When do you notify the Competition Commission of your merger?

Not all mergers are created equal with some mergers requiring notification to the Competition Commission and others not. In this article, we elaborate on the mergers that will require notification as well as the consequences of failing to notify the Competition Commission.

The Competition Commission is another key South African regulatory body governing Mergers and Acquisitions (“M&A”) in South Africa. the Competition Commission is established in terms of the Competition Act, No. 89 of 1998 (“Act”).  

The Competition Commission’s core functions are to investigate and prosecute abuse of power and restrictive practices, to conduct legislative reviews and formal inquiries into the state of South African markets, to grant or refuse applications for exemption from the Act’s application and, lastly, to decide on M&A applications.  

The responsibility of ensuring that the Competition Commission is made aware of any applicable mergers is the responsibility of the merging parties and parties failing to notify the Competition Commission, may incur fines of up to 10% of the annual turnover of the merging parties.  

To answer the question of whether a merger notification is necessary will always depend on the facts of the particular merger. The main considerations include:

  • The jurisdiction of the Competition Commission.
  • Whether the transaction meets the definition of a merger according to the Act.
  • Whether the transaction exceeds the relevant thresholds.

Jurisdiction

The Act applies to M&A transactions within South Africa. Thus, the question of jurisdiction requires that the merger take place in South Africa or that the transaction must have an effect within the territory of South Africa.  

Merger

Determining whether a “merger” occurs with respect to the above requires a look at section 12 of the Act. Section 12 states that a merger occurs when one or more firms (the “acquiring firm(s)”) (referring to not only companies, but also persons, partnerships, trusts, etc.) acquire or establish, direct or indirect control over the whole or part of the business of another firm (the “target firm(s)”).  

The term “control” holds a broad meaning with respect to the above and it is not always straightforward to determine whether control is acquired. The facts of each merger must therefore be assessed on a case-by-case basis and it is advisable to seek legal advice in this regard. 

Threshold

The Competition Commission must be notified of all proposed M&A transactions where the value of the transaction is greater than or equals R600 million Rand (referring to the value obtained by adding the annual turnover of both the acquiring and transferred firms or by combining the value of their assets (“transaction value”)) and where the annual turnover or asset value of the transferred firm is at least R100 million Rand but less than R190 million. Additionally, where the transaction value equals or exceeds R6.6 billion Rand, and the annual turnover/asset value of the target firm equals or exceeds the threshold of R190 million Rand, notification of such merger must be submitted to the Competition Commission as a large merger. 

Where a merger does not exceed the above thresholds, such merger is considered a small merger. In these instances, a notice to the Competition Commission is not needed but may still be done voluntarily under section 13 of the Act.

To conclude. Before entering into and affecting a merger it is vital for the parties to the merger to consider the above requirements for notification. As mentioned, failing to do so could result in extreme fines for the parties resulting in severe financial loss. Talk to our M&A team should you be in need of legal advice and support for your intended M&A transaction.

Disclaimer: This article is the personal opinion/view of the author(s) and is not necessarily that of the firm. The content is provided for information only and should not be seen as an exact or complete exposition of the law. Accordingly, no reliance should be placed on the content for any reason whatsoever and no action should be taken on the basis thereof unless its application and accuracy has been confirmed by a legal advisor. The firm and author(s) cannot be held liable for any prejudice or damage resulting from action taken on the basis of this content without further written confirmation by the author(s). 

 

January 28, 2024
TRP approval: Essential for SA company transactions

TRP approval: Essential for SA company transactions

The Takeover Regulation Panel (“TRP”) is a key South African regulatory body responsible for regulating certain types of transactions undertaken by companies in South Africa. In this article, we take a look at a few transactions that specifically need to be approved by the TRP and, in particular, the requirements to give notice of such transactions.

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