This country-specific Q&A provides an overview to merger control laws and regulations that may occur in the South Africa.
It will cover jurisdictional thresholds, the substantive test, process, remedies, penalties, appeals as well as the author’s view on planned future reforms of the merger control regime.
This Q&A is part of the global guide to Merger Control. For a full list of jurisdictional Q&As visit http://www.inhouselawyer.co.uk/index.php/practice-areas/merger-control-3rd-edition
The relevant legislation is the Competition Act, 89 of 1998 as amended (Act) and the regulations promulgated thereunder. The enforcement agencies are the Competition Commission (Commission), the Competition Tribunal (Tribunal) and the Competition Appeal Court (CAC).
The merger provisions of the Act stipulate that when one or more firms directly or indirectly acquire or establish direct or indirect control over the whole or part of a business of another firm (e.g. through the purchase or lease of shares, or through the amalgamation or other combination of the entities), that transaction will constitute a merger.
Where there is a merger, the notification thresholds are met (see below), and the transaction constitutes economic activity within, or having an effect within South Africa, the merging parties are required to notify the merger to the competition authorities. Parties to a notifiable merger may not implement the merger before obtaining the requisite approval from the competition authorities.
Notably, the Act specifically provides for public interest considerations to be taken into account, in addition to the business and economic efficiency criteria which are used to assess the effect that a merger will have on competition (see further below).
Is mandatory notification compulsory or voluntary?
The Act applies a mandatory system, requiring notification to the Commission of intermediate and large mergers. Provision is made for voluntary notification of small mergers. The Commission may also require notification of a small merger if the Commission considers that a small merger may substantially prevent or lessen competition or cannot be justified on public interest grounds. Furthermore, in terms of a non-binding Guideline issued by the Commission in April 2009, notification of a small merger will be required if, at the time of entering into the transaction, any of the firms, or firms within their group, are subject to an investigation of a prohibited practice by the Commission or are respondents to pending proceedings in respect of a prohibited practice referred by the Commission to the Tribunal.
Is there a prohibition on completion or closing prior to clearance by the relevant authority? Are there possibilities for derogation or carve out?
Parties to a notifiable merger may not implement the merger before obtaining the requisite approval from the competition authorities. The Act does not deal specifically with “hold-separate” arrangements to “carve-out” South Africa while the merger process is still underway. In practice, however, such arrangements have been put in place successfully in various transactions in the past, on the basis that the jurisdictional ambit of the Act extends (only) to "all economic activity within, or having an effect within" South Africa. Conceptually, therefore, it is arguable that, to the extent that South Africa can be "ring-fenced" from the implementation of the merger elsewhere or worldwide, no contravention of the Act will arise (because the implementation of the merger in other jurisdictions will have no “effect” in South Africa). Importantly, “hold separate” arrangements should ideally be used only after the South African notification is submitted and where it is clear that no (material) competition concerns will arise.
The practical aspects of such a ring-fencing arrangement can be challenging especially in circumstances where the parties’ business activities relating to South Africa are conducted through divisions or subsidiaries outside South Africa that sell products into South Africa. This means that it may be difficult to put in place a ring-fencing structure that is not exposed to attack on the grounds that, at least on some level, the worldwide implementation of the merger will have an effect in South Africa. An appropriate arrangement will depend largely on the specific transaction, the presence (or lack thereof) of the parties in South Africa, and the basis on which they are active in South Africa.
What types of transaction are notifiable or reviewable and what is the test for control?
When one or more firms directly or indirectly acquire or establish direct or indirect control over the whole or part of a business of another firm, that transaction will constitute a merger.
There is no closed list of how control may be achieved. Broadly, a person controls another firm if that person, inter alia:
- beneficially owns more than one half of the issued share capital of the firm;
- is entitled to vote a majority of the votes that may be cast at a general meeting of the firm, or has the ability to control the voting of a majority of those votes, either directly or through a controlled entity of that person;
- is able to appoint or to veto the appointment of a majority of the directors of the firm;
- is a holding company, and the firm is a subsidiary of that company; or
- has the ability to materially influence the policy of the firm in a manner comparable to a person who, in ordinary commercial practice, can exercise an element of control referred to in the first four bullet points above.
