Morocco: Merger Control

The Moroccan merger control review is enforced by the Competition Council, who previously had a consultative role and has since 2014 been granted decision making power, and is set out by law No 104-12 of 30 June 2014 (Dahir No. 1-14-116) on free pricing and competition (Law No 104-12) and its enforcement decree No. 2-14-652 of 1 December 2014 (the Decree), and in law No. 20-13 relating to the Competition Council of 30 June 2014 (Dahir No. 1-14-117) and its enforcement decree No. 2-15-109 of 4 June 2015.

However, these laws have only been enforced since the end of December 2018 with the nomination of the members of the Council.

The main applicable rules are detailed by the Council in its 2022 guide relating to the implementation of compliance programs by undertakings and professional associations (the Compliance Program).

Under the current regime, all transactions that constitute a concentration within the meaning of Law No 104-12 and meet one of three alternative thresholds (a worldwide turnover threshold, a national turnover threshold, and a market share threshold) must be notified to the Competition Council.

When a filing is submitted, the Council has 60 clear days (initial review period or Phase I) to clear the transaction or to open an extensive review period (Phase II) of 90 clear days during which the Council must assess if the transaction is likely to infringe competition.

Closing is prohibited before clearance.

Two drafts laws are currently being examined to amend both Law No 104-12 (the New Draft Law) and Law No 20-13. The New Draft Law provides for several modifications including a modification of the notification thresholds.

Notification is compulsory according to Article 12 of Law N°104-12 which provides that all mergers must be notified to the Competition Council by the companies and parties concerned, before they are implemented.

The suspensive effect of the filing prevents the parties from completing or closing the contemplated transaction prior to the authorization of the Competition Council. No specific rules are provided by Moroccan law concerning public bids.

However, in the event of a specifically motivated need, the notifying parties may ask for an exemption to the suspensive effect of the filing. Article 14 Law N°104-12 provides that a waiver may be granted by the Competition Council allowing the parties to complete all or part of the transaction without waiting for the authorization decision of the Competition Council (for example, in May 2022, the Competition Council has accepted the request submitted by the company Le Cema Bois de l’Atlas S.A. for such exemption). To our knowledge, such an exemption has rarely been granted and only in situations of acquisitions of companies in serious financial difficulties (see also decisions of the Competition Council of April 2022 relating to the exemption granted to CGA CGM and of 31 August 2020 relating to the exemption granted to Delfingen Industries SA).

According to Article 11 of Law N°104-12, a concentration occurs: (i) when a two or more previously independent undertakings merge, (ii) when one or more persons, already controlling at least one undertaking, acquire, directly or indirectly, whether by way of equity participation or purchase of assets, contract or any other means, the control of the whole or part of one or more undertakings and, (iii) when one or more undertakings acquire, directly or indirectly, whether by way of equity participation or purchase of assets, contract or any other means, control of the whole or part of one or more undertakings.

Law N°104-12 further defines control as resulting from rights, contracts or any other means that confer, either separately or in combination, having regard to the considerations of fact or law involved, the possibility to exercise a decisive influence on the activity of an undertaking and, notably: (i) ownership rights or rights of use over all or parts of the assets of an undertaking; or (ii) rights or contracts that confer decisive influence on the composition, voting or decisions of the organs of an undertaking.

According to the Council, an economic concentration is therefore any external growth operation of a company that leads to a lasting change in its control and can take several forms:

• acquisition of shares in the share capital, goodwill or assets or business activity;
• merger;
• creation of a joint venture;
• change from joint to sole control or vice versa;
• signature of certain contracts that confer a decisive influence over a company (on the composition, deliberations or decisions of the management bodies of a company).

Intra-group transactions do not fall within the scope of Moroccan merger control (see for example the decision of the Competition Council dated 10 January 2022 relating to the acquisition by Daimler Truck Holding AG of companies and assets owned by Daimler AG).

