Morocco’s new competition law is finally upcoming

Two months after the parliamentary elections of October 2016, all bets are off concerning the appointment of the new Competition Council, the last – but not least – outstanding point which determines the effective implementation of the new competition laws of June 2014. The time has come to take stock of the past two years and to review the core changes brought about by this long-awaited reform.

Morocco’s ambitious new competition laws are still struggling to be implemented effectively.

Given that all the implementing decrees have now been adopted, these new laws should by now have entered into force from a legal standpoint. In practice, however, we still await the appointment of the pivotal body of the new regime, the Competition Council, whose members must be officially nominated by the King (in the case of the President) and the head of government after consultation of the relevant bodies (in the case of the other members). Some say that these nominations are forthcoming, but with a new head of government to be elected following the recent parliamentary elections of October 2016, it is difficult to establish a precise timetable.

This transitional period of more than two years will have given rise to numerous and varied interpretations of the regulations, putting businesses in an uncomfortable position of uncertainty, particularly regarding their management of mergers and acquisitions. The efforts of the Moroccan authorities should nevertheless be recognised for adopting relatively efficient operational practices, given the circumstances, while waiting for the new regime to be fully implemented, both in relation to merger control, and anticompetitive practices.

What is going to change?

New thresholds

Apart from the 40 per cent market share threshold, which is maintained, two turnover thresholds are introduced by the new regulations:

• 1^st threshold: where the parties achieve a combined global turnover of more than 750 million dirhams;
• 2^nd threshold: where at least two of the parties achieve an individual turnover of more than 250 million dirhams in Morocco.

These turnover thresholds and the market share threshold are alternative. Therefore, only one of these thresholds must be met for the transaction to be subject to notification.

However, in accordance with article 1 of law n°104-12, the transaction must also be capable of having an effect on the market in Morocco. It is therefore arguable that transactions where parties have no presence or turnover in Morocco would not be subject to notification, even if they achieve the global threshold of 750 million dirhams.

On the other hand, the following should be subject to notification:

• transactions which meet the 2^nd (local) turnover threshold, regardless of the turnover achieved by the parties on a global level;
• transactions which meet the 1^st (global) threshold while not meeting the 2^nd (local) threshold, but where at least one of the parties is established in, or achieves turnover in Morocco.

Definition of the concept of concentration

Henceforth based on the definition adopted in many jurisdictions, the concept of concentration will cover mergers, acquisitions of control (sole or joint) and creation of “full function” joint ventures (i.e. those which perform on a lasting basis all the functions of an autonomous economic entity).

At this stage no guidelines have yet been published, but this will doubtless be among the first tasks of the Competition Council, whose current members have already expressed their desire to bring Moroccan competition law in line with international standards.

Procedure

Once nominated, the Competition Council will be competent to receive notifications and to give rulings on transactions according to the timetable set out by law n°104-12, with the exception of transactions involving businesses active in the telecommunications sector, which fall within the jurisdiction of the ANRT (l'Agence Nationale de Réglementation des Télécommunications) in accordance with decree n°2-16-347 of 31 May 2016. Moreover, in the case of transactions involving financial institutions (or equivalent accredited bodies), the Competition Council must refer to the Bank Al-Maghrib for its prior opinion before making any decision, in accordance with law n°113-12.

However, the head of government’s office will retain a “right of evocation”, permitting them to take jurisdiction over transactions on the grounds of public interest (other than the preservation of competition), notably industrial development, the international competitiveness of the businesses in question or the creation or maintenance of employment. Although little utilised in certain countries (for example France, where it has never been applied), this power should not be overlooked in the Moroccan regime, particularly in the case of sensitive transactions.

The notification files must follow the form set out by decree n°2-14-652 of 1^st December 2014, which is significantly more demanding than that required by the previous decree n°2-00-854.

The new regime does not contemplate a pre-notification procedure. However, it is to be hoped that the Competition Council will accept informal contact before notification, as the head of government’s office does from time to time.

What to do during the transitional period?

While waiting for the new regime to be fully implemented by the Competition Council, businesses which are party to a merger seem to have no choice but to notify their transactions to the head of government’s office under the authority of the previous law n°06-99.

There is good reason for reaching this conclusion: the head of government’s office does not have jurisdiction to receive notifications under the new regulations, but, given that it has not been nominated, the Competition Council cannot in practice investigate notification files on the basis of the new laws, leaving it with no choice but to remit to the head of government’s office those files which are submitted to it.

