Legislation and jurisdictionRelevant legislation and regulators
What is the relevant legislation and who enforces it?
The relevant legislation is the Competition Act No. 89 of 1998 (the Act) and the regulations promulgated thereto. The Competition Amendment Act No.18 of 2018 (the Amendment Act), which has been assented to by the President of the Republic of South Africa, but at the time of writing has not yet come into force, seeks to address the high levels of economic concentration and ownership profile of the South African economy. As a result, several potentially far-reaching amendments have been introduced (see questions 8, 35 and 36).
The Act is enforced by the Competition Commission (Commission) and the Competition Tribunal (Tribunal). Decisions by the Tribunal can be appealed or taken on review to the Competition Appeal Court (CAC). In circumstances where a competition matter raises constitutional issues or if the matter raises an arguable point of law of general public importance, such matters can also be referred to the Constitutional Court (CC).Scope of legislation
What kinds of mergers are caught?
The Act stipulates that parties to transactions that meet the following two requirements must notify and obtain the approval of the relevant competition authority. First, the transaction must constitute a ‘merger’ as defined in the Act. Second, the transaction must exceed the prescribed financial thresholds.
In terms 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. The Tribunal has found that a business is something to which a market turnover can be clearly attributed, represents a measurable and relatively permanent transfer of market share or productive capacity from one firm to another, or tends to increase concentration or give the acquiring firm a larger market share even though the asset itself does not increase productive capacity. It appears that the decision by the Tribunal was subsequently amplified by the CAC and that parties should consider whether a transaction results in the ‘transfer of an identified set of activities and structures which can now be identified as a separate business undertaking and which could be pursued by the transferee’.
Mergers are categorised as either being small, intermediate or large depending on which threshold is met. Only intermediate and large mergers require merger control approval, although the Commission can request parties to a small merger to apply for merger control approval where the Commission considers that the merger may substantially prevent or lessen competition or cannot be justified on public interest grounds (see question 5).
The Commission is responsible for investigating and issuing a decision in respect of small and intermediate mergers. Large mergers are adjudicated by the Tribunal following an investigation and recommendation by the Commission on whether the transaction should be approved, approved with conditions or prohibited.
What types of joint ventures are caught?
The merger control provisions of the Act do not specifically refer to joint ventures, but the Act’s definition of a merger is wide enough to catch any joint venture that results in an acquisition of control by the joint venture (and therefore the parents of the joint venture) over the businesses of the parents that are transferred or contributed to the joint venture.
Is there a definition of ‘control’ and are minority and other interests less than control caught?
The Act provides a list of examples of situations in which a firm is deemed to control another firm, including if that firm beneficially owns more than half of the issued share capital of the other firm, holds or controls the majority of votes at the shareholder or board of directors levels of the other firm, or has the ability to materially influence the policy of the other firm in a manner comparable to, for example, a majority shareholder.
The competition authorities typically consider a firm to have material influence over the policy of another firm where the former has a required say on or veto over strategic issues such as the budget, business plan, appointment of senior management, and direction of commercial policy of the latter, or a casting vote in the event of a tie in voting in members meetings or board meetings of the latter (similar to the factors considered by the European Competition Commission).
However, this is not an exhaustive list, and there may be matters not involving the typical decisions referred to above, which are of such a nature that they are nevertheless material to the strategic direction of a particular business (such as approving borrowing plans in a capital-intensive business requiring large amounts of loan funding).
The question of whether parties to an internal reorganisation must apply for merger control approval has been a hotly debated topic in South Africa for many years. The Commission has taken a view that internal reorganisations are subject to the merger control provisions of the Act, whereas the CC’s decision in Competition Commission and Hosken Consolidated Investments Limited/Tsogo Sun Holdings Limited seems to suggest that internal reorganisations need not be notified for merger control approval - this interpretation is untested.Thresholds, triggers and approvals
What are the jurisdictional thresholds for notification and are there circumstances in which transactions falling below these thresholds may be investigated?
Parties to an intermediate or large merger may not implement the merger until the relevant competition authority has issued a clearance certificate.
Parties to a merger that do not meet the relevant merger notification thresholds (a ‘small merger’) may implement the merger without the approval of the Commission. However, the Commission has the discretion to require parties to a small merger to apply for merger control approval within six months of the implementation date in circumstances where the Commission considers that the merger may substantially prevent or lessen competition or cannot be justified on public interest grounds. Moreover, the Commission’s guidelines on small merger notifications state that, if at the time of entering into the transaction, any of the firms (or firms within their group) is subject to a prohibited practice investigation by the Commission or respondents following a referral by the Commission of a prohibited practice investigation to the Tribunal, then the Commission will require the notification of the small merger. The Commission’s guidelines on small merger notifications do not have the force of law and any merger parties may use their own discretion in deciding whether to voluntarily notify a small merger.
