CAK relaxed rules almost led to security monopoly

Kenya allowed companies with less than a third of their revenues to apply for merger approval at the regional antitrust body to reduce the number of applications firms are required to make during the Coronavirus pandemic.

The Competition Authority of Kenya (CAK) said only companies with more than two thirds of their turnover and assets should file merger applications locally.

CAK said it has been notified by Common Market for Eastern and Southern Africa (Comesa) Competition Commission of four merger cases of companies with only minimal presence in the country.

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“The rules now prescribe a single notification regime whereby if at least two thirds of the merging parties combined turnover or assets is generated or located in Kenya approval only needs to be sought from CAK,” said CAK director-general Wang’ombe Kariuki.

It was, however, during this period that the two largest security companies almost merged to create a dominant player in the Kenya guard services industry.

GardaWorld Security Corporation, which owns Kenya Kazi (KK) security, made a play for G4S which could have made the combined player the biggest organized security firm in Kenya prompting CAK to protest.

The Canadian security firm had made a £3.68bn (Sh562 billion) takeover offer for the UK outsourcing group, G4S, where Bill Gates bought a stake back in 2013.

The offer was rejected and US Allied Universal Security Services is now set to take over the company and has notified Comesa antitrust watchdog of its intentions to buy the firm.

Kenya had sought to block the bid by GardaWorld for the acquisition of G4S in its territory notifying Comesa that the proposed transaction is likely to lead to concentration in the security sector and potentially lead to acquisition of, or enhancement of a dominant position.

CAK told Comesa that this will substantially lessen competition in the sector in the country leading to loss of welfare to the people of Kenya.

“Therefore, in line with the principal of subsidiarity, the commission considered that the specific likely competition and public interest concerns would be more effectively addressed by the CAK. Nevertheless, for the avoidance of doubt, the parties shall not be required to pay additional notification fees to CAK,” Comesa said.

Cornavirus pandemic has created a space that allow companies to consolidate and compete while also surviving the tough economic environment.

The Kenyan antitrust body has also cut merger fees for small businesses by exempting companies with a combined turnover of less than Sh500,000 from notifying the authority when marrying their businesses.

The amendment is meant to reduce the costs of mergers and acquisition, enabling companies to find quick strategies to combine their businesses.

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