Mergers and Acquisitions in South Africa: The Role of the Competition Commission

Mergers and acquisitions are a common feature of the business landscape in South Africa. They involve the consolidation of two or more companies into a single entity and can have a significant impact on competition and consumer welfare. The Competition Commission in South Africa is responsible for regulating mergers and acquisitions to ensure that they do not harm competition or consumers. In this article, we will provide a comprehensive guide to the role of the Competition Commission in regulating mergers and acquisitions in South Africa.

What is the Competition Commission?

The Competition Commission is an independent statutory body established by the Competition Act in South Africa. The Commission is responsible for investigating and prosecuting anti-competitive conduct, as well as regulating mergers and acquisitions to ensure that they do not harm competition or consumers.

What is Merger Control?

Merger control is the process of regulating mergers and acquisitions to ensure that they do not harm competition or consumers. The Competition Commission is responsible for conducting a review of mergers and acquisitions to determine whether they are likely to substantially prevent or lessen competition in a market. If a merger or acquisition is found to be anti-competitive, the Commission may require the parties to the merger to make certain concessions or may prohibit the merger altogether.

In South Africa, the Competition Act requires that the Competition Commission be notified of a merger if the merger meets certain thresholds. The thresholds are based on the combined assets or turnover of the merging parties and are updated from time to time. Currently, the thresholds are:

• If the combined assets or turnover of the merging parties exceed R190 million and R560 million respectively, then the merger must be notified to the Competition Commission.

• If the merger involves a firm that has assets or turnover in, or from South Africa, and a foreign firm that has assets or turnover above R190 million, then the merger must be notified to the Competition Commission.

• If the merger involves a firm that has assets or turnover in, or from South Africa, and a foreign firm that has assets or turnover above R560 million, then the merger must be notified to the Competition Commission.

It is important to note that the Competition Act requires that mergers that meet the thresholds be notified to the Competition Commission before the merger is implemented. The notification must be made as soon as possible after the conclusion of an agreement or the announcement of a firm intention to make an offer, whichever occurs first.

What is the Process of Merger Control?

The process of merger control in South Africa involves the following steps:

1. Notification: The parties to the merger must notify the Competition Commission of the proposed merger.

2. Pre-assessment: The Competition Commission conducts a pre-assessment of the merger to determine whether it is likely to have a significant effect on competition or consumers.

3. Investigation: If the pre-assessment indicates that the merger is likely to have a significant effect on competition or consumers, the Competition Commission will conduct a detailed investigation into the merger.

4. Assessment: The Competition Commission assesses the merger to determine whether it is likely to substantially prevent or lessen competition in a market.

5. Remedies: If the Commission determines that the merger is anti-competitive, it may require the parties to the merger to make certain concessions or may prohibit the merger altogether.

6. Appeal: The parties to the merger may appeal the decision of the Competition Commission to the Competition Tribunal.

What Criteria are Used to Assess Mergers?

The Competition Commission uses a range of criteria to assess mergers, including:

1. Market definition: The Commission will determine the relevant market in which the merger takes place and assess the impact of the merger on competition in that market.

2. Market concentration: The Commission will assess the level of market concentration resulting from the merger.

3. Barriers to entry: The Commission will assess the impact of the merger on barriers to entry in the market.

4. Countervailing buyer power: The Commission will assess the ability of buyers to counteract any increase in market power resulting from the merger.

5. Efficiencies: The Commission will assess any efficiencies resulting from the merger, such as cost savings or improved product quality.

What are the Consequences of Non-Compliance with Competition Laws?

Non-compliance with competition laws in South Africa can have significant consequences for companies involved in mergers and acquisitions. The Competition Commission has the power to impose fines of up to 10% of a company's turnover for anti-competitive conduct. In addition, if the Commission determines that a merger is anti-competitive, it may prohibit the merger altogether or require the parties to the merger to make certain concessions, such as divesting certain assets or changing their business practices. Companies that fail to comply with competition laws may also face reputational damage and loss of market share.

Conclusion

Mergers and acquisitions can have a significant impact on competition and consumers in South Africa. The Competition Commission plays a crucial role in regulating mergers and acquisitions to ensure that they do not harm competition or consumers. By understanding the process of merger control, the criteria used to assess mergers, and the potential consequences of non-compliance with competition laws, companies involved in mergers and acquisitions can ensure that they comply with the regulations and contribute to a competitive and fair business environment in South Africa.

If you would like to find out more, contact our offices today to schedule a consultation with one of our specialist corporate law attorneys.