Minority interests are caught by the merger control rules (see for example decision No. 72/Q/19 of 24 July 2019 of the Competition Council relating to the acquisition by Carlyle Group of 35% of the shares and voting rights of Compañía Española de Petróleos SAU). There is no percentage shareholding below which it can be assumed that control will not arise.

The Competition Council considers that sole control may arise from a minority shareholding when specific rights are attached to the latter, in particular when:

• preference shares with special rights attached give the minority shareholder the ability to determine the business strategy of the target company, such as the power to appoint more than half of the members of the board of directors or supervisory board;
• a minority shareholder has the right to manage the company’s business and determine its business policy on the basis of the organizational structure.

In special circumstances, decisive influence can result from de facto control, for example when very large long-term supply contracts or credits, combined with structural links, give the company a decisive influence.

A concentration must be notified to the Competition Council when one of the three following alternative conditions is fulfilled:

• the combined aggregate worldwide pre-tax turnover of all the undertakings or groups of natural or legal persons involved in the concentration is equal to or greater than 750 million dirhams;
• the aggregate Moroccan-wide pre-tax turnover of at least two of the undertakings or groups of natural or legal persons involved in the concentration is equal to or greater than 250 million dirhams; or
• the undertakings which are parties to the concentration, or which are the subject of the concentration, or which are economically linked to them, have generated altogether, during the previous calendar year, more than 40% of the sales, purchases or other transactions on a national market of identical or substitutable goods, products or services, or on a substantial part of such market.

Those thresholds are not periodically updated. However, the New Draft Law, which is currently being examined in Morocco, intends to modify these notification thresholds.

The Decree provides that different turnover thresholds may be established for certain specific sectors or geographic areas by the Chief of Government or the government authority upon delegation of the latter. However, no such specific thresholds have been established as of today.

Neither the Moroccan law, nor the Compliance Program of the Competition Council define the parties to the concentration nor provide precision as to the method of calculation of the thresholds. However, in our experience:

• the seller is, in any case, not taken into account;
• the turnover thresholds refer to all revenues and not only those related to the relevant product market;
• the turnovers and market shares are assessed at group level.

It should be added that Article 1 of Law No 104-12 also indicates that this Law shall apply to legal persons, whether they have or not their headquarters or establishments in Morocco, whose transactions or behaviours have as their object or might have an effect on competition on the Moroccan market or a substantial part of it.

Therefore, the Competition Council, in its annual report for 2019, has stated that it is not mandatory to notify an international merger which only meets the worldwide turnover threshold of 750 million dirhams where (i) the parties have no physical presence or activity in Morocco or (ii) the foreign parties’ subsidiaries or activities in Morocco are not concerned by the transaction because they are not active on the same market or on an upstream, downstream or related market and thus the transaction does not have any impact on the Moroccan territory through potential horizontal, vertical and/or conglomerate effects.

For example, in Decision nº61/Q/19 of 19 June 2019 concerning the acquisition of joint control of the French group “Indigo” by the French companies Prévoyance Dialogue du Crédit Agricole (PREDICA) and Mirova, the Competition Council considered that the transaction did not fall within the scope of merger control rules since the parties concerned had no presence on the Moroccan market and did not generate any revenues in Morocco.

Neither the Law N°104-12 nor its Decree nor the Compliance Program of the Competition Council provide a method for the valuation of turnovers or market shares for the purposes of jurisdictional thresholds. As a result, some uncertainties remain with respect to the assessment of the thresholds.

In our understanding, the period over which the turnover thresholds are to be assessed is the last closed fiscal year, unless exceptional events have occurred during the year of the notified transaction.

The texts do not provide either any rule for the geographical allocation of the turnover. In practice, the main position of the European Commission, according to which the location of turnover is determined by the location of the customer, could be retained.