This uncertain situation equally raises questions about the assessment of notification thresholds as well as the notification procedure:

• Regarding the notification thresholds:

By virtue of the previous law n°06-99, only those transactions concerning businesses which together attain a market share of 40 per cent in Morocco are subject to notification. The assessment of the 40 per cent threshold remains a source of difficulty inasmuch as the head of government’s office considers that it can be met even if only one of the parties is active in Morocco, regardless of whether it is the target or the acquirer. This interpretation is questionable as it is difficult to see what would be the impact of such a transaction on the Moroccan market. In this case, though not possible to dispense completely with notification, the parties can in practice limit it to a succinct and simplified filing, which the head of government’s office will endeavour to deal with rapidly.

But what of the turnover thresholds contemplated by law n°104-12 during the transitional period? A number of businesses have already decided to notify their transactions on this basis as a precaution. These notifications have generally ended with a letter from the head of government’s office concluding that the transaction was not subject to notification due to not fulfilling the criteria fixed by law n°06-99, notably the 40 per cent market share threshold. Nevertheless, this prudent approach has the merit of providing legal certainty to the parties, which is of not insignificant value.

• Regarding the notification procedure:

In practice the notification files remain entrusted to the head of government’s office in the forms contemplated by law n°06-99 until the Competition Council is finally appointed.

An important question remains: what would happen if a transaction raised competition concerns? According to law n°06-99, the head of government’s office should refer to the Competition Council for its prior opinion, which is not possible in the absence of that body. Such a scenario does not seem to have yet arisen. This situation may encourage businesses to take advantage of the transitional period to notify sensitive transactions. However, it should not be forgotten that the head of government’s office has the power to prohibit a transaction, even if this power has never been used.

In the event that the Competition Council is nominated while a transaction is under investigation by the head of government’s office under the previous law, nothing is contemplated by the legislation. However, taking into account the pragmatic approach shown by the authorities, it is likely that the transaction would be assessed until its completion according to the conditions set out by law n°06-99.

What is going to change?

The new regime’s major innovation is without doubt the allocation to the Competition Council of extensive powers in terms of investigation, prosecution, and sanction of anticompetitive practices (agreements and abuses of dominant position). However, as with merger control, anticompetitive practices involving businesses active in the telecommunications sector fall within the jurisdiction of ANRT, and the Competition Council will be required to obtain the prior opinion of Bank Al-Maghrib before taking any action against financial institutions (or equivalent accredited bodies).

Like many competition authorities, the Competition Council will be able to conduct in-depth investigations into businesses and in this context, will have the right to seize documents (provided that it has been duly authorized by the King’s prosecutor having jurisdiction).

On the basis of its investigations, the Competition Council will have the ability to decide whether or not to bring proceedings, and to sanction the businesses concerned, after carrying out a procedure which permits them to make observations.

The Competition Council’s powers of sanction are particularly broad, and permit it to impose:

• interim measures which aim to remedy serious and immediate harm caused by the practices to the national economy, or the relevant sector, in the interests of consumers or complainant businesses;
• an administrative fine of up to 10 per cent of the highest consolidated turnover of the business concerned prior to the implementation of the practices (or 4 million dirhams if the author of the practices is a natural person). This fine can be doubled in the case of repeat offences within a 5 year period;
• injunctions, accompanied by penalties of up to 5 per cent of the average daily turnover for each day of non-compliance;
• publicity measures (i.e. the publication of the whole, or an extract of, the Competition Council’s decision).

The weight of the administrative fine in particular may encourage businesses to make use of the two cooperation procedures created by law n°104-12:

• the leniency procedure, by which a business can obtain total or partial immunity from the fine if it informs of its participation in an anticompetitive agreement and provides evidence to the Competition Council which enable it to establish the veracity of the practice and to identify the parties involved. In many jurisdictions this procedure has become one of the principal sources of case files for competition authorities;
• the “no contest” procedure, by which a business can obtain a reduction in the level of the fine (reducing the upper limit by half) if it does not contest the veracity of the practices described in the statement of objections notified to it.

What to do during the transitional period?

On the anticompetitive practices front, given that the Competition Council – and the important powers conferred on it – are currently dormant, the departments of the head of government’s office and the Minister of the Interior’s office remain the only authorities competent to carry out investigations.

Until now, proceedings have however remained limited in practice and have only given rise to warnings for the businesses involved, an option which the head of government’s office prefers to the opening of judicial proceedings, which would come under the jurisdiction of the non-specialised first instance tribunal.

As for the current Competition Council, pending the nomination of its next members, it continues to work on the antitrust cases which are submitted to it. Therefore, some thirty cases, partly investigated, seem to be waiting on the desk of the future council.

Unaccustomed to the important powers which the Competition Council will possess from its nomination, certain Moroccan businesses are already beginning training in order to be ready to respond to an investigation when the moment comes, to ensure they know their rights and the limits of investigators’ powers.

In short, all the elements are in place to make competition law a new, powerful, instrument of economic policy in Morocco. The only remaining step is to nominate the body which will put it into practice, and for businesses, to prepare themselves for its upcoming activities...