Chapter 3 of the Competition Act 89 of 1998 (Competition Act) contains provisions that deal with mergers. The aim of these provisions is to ensure that the various markets in the economy are functioning competitively and efficiently. Specifically, merger regulation targets commercial transactions that may result in the substantial prevention or lessening of competition in the relevant markets.
The merger control provisions of the Competition Act require the parties to a merger transaction to notify the transaction to, and seek the approval of, the competition authorities if it fulfils certain requirements. The first requirement is that the transaction constitutes a "merger" as defined in the Competition Act. The second requirement is that the value of the merger transaction exceeds the financial thresholds prescribed by the Minister of Trade and Industry in a government gazette.
Once a transaction is notified, the competition authorities evaluate the following factors in deciding whether the merger should be approved:
What is a merger?
A "merger" is defined in the Competition Act as the (direct or indirect) acquisition or establishment of control by a firm/s over the whole or part of the business of another firm.
A person is deemed to control a firm if that person, for example:
Once a transaction is classified as a "merger", it is notifiable only if the turnover/asset value thresholds are exceeded. These thresholds are calculated with reference to the turnovers/asset values (whichever is greater) of (i) the acquiring group together with the target firm and its subsidiaries; and (ii) the target firm and its subsidiaries. The turnovers/asset values must be derived in, into or from South Africa for the preceding financial year.
A distinction is made between a "small merger", an "intermediate merger" and a "large merger" as follows:
An "intermediate merger" is where the combined turnovers/asset values of the acquiring group and the target firm and the target firm’s turnover/asset value falls between these lower and higher thresholds.
|Annual turnover or assets||Large Merger||Intermediate Merger||Small Merger|
|Merger Group||> R6.6 billion||R600 million - R6.6 billion||< R600 million|
|Target Firm||> R190 million||R100 million - R190 million||< R100 million|
A small merger does not need to be notified to the Competition Commission (Commission) except in the following two circumstances:
An intermediate or large merger must be notified to the Commission and may not be implemented until it has been approved, with or without conditions, by the relevant competition authorities.
Merger control considerations
In assessing whether a merger will substantially lessen or prevent competition in the relevant market, the competition authorities must consider a number of factors (listed in the Competition Act) which serve to assess the strength of competition in the relevant market and the probability that after the merger the firms in the market will behave competitively or in a collusive manner.
Even if a merger is likely to substantially prevent or lessen competition, the competition authorities can approve it if the merger:
In the case of intermediate mergers, the Commission investigates and decides the merger. The Commission must decide the merger within 20 business days of receiving the merger notification. The Commission may extend this period by up to a further 40 business days. If no decision is made, the Commission is deemed to have approved the merger. If the Commission does not give an unconditional approval or prohibits an intermediate merger, the merging parties can request the Tribunal to consider the merger.
In the case of large mergers, the Commission investigates the merger and makes a recommendation to the Tribunal, which then decides the merger. The Commission must make its recommendation to the Tribunal within 40 business days of the notification but the Tribunal may extend this period on application by the Commission for periods of 15 business days at a time. There is no statutory prescribed period for the Tribunal to decide a large merger.
Merger filing fees
|Type of Merger||Notification fee|
|Intermediate Merger||R150 000|
|Large Merger||R500 000|
Failure to notify a merger
An administrative penalty of up to 10% of the turnover of the merging parties may be imposed in the event of:
The Tribunal may also order divestiture of a firm’s assets and, it would seem, any shareholders’ shares in such firms.