For the assessment of the market shares, it follows from the Law N°104-12 and the Compliance Program of the Competition Council that the 40% threshold has to be realized on the national market of products or services which are identical or which are regarded as interchangeable or substitutable by the consumer, by reason of the products’ characteristics, their prices and their intended use, or on a substantial part of such national market.

If the market in question has not been previously considered by the Competition Council, the parties can contact the instruction services and conduct pre-notification discussions to verify their bona fide determination of their market shares.

No specific determination method is provided by the Law, the Decree or the Compliance Program of the Competition Council regarding the exchange rate to be used for converting turnover thresholds.

In practice, the exchange rate of the date of filing can be retained.

Merger control rules apply to the creation of a joint venture, performing on a long-lasting basis all the functions of an autonomous economic entity, i.e. a so-called full-function joint venture.

To be considered “full function” and therefore notifiable, a joint venture must meet the following conditions:

• it must have sufficient resources to operate independently in a market;
• it must have activities beyond a specific function for the parent companies; It must not be dependent on sales to or purchases from its parent companies and must therefore have access to the market upstream or downstream of the one on which it operates.

If the joint venture is not “full function”, it could be reviewed under the prohibition on anticompetitive agreements.

Despite the lack of any rule or guideline provided by Moroccan texts relating to the assessment of the jurisdictional thresholds, we understand that these thresholds should be assessed at the level of the groups of the parents’ companies and should take into account the joint venture if it is already existing.

Concerning the application of the “local effect test” provided by Article 1 of Law No 104-12 to the creation of new joint ventures, the Moroccan Competition Council has already considered that the creation of a joint venture was not subject to the notification obligation insofar as the transaction would take place outside the geographical borders of the Kingdom of Morocco and would have no effect on competition on the Moroccan market (see for example, its decision 102/D/19 on the economic concentration relating to the creation of a joint venture between Saudi Aramco Development Company and Korea Shipbuilding & Offshore Engineerie Co., Ltd).

Therefore:

• if the parent companies meet the thresholds and the new joint-venture is intended to be present or active in Morocco, the transaction should fall under the scope of the Moroccan merger control;
• if the thresholds are met but that the joint-venture is not expected to have any presence or activity on the Moroccan territory, a more in-depth analysis would be necessary.

No provision of the Law, its Decree or the Compliance program of the Competition Council addresses the issue of separate notification and review of inter-related transactions.

However, the New Draft Law envisages the possibility for two or more transactions that take place within a period of two years between the same persons or undertakings and result in a change of control to be regarded as a single concentration as of the date of the last transaction.

No specific thresholds are provided with respect to “foreign to foreign” transactions, which have to be notified when they meet one of the three alternative thresholds and if the transaction has a local effect on the Moroccan market (see answer to question 6 above).

Not applicable.

The substantive test applied by the Competition Council to clear a merger consists in assessing whether the transaction is likely to infringe competition, in particular by creating or strengthening a dominant position or a purchasing power that places suppliers in a situation of economic dependence.

To conduct this test, the Competition Council makes the following assessments:

• the assessment of the possible horizontal effects of a concentration, i.e whether a transaction would lead to the creation or strengthening of a dominant position on the market, enabling the parties to act independently of their competitors, customers and consumers. According to the established position of the Competition Council, such an effect is not likely to occur where the parties’ activities do not overlap;
• the assessment of vertical effects, which consists of examining whether the vertical integration of the parties is likely to lead to foreclosure by impeding or preventing access to sources of supply or markets;
• the assessment of conglomerate effects, which consists of examining whether the concentration would lead to an expansion and a diversification of the merging parties’ products lines and brands which would increase their market power and enable them to impede competition through practices such as tying or bundled rebates;
• the assessment of coordinated effects which examines whether the merging parties, will, after the transaction, be able to coordinate their behaviour on the market and whether the transaction will, as a result, lead to the creation or the strengthening of a collective dominant position.

To conduct these assessments, the Competition Council must define the relevant products and services market and the relevant geographic market to determine, in particular, the parties’ market shares after the transaction and that of their competitors, the barriers to entry etc.

