Merger Control in Pakistan: Notification Thresholds, Review Stages and Penalties for Non-Compliance

Buying shares, acquiring a business or establishing a joint venture can require competition clearance even where the parties have obtained corporate approvals and agreed all commercial terms.

Section 11 of the Competition Act, 2010 establishes the merger-control framework. The central distinction is between whether a transaction must be notified and whether its competitive effects justify clearance. Crossing a notification threshold does not make a merger unlawful; it makes the regulatory assessment necessary.

Which Transactions Can Be Covered?

The regime extends beyond transactions formally described as mergers. Acquisitions of control through shares, assets or contractual arrangements may be relevant. Certain jointly controlled, independently functioning and lasting joint ventures also fall within the Merger Control Regulations.

The regulations can apply to undertakings incorporated outside Pakistan where the relevant Pakistan business connection exists. Foreign incorporation or overseas signing should therefore not be treated as automatic exclusions. (Merger Control Regulations, 2016)

Before examining financial thresholds, the parties should identify what is being acquired, how control changes and whether a specified exemption applies. Certain intra-group transactions and other defined categories are exempt from notification, but the precise regulatory conditions matter.

The Ordinary Notification Thresholds

Under regulation 4 of the Competition (Merger Control) Regulations, 2016, the ordinary test, excluding the separate asset-management-company regime, combines a financial-size condition with a transaction condition.

Financial size: At least one alternative must be satisfied

Table — scroll horizontally on small screens

Transaction size or voting interest: At least one alternative must also be satisfied

The transaction must involve either shares or assets worth PKR 100 million or more, or an acquisition of voting shares which, together with shares already held, gives the acquirer more than 10% of the voting shares.

The structure is one financial-size alternative AND one transaction alternative. It is not necessary to satisfy every figure in the table, and transaction value alone does not answer the notification question. (Merger Control Regulations, 2016)

For a transaction otherwise falling within the merger regime, an acquisition below PKR 100 million can therefore still require notification through the voting-share alternative.

Separate treatment of asset management companies

The regulations prescribe a separate test involving collective voting exposure exceeding 25% in a single entity, or assets under management of at least PKR 1 billion, combined with the specified transaction-value or voting-share condition. The ordinary asset-and-turnover table should not simply be substituted for that regime. (Merger Control Regulations, 2016)

When Must the Parties Apply?

Section 11 requires an application once the parties agree in principle or sign a non-binding letter of intent. Its general rule is that the intended merger must not proceed before clearance.

There is a specific regulatory provision for capital-market transactions, requiring an application within 15 days of the transaction. That provision must be assessed for the transaction concerned; it is not a general licence to complete ordinary acquisitions and notify later. (Merger Control Regulations, 2016)

As a drafting precaution, transaction documents should address responsibility for filing, cooperation in supplying information, allocation of regulatory risk, conditions precedent and the consequences of delayed or conditional approval. Signing and completion should not be treated as interchangeable events.

First-Phase Review

The first phase is intended to identify transactions that do not require a more detailed competitive assessment.

The Commission considers the transaction’s character, notification thresholds, relevant markets and potential competition concerns. Under the regulations, the first-phase period is 30 working days, subject to receipt of a compliant and complete application.

Receipt is not the same as completeness. Outstanding information, missing documents or an unpaid prescribed fee can prevent the review period from beginning. It is therefore unsafe to count from the date a partially completed form was first delivered. (Merger Control Regulations, 2016)

The Act contains a deemed-no-objection provision where the applicable period expires without the required determination. Reliance on that provision requires careful verification of the filing’s completeness and the applicable statutory and regulatory conditions.

Second-Phase Review

A transaction proceeds to the second phase where the initial assessment does not resolve the competition concerns.

The regulations provide 90 working days, commencing after notification of the second-phase review and receipt of all information required for that review. The Act states the 30- and 90-day framework; the regulations express the operational periods in working days. (Merger Control Regulations, 2016)

The substantive issue under section 11 is whether the transaction substantially lessens competition by creating or strengthening a dominant position. Relevant considerations include barriers to entry, imports, buyer bargaining power, concentration, vertical integration, innovation and the removal of an effective competitor. (CCP: Frequently asked questions)

A second-phase review is not a finding that the merger must be prohibited.

In Acquisition of Shareholding in Central Depository Company of Pakistan Ltd. by Pakistan Stock Exchange Ltd., 2023 CLD 475 (CCP), the Commission undertook a second-phase review of a transaction involving important, interconnected securities-market services. It ultimately authorised the acquisition after assessing the transaction’s effect on control and competition.

Clearance, Conditions, Efficiencies and Prohibition

The Commission may authorise a transaction, impose conditions or require enforceable commitments. Where the statutory requirements are met, it may prohibit or undo a merger. Section 31(d) expressly places prohibition or undoing of a merger at the conclusion of the second-phase review.

Section 11(10) also recognises grounds on which a transaction raising competition concerns may nevertheless be approved. These include substantial efficiencies that cannot reasonably be achieved through less restrictive means and whose benefits outweigh the competitive harm. A separate failing-undertaking limb concerns the least anti-competitive option for the assets where actual or imminent financial failure exists.

A statement that the transaction “saves jobs” or “creates synergies” is not a substitute for the required evidence. The applicant bears the burden of establishing the claimed justification.

Processing Fees and Late Notification

The fee amendment published through S.R.O. 421(I)/2024 prescribes ordinary processing fees ranging from PKR 800,000 to PKR 4.5 million, depending on the applicable band. Asset management companies have their own assets-under-management bands. (S.R.O. 421(I)/2024: processing fees)

The amendment also distinguishes completed transactions disclosed voluntarily from those detected by the Commission. The published post-completion schedules are 1.5 times the ordinary fee for voluntary disclosure and twice the ordinary fee where the CCP detects the completed transaction. The applicable ordinary and post-completion schedules should be read together. (S.R.O. 421(I)/2024: processing fees)

An increased processing fee is not the same as a statutory penalty, and paying it does not itself confer immunity.

Failure to Notify, Premature Completion and False Information

Non-compliance can involve failing to notify a qualifying transaction, completing it contrary to the standstill obligation or supplying materially false or misleading information.

The Chapter II penalty framework under section 38 permits up to PKR 75 million or 10% of annual turnover, as determined in the circumstances. The Act also permits remedial orders concerning completed transactions after the prescribed process.

Clearance obtained through false or misleading information, or followed by non-compliance with conditions, is not necessarily secure: section 11(14) permits further action, including undoing the transaction or modifying the original order after an opportunity to be heard.

Regulatory filing should therefore be treated as a substantive transaction obligation, not a clerical step to be completed after the commercial deal is finished.

Conclusion

Merger planning should resolve four questions early: Is the transaction covered? Are the thresholds met? What competitive concerns arise? What must happen before completion?

Legum Law Firm’s Competition and Antitrust Law and Corporate and Business Law practices advise on acquisitions, joint ventures, merger notifications and transaction documentation in Pakistan.

Thresholds, fees, forms and regulations should be checked against the applicable notifications before a transaction is signed or completed.