Threshold for purposes of “Economic Concentration” under Kazakhstan’s Competition Law has increased to over 50%
The Law of the Republic of Kazakhstan “On Competition” #112-IV dated December 25, 2008 (“Competition Law”) was significantly amended effective 18 May 2015.
The Competition Law provides that prior consent of Kazakhstan’s Antimonopoly Authority is required for certain transactions involving “economic concentration”. The original threshold for triggering economic concentration was the acquisition by an entity (or group of entities) of more than 25% of the equity interest of another entity. The amended Article 50.1.2 of the Competition Law now raises that threshold to more than 50% of the equity interest of another entity.
Article 50.1.2 also now establishes that incorporation of a new legal entity does not trigger economic concentration. It should be noted that while Article 50.1.4 states a transaction that results in an entity acquiring the right to give binding instructions to another entity does constitute economic concentration, it does not trigger the need to apply for prior consent to the Antimonopoly Authority. Instead, the entity acquiring the right must notify the Antimonopoly Authority following the consummation of the transaction.
It is not clear at this stage how the Antimonopoly Authority will interpret the amended Competition Law. A literal interpretation suggests that the exemption for incorporation of a new legal entity applies only to Article 50.1.2 of the Competition Law and not to Article 50.1.4. Another interpretation is that Article 50.1.4 should be interpreted in the general context of the amended Competition Law.
In the past, the Antimonopoly Authority has taken the view that blocking rights amount to a right to give binding instructions under Article 50.1.4 of the Competition Law. However, this interpretation was in keeping with the old 25% equity interest threshold for constituting economic concentration. Given that the amended Article 50.1.2 raises this threshold to more than 50%, binding instructions under Article 50.1.4 could be interpreted as the right to take decisions by a majority of votes, rather than the ability to block certain decisions.