A merger will be categorised as an intermediate merger if:
- the turnover of the target firm in, into or from South Africa or asset value in South Africa (whichever the highest) exceeds 100 million rand; and
- the combined turnover in, into or from South Africa or asset value in South Africa of the acquiring firm (whichever the highest) and the turnover or asset value of the target firm (whichever the highest) exceed 600 million rand.
A merger will be categorised as a large merger where:
- the turnover of the target firm in, into or from South Africa or asset value in South Africa (whichever the highest) exceeds 190 million rand; and
- the combined turnover in, into or from South Africa of the acquiring firm (whichever is highest) and the turnover or asset value of the target firm (whichever the highest) exceed 6.6 billion rand.
Is the filing mandatory or voluntary? If mandatory, do any exceptions exist?
Parties to a transaction that constitutes a ‘merger’ and meets the prescribed financial thresholds must apply for merger control approval and may not implement the merger until such time as the Commission or Tribunal (as the case may be) has issued a merger clearance certificate.
As mentioned in question 5, the Commission can call upon parties to a small merger to apply for merger control approval in which circumstances the Commission may ask the parties to take no further steps in implementing the merger.
Mergers involving banks and insurance companies may be excluded from the suspensory provisions of the Act in circumstances where consent or approval is required in terms of the Banks Act, Financial Services Boards Act and Financial Markets Act and where the Minister of Finance has issued the relevant notice to the Commission (see question 8 for more detail).
Do foreign-to-foreign mergers have to be notified and is there a local effects or nexus test?
The Act applies to all economic activity within or having an effect within South Africa. The competition authorities have taken a broad view on what constitutes ‘economic activity’ and it would cover circumstances where firms outside of South Africa render services or supply goods to customers in South Africa.
Are there also rules on foreign investment, special sectors or other relevant approvals?
The Act provides that the Commission and Tribunal may not make an order in relation to an intermediate or large merger where consent or approval is required in terms of the Banks Act, Financial Services Boards Act and Financial Markets Act and where the Minister of Finance has issued a notice to the Commission certifying that it is in the ‘public interest’ that the jurisdiction of the Act is excluded.
This public interest requirement has typically only been applied in circumstances where applying for the approval of a merger by the Commission or Tribunal would result in systemic or economic risk (due to timing or confidentiality reasons) as a result of a failing financial institution. Nevertheless, there is precedent for the Minister of Finance excluding the jurisdiction of the competition authorities even after a merger application has been filed to reduce confusion arising from approval having to be obtained from more than one regulator.
The Amendment Act will introduce provisions that allow the President of South Africa to intervene in mergers where the acquiring firm is foreign and where the merger may adversely affect South Africa’s national security interests. The intervention by the President will take place via a committee, which is to be appointed by the President and which will comprise of Cabinet members and other public officials.
The foreign acquiring firm will be required to notify the committee of an intermediate or large merger. The committee must consider whether the merger will have an adverse effect on South Africa’s national security interests, and in doing so, may consult and seek advice from the competition authorities or any other regulatory authority or public institution. The committee will effectively have a veto over mergers that are deemed to have a national security interest as the Commission and Tribunal may not consider a merger if the committee was not notified of the merger and may not approve the transaction if it was prohibited by the committee.
The President is required to publish a list of national security interests and must take into account the following factors in determining what constitutes a national security interest: the potential impact of the merger on defence capabilities; sensitive technology; infrastructure security; supply of critical goods or services; foreign surveillance risks; foreign relations; and terrorism.
This new provision is exceptionally broad and may result in many foreign mergers being subject to an additional level of scrutiny, which in turn may lead to procedural and timing delays and additional costs.
Notification and clearance timetableFiling formalities
What are the deadlines for filing? Are there sanctions for not filing and are they applied in practice?
There are no deadlines for filing a merger, but intermediate or large mergers may not be implemented until the merger has been approved by the relevant competition authority. The sanctions for failing to notify an intermediate or large merger may include: an administrative penalty of up to 10 per cent of a firm’s South African turnover and or exports from South Africa; and any other order deemed appropriate by the Tribunal, including the unbundling of the merger and divestiture (most likely in mergers giving rise to competition concerns). To date, the competition authorities have only imposed administrative penalties for failing to receive merger control approval and the penalties to date have typically ranged between 350,000 and 2 million rand.
Which parties are responsible for filing and are filing fees required?