The first four bullet points above set out what are referred to as instances of ‘bright line’ or ‘legal’ control. The last bullet point provides a ‘catch-all’ to the effect that a person controls a firm if that person “has the ability to materially influence the policy of the firm in a manner comparable to the person who, in ordinary commercial practice, can exercise an element of control,” referred to in the first four bullet points. This covers instances in which a firm, without acquiring ‘bright line’ control, may acquire de facto control by being able to materially influence the policy of another firm in a manner comparable to a person who, in ordinary commercial practice, can exercise an element of ‘bright line’ or ‘legal’ control.
In which circumstances is an acquisition of a minority interest notifiable or reviewable?
The last bullet point in 4 above is a catch-all, intended to catch minority and other interests, but only to the extent that they have the effect described in that point. Specifically, de facto control can be acquired where a less than 50% shareholder has the ability to materially influence the policy of the firm in a manner comparable to a majority shareholder.
Minority protections or veto rights which typically confer control are those relating to the determination of the budget and business plans or the appointment and remuneration of senior management.
Since the test for “material influence” is largely comparable to the “decisive influence” test for purpose of the EU Regulation, in the ordinary course acquisitions of minority interests that do not amount to “decisive influence” need not be notified.
What are the jurisdictional thresholds (turnover, assets, market share and/or local presence)? Are there different thresholds that apply to particular sectors?
Notification and approval of intermediate and large mergers to the competition authorities is compulsory. Small mergers are those that fall below the thresholds prescribed for an intermediate merger and do not have to be notified in the ordinary course (see response to question 2 above).
An intermediate merger is one that meets both a combined threshold as well as a target firm threshold as follows:
- the combined turnover in, into or from South Africa of the acquiring and target firms is between 600 million rand and 6.6 billion rand;
- the combined assets in South Africa of the acquiring and target firms is between 600 million rand and 6.6 billion rand;
- the turnover in, into or from South Africa of the acquiring firm plus assets in South Africa of the target firm is between 600 million rand and 6.6 billion rand; or
- the assets in South Africa of the acquiring firm plus the turnover in, into or from South Africa of the target firm are valued at or above 600 million rand but below 6.6 billion rand; and either:
- the annual turnover in, into or from South Africa of the target firm exceeds 100 million rand; or
- the value of the assets in South Africa of the target firm exceeds 100 million rand.
A large merger is one that meets both a combined threshold as well as a target firm threshold as follows:
- the combined turnover in, into or from South Africa of the acquiring and target firms is valued at or above 6.6 billion rand;
- the combined assets in South Africa of the acquiring and target firms are valued at or above 6.6 billion rand;
- the turnover in, into or from South Africa of the acquiring firm plus the assets in South Africa of the target firm are valued at or above 6.6 billion rand; or
- the assets in South Africa of the acquiring firm plus the turnover in, into or from the target are valued at or above 6.6 billion rand; and either:
- the turnover in, into or from South Africa of the target firm exceeds 190 million rand; or
- the value of the target firm’s assets in South Africa exceeds 190 million rand.
With regard to a local presence requirement, the Act applies to all economic activity having an effect within South Africa. However, insofar as the notification of mergers is concerned, the thresholds are calculated in relation to combined turnover or assets in relation to South Africa only. Accordingly, the Act is applicable to foreign-to-foreign mergers to the extent that the parties have assets in South Africa or turnover generated in, into or from South Africa.
The informal view of the Commission is that neither party requires a presence in South Africa and that it is sufficient that the parties generate turnover in South Africa so as to meet the thresholds. No final case law exists on this point, although in the context of restrictive practices analysis the CAC has ruled that South African authorities have jurisdiction in relation to agreements entered into outside South Africa, as long as they have an effect in South Africa. These effects are not limited to anticompetitive or deleterious effects (this was confirmed by the Supreme Court of Appeal in Ansac/Botash).
