In terms of the Competition Act, certain mergers and acquisitions transactions may not be implemented unless they have been approved by the Competition Authorities. Parties entering into a transaction must therefore consider whether the transaction meets the criteria of the Act in terms of which approval is required. The Competition Authorities comprise of the Competition Commission, the Competition Tribunal, and the Competition Appeal Court. These entities work together to enforce the Competition Act and to promote fair competition in the market. The main criteria that determine whether the approval of the Competition Authorities is required are –
- Whether it has an economic effect in South Africa;
- Whether it amounts to a “merger”. In terms of the Act, a merger occurs when "one or more firms directly or indirectly acquire or establish direct or indirect control overthe whole or part of the business of another firm". Our competition law recognisesthat control may be established in different ways. Section 12(1)(a) recognises that control can be acquired directly or indirectly, while section 12(2) recognises that control can be acquired solely or jointly.
- Whether the asset values and turnovers of the parties meet certain minimum thresholds, Based on these thresholds, a merger may be classified as “small”, “intermediate” or “large”. Small mergers generally do not require approval, while intermediate mergers must be approved by the Competition Commission and large mergers by the Competition Tribunal.
The Commission has 60 business days to approve or prohibit an intermediate merger. For large mergers, the Commission has an initial 40 business days to consider and refer the case to the Tribunal, which then has 10 business days to schedule a hearing and make a decision. In addition to competition concerns, the Competition Authorities also consider broader public interest factors when evaluating mergers. These factors include the effect of the merger on employment, small businesses, and the ability of historically disadvantaged individuals or firms to participate in the market. The Competition Amendment Act of 2018 introduced a transformation mandate for the Competition Authorities, requiring them to consider the promotion of ownership by historically disadvantaged persons and workers. It is unlikely they will prohibit a merger solely because there will be a decrease in HDP ownership. However, the Tribunal has emphasised the need for a holistic approach, weighing various public interest factors against each other to determine the overall impact on the public interest. The filing fee payable to the Commission for mergers varies depending on the size of the transaction. The filing fee for an intermediate merger is R165 000 and for a large merger is R550 000. The Competition Authorities in South Africa play a vital role in ensuring fair competition and promoting public interest objectives. While competition considerations are essential, the Authorities also take into account broader societal impacts when evaluating mergers. The assessment of public interest factors is case-specific, and the authorities strive to strike a balance between promoting competition and safeguarding broader public interest objectives.
