By Dr Goodluck Temu

Act No. 13 of 2024 introduced substantial amendments to the Fair Competition Act of 2003. After 21 years of existence, a degree of rejuvenation was undoubtedly necessary. One significant area affected by these amendments is the law governing mergers in Tanzania. This brief article highlights the key changes.

1. Definition of Merger Control Parameters

Section 11(1) of the 2003 Act provided that: “A merger is prohibited if it creates or strengthens a position of dominance in a market.”

The provision focused on two key aspects: (i) a merger that creates a position of dominance (i.e., where no dominance previously existed), and (ii) a merger that strengthens an already existing dominant position.

The 2024 amendments have replaced the phrase “creates or strengthens a position of dominance” with “substantially lessens competition.” This marks a significant shift from a dominance-based approach to an effects-based approach. Dominance, in itself, is no longer the primary concern. Instead, the focus is now on whether a merger substantially lessens competition.

Under this new framework, the Fair Competition Commission (FCC) is no longer required to assess mergers solely based on post-merger market shares. Instead, the Commission must evaluate the actual competitive effects of the merger. If a merger is found to substantially lessen competition, it will be prohibited.

2. Mergers and Public Interest Considerations

It is common for mergers to generate significant public benefits, even if they result in reduced competition. Prior to the 2024 amendments, exemptions to merger prohibitions were provided under Section 13 of the Act. The amendments have now introduced Section 11A, which expressly sets out the circumstances under which exemptions may be granted.

Under Section 11A(1), an exemption may be granted if:

“A merger is likely to result in substantial benefits to the public that outweigh any detriment caused by the proposed merger in preventing, restraining, or distorting competition.”

This test is subjective, meaning that each merger must be reviewed on a case-by-case basis to determine whether the public benefits outweigh the competitive harm.

However, the Commission does not have absolute discretion in making this determination. The law now provides clear guidelines for assessing public interest exemptions. Under Section 11A(2), the FCC must consider the following factors:

  1. The extent to which the proposed merger will contribute to greater efficiency in resource allocation;
  2. The extent to which the proposed merger is likely to promote technical or economic progress, facilitate the transfer of skills, or otherwise improve the production and distribution of goods or services in Mainland Tanzania;
  3. The extent to which the target firm is facing actual or imminent financial failure, and whether the proposed merger offers the least anti-competitive alternative for utilizing the business assets;
  4. The extent to which the proposed merger will boost exports from Mainland Tanzania or increase employment opportunities;
  5. The extent to which the proposed merger will impact a specific industrial sector or region;
  6. The extent to which the proposed merger may affect the competitiveness of national industries in regional and international markets; and
  7. The extent to which the proposed merger may impact the ability of small businesses to compete effectively.

3. Conclusion

These amendments introduce greater flexibility in the interpretation of merger regulations and the application of exemptions for public interest benefits. This is particularly significant for Tanzania as a developing economy, where opportunities for growth should not be stifled by rigid legal and regulatory frameworks. By adopting a more effects-based approach to merger control and incorporating public interest considerations, the amended law strikes a balance between maintaining competition and fostering economic development.


                  Disclaimer

                  This article is not intended to replace professional advice. No one should rely exclusively on the information provided as a substitute for seeking professional advice. The writers or the Firm are not liable for any use of the information contained herein and do not guarantee the accuracy of its contents from the date of publication to the date of usage. For contact: temu@africorp.co.tz or info@africorp.co.tz

                  AfriCorp Attorneys

                  Phone Number: +255 22 211 0660
                  Amverton Office Park, Plot No 64 Lugalo Street
                  Dar es Salaam, Tanzania