Since the Act came into effect in 1999, the Tribunal has considered and approved many foreign-to-foreign transactions and, as a matter of general practice, foreign-to-foreign mergers, where the target has a subsidiary or business activities in South Africa, are notified to the authorities if the relevant thresholds are met.
How are turnover, assets and/or market shares valued or determined for the purposes of jurisdictional thresholds?
A schedule to the Act deals with the Method of Calculation (the “Schedule”), which provides that the asset value of a firm must be calculated in accordance with IFRS. More specifically, the Schedule provides that for threshold purposes, the asset value of a firm at any time is based on the gross value of the firm’s assets as recorded on the firm’s balance sheet for the end of the immediately previous financial year, subject to other specific provisions. The thresholds relate only to assets in South Africa and, in this regard, among other provisions, the Schedule states that assets in South Africa includes all assets arising from activities in South Africa. In short, it is typically the gross asset value as included on the firm’s balance sheet as at the end of the most recent financial year.
Importantly, as far as the other specific provisions are concerned, the Schedule also provides, broadly, that if between the date of the financial statements being used to calculate the asset value of a firm, and the date on which that calculation is made, the firm has acquired any subsidiary company, associated company or joint venture not shown on those financial statements, or divested itself of any of these, then the value of the recently acquired assets must be added to the asset value or, conversely, the value of the recently divested assets must be deducted. Simply put, recent acquisitions or divestitures must be added, or deducted, as the case may be, to get to the correct asset value.
In terms of the Schedule, the annual turnover of a firm at any time is the gross revenue of that firm from income in, into or from South Africa, arising from the following transactions/events as recorded on the firm’s income statement for the immediately previous financial year:
- the sale of goods;
- the rendering of services; and
- the use by others of the firm’s assets yielding interest, royalties and dividends.
In short, the turnover is typically that of the firm, as reflected on its income statement as gross revenue, as at the most recent financial year-end.
Is there a particular exchange rate required to be used to convert turnover and asset values?
While not expressly provided for by the Act or regulations, in practice, the exchange rate applied is typically the average exchange rate for the relevant accounting period to which the financial values relate.
In which circumstances are joint ventures notifiable or reviewable (both new joint ventures and acquisitions of joint control over an existing business)?
The Act does not specifically refer to joint ventures. To the extent that a joint venture constitutes a ‘merger’ as defined, the merger control provisions of the Act will apply. Generally ‘greenfield’ joint ventures will not be caught by the Act, but a combination of existing operations may be. The Commission has published a non-binding practitioners’ note to help determine whether a joint venture is caught by the merger control provisions. To the extent that a joint venture is not a ‘merger’, the prohibited practices provisions of the Act may nevertheless apply.
Are there any circumstances in which different stages of the same, overall transaction are separately notifiable or reviewable?
It is conceivable that different stages of the same, overall transaction are separately notifiable. However, the situation that typically arises is the single notification of mergers which involve multiple interdependent and indivisible steps. The competition authorities typically accept a single notification in these circumstances if the steps are factually and legally part of a single transaction aimed at acquiring control of the target firm.
In relation to “foreign-to-foreign” mergers, do the jurisdictional thresholds vary?
The jurisdictional thresholds do not vary according to whether the transaction is "foreign-to-foreign" (i.e. where the legal entities acquiring and being acquired are all located outside South Africa). Please refer to the “local presence” discussion at question 6 above.
For voluntary filing regimes (only), are there any factors not related to competition that might influence the decision as to whether or not notify?
What is the substantive test applied by the relevant authority to assess whether or not to clear the merger, or to clear it subject to remedies? Are there different tests that apply to particular sectors?
The substantive test to assess whether or not to clear the merger, or to clear it subject to remedies, is whether the merger is likely to substantially prevent or lessen competition, and, if so, whether any technological, efficiency or other pro-competitive gains are likely to result from the merger that may offset the lessening of competition. Relevant factors to be considered are:
- the strength of competition in the market;
- the probability that firms in the market will behave competitively following the merger;
- the actual and potential level of import competition;
- ease of entry into the market, including tariff and regulatory barriers;
- the level and trends of concentration and history of collusion in the market;
- degree of countervailing power in the market;
- likelihood of the merged firm having market power;
- dynamics of the market, including growth, innovation and product differentiation;
- the nature and extent of vertical integration;
- whether the business of a party has failed or is likely to fail; and
- whether the merger will result in the removal of an effective competitor.