The Competition Council assesses, during Phase II of the merger review, whether the transaction brings sufficient contribution to economic progress to compensate for the harm to competition it may cause.

In this context, the economic goals of the transaction, including the expected benefits for the parties and for the Moroccan economic situation (competitiveness of the industry concerned by the Transaction, consumers’ welfare, job situation etc.) are taken into consideration.

Moreover, the Chief of Government may, after the Phase II decision of the Council, evoke the case and rule on the transaction for reasons of general interest other than the maintenance of competition compensating for the harm to competition caused by the transaction. These reasons of general interest, are, in particular, industrial development, the competitiveness of the companies in question with respect to international competition or the creation or maintenance of employment.

The issue of ancillary restraints is not addressed by Moroccan texts and still need to be clarified by the Council’s future decisional practice or future guidelines.

There is no statutory deadline for notification of the transaction.

The notification of the transaction to the Competition Council can take place as soon as the parties concerned are able to present a project that is sufficiently mature to allow the examination of the case and, in particular when they have concluded an agreement in principle, signed a letter of intent or as soon as a public offer is announced.

It is not standard practice to engage in pre-notification discussions, which are not set out by Moroccan law and regulation, although it is always possible to exchange with the instruction services prior to the filing.

In Phase I, the Moroccan Competition Council must rule on the operation within 60 clear days in principle from the reception of the complete notification file.

A meeting is held with the case handler after the notification file is submitted. The official acknowledgement of receipt of the notification file, which starts the 60-day review period, is issued at the end of this meeting or after the additional information and documents requested have been provided.

The opening of a Phase II, in case of serious doubt of infringement to competition, adds, in principle, a 90 clear days period during which the Competition Council conducts an in-depth review and should determine whether the transaction is likely to infringe competition.

In Phase I, the 60-day period is extended by 20 clear days if commitments are proposed by the parties and may be suspended for up to 20 clear days at the request of the parties in case of particular need (such as finalisation of commitments).

Moreover, within 20 clear days of receiving a copy of the decision or being informed of it by the Competition Council, the Chief of Government may ask the Council to open a Phase II.

In Phase II, if the notifying parties offer commitments less than 30 clear days before the end of the 90-day deadline, the deadline will then expire 30 clear days after the reception of the commitments.

Moreover, the 90-day deadline may be suspended for up to 30 clear days at the parties’ request in case of particular necessity, notably to finalize their commitments.

This time limit may also be suspended at the initiative of the Competition Council when the notifying parties have failed to inform it of a new fact as soon as it arises or to communicate to it, in whole or in part, the information requested within the time limit set, or when third parties have failed to provide it the information requested for reasons attributable to the notifying parties. In such a case, the time limit resumes its course as soon as the cause that justified its suspension disappears.

Finally, upon receiving a copy of the decision or being informed of it by the Competition Council, the Chief of Government may within 30 clear days exert its evocation power and issue a decision on the operation for reasons of public interests.

The Law and its Decree do not provide for an accelerate procedure.

In practice, in the absence of competition concerns (in particular, in the absence of overlap between the parties’ activities), it is usually possible to obtain an early clearance, before the expiry of Phase I.

Moreover, although the suspensive effect of the filing obliges the parties to wait for the authorization of the Competition Council to implement the contemplated merger, the Council may grant the parties an exemption to this suspensive effect and allow them to complete all or part of the transaction without waiting for an authorization decision in the case of duly motivated need (article 14 of Law No 104-12). To our knowledge, this exemption has, so far, only been granted in rare situations, in the context notably of the acquisition of companies in financial distress.

The party responsible for submitting the filing is the party which acquire control over all or part of another undertaking or, in the case of a merger or the creation of a joint venture, all concerned parties who shall then submit a joint notification (article 13 of Law No 104-12).

