called upon by the FCC to make submission on the proposed merger. Ordinarily, a public notice issued by the FCC sets a timeline within which third parties have to file their submissions for or against the proposed merger. Failure to file the submissions on time renders the same incompetent for being filed out of time.
In the same vein, third parties may appeal to the Fair Competition Tribunal once they are dissatisfied with the decision of the FCC on the merger. This is a clear manifestation that the law protects interests and rights of third parties in mergers and acquisitions.
This publication has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this publication, and, to the extent permitted by law, Breakthrough Attorneys, its members, employees and agents do not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it.