Are factors unrelated to competition relevant?
The Commission must also consider whether the merger can be justified on substantial public interest grounds, particularly the effect of the merger on employment; the ability of small businesses or firms controlled by historically disadvantaged persons to become competitive; and the ability of national industries to compete in international markets.
The Commission has shown concern for issues such as employment with regard to both mergers and complaints of prohibited practices. In some recent merger decisions, the Commission has been unwilling to accept merger-related job losses. Further, the Commission has recently indicated that certainty from merging parties is required as to whether job losses will occur as a result of a merger or not. Notwithstanding the above, in the vast majority of cases, competition arguments are the Commission’s main focus and the basis on which decisions are made. However, public interest considerations remain significant. An illustration of the significance of public interest considerations is the large merger between the US corporation, Wal-Mart Inc. (Wal-Mart), and South African wholesaler and retailer, Massmart Holdings Ltd (Massmart). Wal-Mart had no presence in South Africa and the Commission recommended unconditional approval of its proposed acquisition of a 51% stake in Massmart. Public interest concerns were raised by trade unions and industry bodies in relation to Wal-Mart’s record on labour rights and the effect of its procurement practices on local manufacturers and suppliers. Three government departments made submissions to the Tribunal that the acquisition would lead to thousands of job losses, worsening labour conditions and the squeezing out of local suppliers. The Tribunal approved the merger subject to conditions including a moratorium on retrenchments for two years and an obligation to give preference to 503 employees previously retrenched, once employment opportunities become available within the merged entity. The merged entity was also required to establish a programme for the development of local suppliers and contribute ZAR 100 million to the programme, to be expended within three years. In 2012, following the Tribunal’s decision, the CAC upheld, in part, an appeal by a trade union against the Tribunal’s order. However, the CAC approved the merger subject to conditions and held that there was insufficient evidence to conclude that the public interest concerns (in particular, the effect of mergers on employment and on small and medium-sized businesses) should result in the prohibition of the merger. Notably, the CAC accepted that there were legitimate concerns about the effect of the merger on small producers and therefore consequent effects on employment and recognised that the provisions of the Act required measures to be taken to safeguard the public interest concerns, in particular, those regarding small producers.
Are ancillary restraints covered by the authority’s clearance decision?
Yes – to the extent that these are set out in the documents submitted to the competition authorities as part of the merger notification. There is no separate application dealing with ancillary restraints.
For mandatory filing regimes, is there a statutory deadline for notification of the transaction?
There are no deadlines for filing, but an intermediate or large merger may not be implemented until notified to and approved by the competition authorities.
What is the earliest time or stage in the transaction at which a notification can be made?
The usual practice is to notify the transaction once the relevant agreement has been signed. It is, however, possible to file on the basis of a draft transaction document, provided that the transaction structure and principal terms are reasonably clear and do not change significantly.
Is it usual practice to engage in pre-notification discussions with the authority? If so, how long do these typically take?
Merging parties do not typically engage in pre-notification discussions with the Commission. While pre-notification meetings are rare, it is possible to request a pre-notification meeting if there are deal complexities which the parties require guidance on from the Commission.
What is the basic timetable for the authority’s review?
The review period for intermediate mergers comprises an initial review period of 20 business days (excluding the first day, but including the last). This period may be extended by a single period not exceeding 40 business days. If upon the expiry of the initial period of 20 business days the Commission has not extended the period or issued a decision, the intermediate merger will be regarded as having been approved. If upon the expiry of the extended period of 40 business days the Commission has not issued a decision in relation to an intermediate merger, the merger will be regarded as having been approved. In practice, the Commission often makes use of the extension period to complete its investigations and unlike in certain other jurisdictions, the Commission need not have competition or public interest concerns to make use of the extension period. The Commission is also not required to justify the use of the extension period.