The filing form shall include a description of the transaction, a presentation of the parties and their activities, a definition of the relevant product and geographic market(s) as well as a competitive analysis including the parties and their main competitors ‘market shares. More information is required in case of “affected” markets.

Additional information might be requested by the case handler during the meeting that follows the submission of the notification file and before the delivery of the official acknowledgement of receipt.

No “short form” filing can be used for the moment but this possibility might be introduced by the New Draft Law.

The following supporting documents must be filed with the Competition Council:

• Copy of the draft instruments subject to filing (such as the share purchase agreement etc.);
• Minutes of the deliberative bodies relating to the transaction;
• Power of attorney from the party in charge of the filing;
• Latest financial statements and annual report, in any, of all concerned parties;
• Summary table of financial data over the last three completed financial years for all concerned parties.

All these documents must be established or translated in French or Arabic.

No formality is required except for the power of attorney, which must be legalized, apostilled or notarized, depending on the nationality of the party in charge of the filing.

The filing form require signature from the party in charge of the notification or its legal representative mandated by a power of attorney.

There is currently no filing fee but the New Draft Law envisages the possibility to establish such fee.

The fact that a notification has been filed is publicly announced within 5 days after the filing on the Competition Council’s website and in a journal of legal notices.

The Competition Council always invite all third parties to make observations in a through the announcement of the filing which is published on its website and in a journal of legal notices.

Moreover, the case handler can carry out a market test and interview customers, competitors, trade associations or consumer organisations. Such market tests are more common for transactions which are likely to raise competition concerns and during Phases II.

First, the public announcement which follows the filing includes some information about the parties, the nature of the transaction, the concerned economic sectors, the timeframe within third parties can make observations and a non-confidential summary of the transaction.

The notification file and the supporting documents are not published by the Competition Council and are not, in principle, made available to third parties while the decisions of the Competition Council are published on its website and in a journal of legal notices.

When questioning third parties about the transaction, its effects and the commitments proposed by the parties, and when making its decision public, the Council shall take into account the legitimate interest of the notifying parties that their business secrets should not be disclosed (article 23 of Law No 104-12).

Therefore, parties must indicate, when the filing takes place, which information is covered by the business secret and the General Rapporteur makes sure that this information is intended only to the Council and the Government Commissioner and establishes, if necessary, non-confidential versions of the documents (article 31 of Law No 104-12 and 25 of the Decree).

Furthermore, article 32 of Law No 104-12 punishes the disclosure by one of the parties involved of information concerning another party or a third party by a fine of ten thousand (10,000) to one hundred thousand (100,000) dirhams.

The Moroccan Competition Council cooperates with antitrust authorities in other jurisdictions.

Concerning the European Union, an association was established as soon as 2020 between Morocco, on one hand, and the member states, on the other hand, by the Euro-Mediterranean Agreement. Then, in 2004, a mechanism of cooperation between European and Moroccan competition authorities was put into place (by Decision No. 1/2004 of the EU-Morocco Association Council) and in 2020, a partnership with the European Union was announced with the objective of harmonising and converging their respective legislation in competition law matters.

Moreover, the Council has entered into cooperation agreements and memorandums of understanding with the authorities of countries such as Tunisia, China, Spain, Portugal, Chili, Turkey, and Greece.

The decisional practice of the Competition Council on the subject is still limited but it appears that both structural (such as business or assets divestments, termination of contracts or distinct management) and behavioural remedies (relating for example to the pricing policy or the production levels of the parties after the implementation of the transaction) appear acceptable to the Competition Council to clear a transaction.

Remedies can be proposed by the parties at any moment of the merger control review, i.e. with the notification file and during both the initial review period (Phase I) or the extended review period (Phase II), as long as the Council has not adopted its decision.

When remedies are proposed by the parties during Phase I, the 60-day time period is extended by 20 clear days.

If remedies are proposed in Phase II less than 30 days before the expiry of such Phase, the 90-day time period expires 30 clear days after the reception of the remedies.

