Competition commission revised Guidelines on small mergers
For businesses considering an acquisition, falling below South Africa’s mandatory merger notification thresholds might seem to mean one less regulatory hurdle to worry about. But that is not always the case. Recent developments show that smaller deals can still attract the attention of the Competition Commission, particularly where a transaction could affect competition or involves a business whose true value may not yet be reflected in its turnover or assets.
The Competition Act requires parties to a “merger” to notify the Competition Commission of that merger and to obtain permission to implement the transaction if the value of the transaction exceeds certain monetary amounts.
The Act defines a merger widely - for purposes of the Act, a merger occurs when one or more firms directly or indirectly acquire or establish direct or indirect control over the whole or part of the business of another firm. This may be achieved in any manner, including through a purchase or lease of the shares, an interest or assets of the other firm, or amalgamation or other combination with the other firm.
For the purpose of calculating whether the parties are obliged to notify the Commission of a transaction, the Act prescribes certain monetary thresholds. If the asset value or turnover of the firm being acquired (“the target firm”), and the asset value or turnover of the target firm, added to the asset value or turnover of the acquiring firm, both exceed the prescribed thresholds, the Commission must be notified and the transaction may not be implement unless the permission of the Commission (in the case of an “intermediate” merger”), or the Competition Tribunal (in the case of a “large’ merger”) has been obtained.
When a ‘small’ merger still matters
A transaction where the asset values and turnover required for an intermediate merger are not exceeded is classified as a “small” merger. In general, the parties to a small merger do not have to notify the Commission of the merger or obtain its permission to implement it.
However, the Commission has recognised that some small mergers have the potential to adversely affect competition or may raise issues in relation to some of the public interest issues the Act requires the Commission to consider when deciding whether to approve a merger.
In 2009, the Commission issued Guidelines indicating that, in certain circumstances, it would require parties to a small merger to notify the Commission of the merger and that, as in the case of intermediate and large mergers, those small mergers could not be amended until approved by the Commission. The Guidelines have been revised on several occasions, the most recent being on 18 August 2026, with the publication of draft revised Guidelines in the Government Gazette.
Prior to the latest revision, the Guidelines provided that the Commission must be informed in writing before implementation of all small mergers which meet any of the following criteria –
- at the time of entering into the transaction any of the firms, or firms within their group, are subject to an investigation by the Commission in respect of prohibited conduct in terms of Chapter 2 of the Act;
- at the time of entering into the transaction any of the firms, or firms within their group, are respondents to pending proceedings referred by the Commission to the Competition Tribunal in terms of Chapter 2 of the Act;
- the acquiring firm’s turnover or asset value alone exceeds the large merger combined asset/turnover threshold (which was recently increased from R6.6 billion to R9.5 billion) and, in respect of the target firm:
- the consideration for the acquisition or investment exceeds the target firm asset/turnover threshold for large mergers (which was recently increased from R190 million to R280 million); or
- only a part of the target firm is being acquired but the consideration payable effectively values the whole of the target firm more than the target firm asset/turnover threshold for large mergers.
Why the Commission is looking more closely
The raising of the thresholds means that fewer merger transactions are automatically notifiable, increases the likelihood that more potentially anti-competitive transactions amy escape the Commission’s scrutiny.
In its introductory note to the revised Guidelines, the Commission noted that “there are concerns that potentially anti-competitive acquisitions in digital or technology markets are escaping regulatory scrutiny due the acquisitions taking place at an early stage in the life of the target before they have generated sufficient turnover or accumulated capital and physical assets that would exceed that would trigger mandatory merger notification as set by the turnover or asset thresholds. This is particularly the case where the target firm valuation is high due to the prospective future value of the concept, technology, intellectual property or skills of the target firm. These are not recorded in the financial statements as ‘assets’ and therefore currently do not trigger a mandatory merger notification. Such acquisitions may substantially prevent future competition with incumbents or lessen competition through strengthening the portfolio of dominant companies (whether they are currently classified as operating in digital markets or not)”.
What businesses need to consider before proceeding
The Commission has the authority to require parties to a small merger of which it becomes aware to notify the Commission of the transaction and not to implement it until the Commission has approved it. Parties to any transaction affected by the Guidelines are therefore advised to notify the Commission as early as possible, to avoid having to suspend a partially transaction while the Commission considers it.
Going forward, businesses should therefore be careful not to treat falling below the monetary thresholds as an automatic indication that competition law considerations can be put aside. Particularly where a transaction involves a high-growth business, valuable intellectual property, technology or a market in which competition is still developing, the potential competition implications should be considered early in the deal process.
For businesses and their advisers, the question should no longer simply be whether a transaction meets the mandatory notification thresholds, but whether there are other features of the deal that could bring it onto the Commission’s radar.
- Ian Jacobsberg is an attorney at Fluxman’s Attorneys.