In the case of large mergers, the Commission must within 40 business days of receipt of a complete notification forward to the Tribunal a written recommendation, with reasons, regarding the merger. This period is extendable with the consent of the Tribunal by periods of no more than 15 business days at a time. If upon the expiry of the period of 40 business days (or any extended period of time granted by the Tribunal), the Commission has neither applied for a further extension nor forwarded a recommendation to the Tribunal, any party to the merger may apply to the Tribunal to begin the consideration of the merger without a recommendation from the Commission. Once the Commission has referred its recommendation to the Tribunal, a date for a hearing must be set within ten (10) business. There is no prescribed period in which a hearing must be held and there is no deemed approval if the hearing does not take place. A certificate of approval or prohibition must be issued within ten (10) business days of the end of the hearing and reasons must be provided within twenty (20) business days of the issue of the certificate.
In practice, the Tribunal has proved efficient, and disposes of matters in a reasonably short time.
Under what circumstances may the basic timetable be extended, reset or frozen?
In ordinary circumstances, the Commission may not suspend the applicable review periods discussed above. However, if the Commission considers that the contents of a merger filing contain false or misleading information, it may issue a demand for corrected information which, if uncontested, has the effect of resetting the review timetable to the date on which the corrected information is supplied to the Commission.
Are there any circumstances in which the review timetable can be shortened?
Neither the Act nor the regulations promulgated thereunder provide for the shortening of the review timetable.
Which party is responsible for submitting the filing?
In the ordinary course, both parties to a merger are responsible for filing.
What information is required in the filing form?
Prescribed forms and declarations need to be submitted, but are generally not as detailed as those required under the US or EU systems. Filings have become more sophisticated and parties often file expert economic reports in support of their merger filings in highly complex matters, or where the parties anticipate significant competition concerns (for example, where a merger takes place in a highly concentrated market). Generally, merging parties submit a joint competitiveness report as part of the notification which typically includes a description of the transaction, the relevant competition markets, the merging parties’ customers and competitors, and the competitive and public interest outcomes. Various documents relating to the transaction are required to be submitted. In 2010, the Commission also published a practice note setting out requirements for ‘complete’ merger notifications.
Which supporting documents, if any, must be filed with the authority?
The following supporting documentation, in addition to the prescribed forms, are required to be filed by each of the merging parties:
- The most recent audited annual financial statements and/or management accounts (to the extent that financial statements are not available);
- The most recent draft of all documents constituting the merger agreements;
- Each report or other document assessing the transaction with respect to competitive conditions;
- Strategic documents (including, but not limited, marketing documents, minutes, reports, presentations and summaries) prepared for the Boards of Directors of the respective parties regarding the transaction and the affected markets;
- The firm’s most recent business plan and budget;
- Affidavit / attestation to the extent that any of the abovementioned documents are not available, confirming the reason why such document/s are unavailable.
No formalisation of documentation is required.
In respect of signing the prescribed forms, these need to be signed by an authorized person who is able to confirm the accuracy of the information provided as part of the filing (this person may be the party’s legal representative, if authorised to do so).
Is there a filing fee?
As at 1 October 2017, the filing fee payable in respect of an intermediate merger is
ZAR 150,000 and the filing fee payable in respect of a large merger is ZAR 500,000. There are no filing fees payable for small mergers.
The Act does not stipulate which party is responsible for payment of the fees – this is generally a matter for commercial negotiation between the parties.
Is there a public announcement that a notification has been filed?
The Commission does not typically issue a public announcement relating to the notification of mergers. However, information is made publicly available on the Commission’s website on a quarterly basis in respect of mergers that have been notified to the Commission. Further, the Commission is required by law to publish, in the Government Gazette, reasons for the prohibition or conditional approval of intermediate mergers. In addition, the Commission publishes media statements in respect of significant decisions – these often summarise the Commission’s reasons for its decision (in the case of intermediate mergers) or the basis for the recommendation to the Tribunal (in the case of large mergers).