According to Article 19 of Law No. 104-12, the sanction for closing a transaction without notifying consists of a fine amounting, for companies in charge of the notification, to a maximum of 5% of the pre-tax turnover made in Morocco during the last fully closed financial year, increased, when applicable, by the turnover made in Morocco during the same period by the acquired company and, for natural persons, to 5 million dirhams.

Moreover, upon failure to file a notification, the Moroccan Competition Council is entitled to compel the parties, subject to a daily penalty payment, to notify the operation, unless they revert to the previous state of affairs.

The same fine is applicable for late notification.

If the parties do not respect a prohibition on closing imposed by the Competition Council at the end of Phase II, the parties might be required, subject to a daily penalty payment, to revert to the previous state of affairs and face the fine described above.

The Moroccan Competition Council has imposed in April 2022 its first fine for failure to notify on the Swiss company Sika AG for its acquisition of sole control of the French company Financière Dry Mix Solutions SAS. The fine amounted to 11 670 215 dirhams (approximately 1,1 million euros).

The Council has since imposed two other fines for gun jumping to companies LSF11 Skyscraper et LFS10 Flavum Holdings, amounting each to 10,6 million dirhams (approximately 1 million euros), by two decisions dated 29th September 2022.

In the event of an omission or inaccurate statement in a notification, the Competition Council may impose a financial penalty on the natural or legal persons who made the notification which amounts, for companies in charge of the notification, to a maximum of 5% of the pre-tax turnover made in Morocco during the last fully closed financial year, increased, when applicable, by the turnover made in Morocco during the same period by the acquired company and, for natural persons, to 5 million dirhams (article 19 of Law No 104-12.

This fine may be accompanied by the withdrawal of the decision that authorized the transaction.

Unless they return to the state prior to the concentration, the parties are also required to re-notify the operation within one month of the withdrawal of the decision.

The Competition Council’s decision can be appealed, and the appeal must be filed before the Administrative Chamber of the Court of Cassation within 30 days from the date of notification of the merger decision, by the parties involved and/or the Government Commissioner (article 44 and 46 of Law No 104-12).

The Competition Council has adopted a very active approach in its merger control function since its reactivation in 2018, by reviewing 121 files in 2021 (versus 53 in 2020). Most of the reviewed transactions were cleared without conditions or the opening of a Phase II.

The Council also imposed in 2022 its first fine for gun jumping to the Swiss company Sika AG for acquiring the French company Financière Dry Mix Solutions SAS without prior filing in Morocco. This fine amounted to 11 670 215 dirhams (approximately 1,1 million euros). The Council has since, by two decisions dated 29th September 2022, sanctioned two other companies (LSF11 Skyscraper et LFS10 Flavum Holdings) for gun jumping, with fines amounting each to 10,6 million dirhams (approximately 1 million euros).

Moreover, the Council, who intends to strengthen its control and investigate more gun jumping cases in 2023, has adopted in 2022 two decisions establishing a regularization procedure for mergers that have been implemented before 31th December 2021 without having been notified to the Council. According to this procedure, the parties who should have notified these mergers can benefit from a reduced financial penalty – amounting to 1% of the Moroccan turnover generated during the last fiscal year or 500 000 dirhams for entities without turnover, instead of the maximum amount of 5% of the turnover applicable in principle – provided they submit a declaration with a notification file to the Council before the end of 2022.

Finally, the Council established in 2022 its Compliance Program which is a guide relating to the implementation of compliance programs by undertakings and professional associations and provide guidelines about the main applicable rules and recommendations.

Two drafts laws are currently being examined to amend both Law No 104-12 relating to competition and free pricing (the New Draft Law) and Law No 20-13 relating to the Competition Council.

The New Draft Law provides for several modifications including the introduction of a filing fee, the possibility to submit a simplified file and, most importantly, a modification of the notification thresholds.