The Tribunal publishes its full reasons for approving or disallowing a merger in any given case. To the extent that information in respect of which confidentiality has been claimed is contained in the reasons, a non-confidential version is prepared for public consumption.
The Commission and the Tribunal both operate information websites which can be found at www.compcom.co.za (Commission) and www.comptrib.co.za (Tribunal).
Does the authority seek or invite the views of third parties?
As part of the investigation, case handlers generally contact competitors and customers, particularly where competition concerns are raised.
Parties to a merger are required to serve a non-confidential version of the merger notification on any registered trade union that represents a substantial number of its employees, or the employees concerned or representatives of such employees, in the absence of a registered trade union. Proof of service on the trade unions and/or employee representatives must be submitted as part of the notification, failing which the notification will not be regarded as complete.
A trade union or employee representative, upon whom a non-confidential version of the merger filing is required to be served, may notify the Commission of its intention to participate in merger proceedings within five (5) business days after receiving notice of the merger. As such, trade unions and / or employee representatives are afforded a more prominent role in the merger review process than other third parties and they are entitled by law to participate in merger proceedings.
In addition to the rights of trade unions and employee representatives to intervene, any person who has a material interest in a merger may apply to intervene in Tribunal proceedings by filing a Notice of Motion. The Notice of Motion must include a concise statement of the nature of the person’s interest in the proceedings. An application to intervene must be served on all parties to the proceedings and the Tribunal is required to determine whether or not the person asserting a material interest is permitted to intervene. The government and other interested parties have intervened in certain significant merger cases on the basis of this provision.
It should be noted, however, that the authorities have issued a clear warning to potential interveners not be obstructive. For example, in 2008 and 2009, technology firm Altech attempted to intervene in the MTN/Verizon merger hearing. The Tribunal dismissed Altech’s application with costs, stating that it would have ‘considered this an appropriate case to award punitive costs’ against Altech, had its jurisdictional scope allowed for it.
Finally, any person may voluntarily submit information to the Commission in relation to a merger.
What information may be published by the authority or made available to third parties?
Provision is made under the Act for merging parties to request that information submitted to the Commission be treated as confidential and a prescribed form is submitted in merger filings for confidentiality claims. The merging parties may claim any document or part of a document as confidential if they can reasonably claim that the information has economic value and that its confidentiality should be preserved. Typically, information relating to customers, financial statements, market share information or documents that only authorised officers of the firm have access to, will be claimed as confidential.
Any information or documents submitted as part of the merger notification and not claimed as confidential by the Commission and which does not amount to restricted information may be published by the Commission or made available to third parties.
Does the authority cooperate with antitrust authorities in other jurisdictions?
The Commission typically contacts antitrust authorities in other jurisdictions in large, global transactions. In circumstances where the authorities seek to exchange information, the parties are requested to provide appropriate waivers to allow for the flow of information, notwithstanding the confidentiality that attaches to the information. The Commission has, in the past, cooperated with the antitrust authorities in the EU, US, Brazil and China (amongst others).
What kind of remedies are acceptable to the authority?
The remedy imposed will depend on the particular harm which has been identified and the Commission and Tribunal have been open to adopting innovative, practical and pragmatic approaches to remedies. At a high level, remedies may be structural (typically divestiture) or behavioural. Examples of innovative behavioural remedies that have been imposed include: the conclusion of long term supply arrangements, pricing commitments, licensing of intellectual property or other rights, obligations to source from existing or past suppliers (in most cases, these are local suppliers), requirements to invest in the domestic supply chain or maintain or expand local production facilities.
While a merger has yet to be prohibited on the basis of public interest concerns alone, conditions have been imposed in transactions in which only public interest concerns arose (i.e. notwithstanding that there were no competition issues). Public interest cases have principally related to employment, in which case the most common condition is a moratorium on merger related retrenchments for a period (although there have been a limited number of decisions in which the Commission has imposed a restriction on retrenchments for an indefinite period). Public interest concerns also include issues such as foreclosure of certain national industries, in which case a behavioural remedy compelling supply to local firms for a period may be imposed.
The authorities have been open to adopting innovative remedies to address employment related concerns. Examples include: requiring the merged firm to train or re-skill employees, to provide assistance to employees to find alternate employment, to re-deploy and re-employ staff when jobs are subsequently created.
What procedure applies in the event that remedies are required in order to secure clearance?
Remedies may be raised (by either the authorities or the merging parties) at any stage of the Commission’s investigation or during proceedings before the Tribunal. Merging parties who are of the view that a transaction is likely to raise competition or public interest concerns may elect to offer remedies up front or early on in the merger review process.
Typically the Commission will inform the merging parties of concerns arising in the course of its investigation and will indicate that remedies are required to address these concerns. In practice, the Commission affords the merging parties an opportunity to engage with it on the need for remedies, and the parameters of the remedies. In most cases, the parties may be able to negotiate an acceptable remedy which addresses the Commission’s concerns. However, if consensus cannot be reached, the Commission will impose conditions (in the context of small or intermediate mergers) and in such circumstances the merging parties may request the Tribunal to consider the Commission’s decision. In the case of a large merger, the Commission will similarly engage with the merging parties in respect of remedies but may only recommend that these be imposed. In both a request for consideration and large merger reviews, the Tribunal will consider the remedies and may accept, amend or remove them.
What are the penalties for failure to notify, late notification and breaches of a prohibition on closing?
Proceeding to implement a merger without obtaining the requisite approval is a contravention of the Act and exposes the parties to administrative penalties of up to 10% of their annual turnover in or from South Africa. The Commission may refer the matter to the Tribunal or conclude a settlement agreement, which must be approved by the Tribunal.
The Tribunal may also impose an administrative penalty (not exceeding 10% of the firms’ annual turnover in South Africa in the preceding financial year) where firms implement a merger in a manner contrary to a condition imposed by the Commission or the Tribunal. As such, parties generally may not proceed to implement a merger without having complied with the conditions to the approval.
What are the penalties for incomplete or misleading information in the notification or in response to the authority’s questions?
The Commission may also revoke its decision to approve a merger if the decision was based on incorrect information for which a party to the merger was responsible.
Can the authority’s decision be appealed to a court?
A decision of the Commission (in the case of small and intermediate mergers) may be considered by the Tribunal. The Tribunal’s consideration is understood as a hybrid of an appeal and review process. Parties may appeal a decision of the Tribunal to the CAC, the Supreme Court of Appeal or the Constitutional Court.
What are the recent trends in the approach of the relevant authority to enforcement, procedure and substantive assessment?
The Commission remains focused on the potential impact of mergers on employment in South Africa. It is becoming more difficult for merger parties to justify job losses pursuant to a merger. The Minister of Economic Development (Minister) (who has standing to participate in merger proceedings on public interest grounds) adopts creative and often far-reaching positions on the scope of the public interest factors set out in the Act for merger assessment and as the domestic and global economic outlook stagnates, it is likely that there will be a sharper focus by the Commission and the Minister on public interest factors in merger proceedings.
Are there any future developments or planned reforms of the merger control regime in your jurisdiction?
Yes, the Competition Amendment Bill (Amendment Bill) was introduced in Parliament by the Minister on 11 July 2018. Key provisions of the Amendment Bill relate to restrictive horizontal and vertical practices, the abuse of a dominant position, increasing the scope for exemptions, merger proceedings involving foreign acquiring firms, bolstering the public interest provisions relating to mergers, impact studies, ministerial powers, administrative penalties and market inquiries.
In relation to mergers, the competition authorities are currently required to consider whether an otherwise anticompetitive merger could be saved on the basis of a substantial positive public interest impact. The Amendment Bill elevates the public interest inquiry to be on equal footing with the competition inquiry. Further, in relation to mergers involving foreign acquiring firms, a new national security provision has been introduced, which contemplates an assessment in respect of the impact of a transaction on national security by an executive body set up by the President, in a process that is prior to, and separate from, the merger control regime under the Act.