The acquiring and target firm are responsible for filing a joint merger application. The applicable filings fees are set out in the table below.
What are the waiting periods and does implementation of the transaction have to be suspended prior to clearance?
The implementation of intermediate and large mergers must be suspended until the merger has been approved by the relevant competition authority. The waiting period for approval depends on whether the merger is intermediate or large. For intermediate mergers, the Commission has an initial period of 20 business days within which to approve or prohibit a merger. This period can be extended by a further 40 business days, at the Commission’s discretion.
In the case of large mergers, the Commission has an initial 40 business days to investigate the merger and make a recommendation to the Tribunal to approve or prohibit a merger. The Commission can, however, apply to the Tribunal to extend the 40-business-day investigation period by 15 business days at a time. The merger parties may consent or object to such an extension request. The number of extensions requested by the Commission typically depends on the complexity of the merger. Once the Commission has made its recommendation to the Tribunal, the Tribunal must convene a hearing within 10 business days of the Commission making its recommendation to: make a final decision on the merger; or, in the case of a contested merger or a merger where third parties wish to participate in the Tribunal proceedings, determine the procedure and dates for the hearing of the matter, including any interlocutory procedures (ie, discovery, procedures for intervening parties, filing of witness statements or expert reports, etc) as may be required.Pre-clearance closing
What are the possible sanctions involved in closing or integrating the activities of the merging businesses before clearance and are they applied in practice?
The sanctions for implementing a merger before clearance are the same as the sanctions that may be imposed for failure to notify. Please refer to question 9. The Commission published Guidelines for the determination administrative penalties for failure to notify mergers and implementation of mergers contrary to the Competition Act. The Guidelines could result in higher administrative penalties being imposed for prior implementation in future. The Guidelines set out a series of steps to be followed by the Commission when determining the administrative penalty.
Under the Guidelines, as a first step, the base amount for the administrative penalty will be double the filing fee (ie, 330 000 and 1.1 million rand for intermediate and large mergers, respectively). This step is followed by multiplying the base amount by a percentage relevant to the duration of the contravention. For example, if the conduct endured for less than a year, 50 per cent is added for every month during which the conduct was ongoing, 75 per cent and 100 per cent is added for every month if the conduct endured for between one and two years, or for longer than two years, respectively. Mitigating and aggravating factors can also be taken into account in determining the appropriate penalty.
Are sanctions applied in cases involving closing before clearance in foreign-to-foreign mergers?
Sanctions for closing before clearance apply equally to local and foreign-to-foreign mergers.
What solutions might be acceptable to permit closing before clearance in a foreign-to-foreign merger?
The Act does not provide for any hold-separate arrangements, but parties who wish to implement foreign-to-foreign mergers prior to obtaining approval in South Africa have in the past established a ‘hold-separate’ arrangement to ring-fence the South African leg of the merger. While the Commission or Tribunal has not expressly proffered a view on such arrangements, it has in the past been accepted in circumstances where the parties are able to illustrate that the South African leg of a global merger can be ring-fenced and will not be implemented prior to approval being granted.Public takeovers
Are there any special merger control rules applicable to public takeover bids?
There are no specific merger control rules applicable to public takeover bids. To the extent that such bids meet the definition of a ‘merger’ in the Act (ie, results in a firm acquiring control over the whole or part of the business of another firm), such bid requires the approval of the competition authorities, if the prescribed financial thresholds are met.Documentation
What is the level of detail required in the preparation of a filing, and are there sanctions for supplying wrong or missing information?
The Regulations to the Act prescribes certain forms and schedules to be completed on behalf of the acquiring and target firm. The information required in these schedules include the control structure of the acquiring firm or group, its controlling interests in South Africa, details of the largest customers and competitors of the parties to the merger and the market shares of the parties in respect of each relevant market.
It is a criminal offence under the Act to provide the Commission with false information. The sanction for such offence is a fine of up to 500,000 rand, imprisonment for a period of up to 10 years, or both a fine and imprisonment. In addition, if information is missing or certain prescribed documentation is not provided, the filing may be deemed incomplete, and the review period will not commence until the outstanding information or documentation is provided.
Documents relating to the merger that must be filed include: all merger agreements, any document including minutes, reports, presentations and summaries prepared for or by the board of directors of both the acquiring and target firms relating to the transaction, financial statements and the parties’ most recent business plan.Investigation phases and timetable
What are the typical steps and different phases of the investigation?
After a merger is filed with the Commission, an investigating team will be assigned. The investigating team will liaise with the parties’ legal counsel throughout the investigation process. The typical steps taken by the investigating team during the investigation include contacting customers and competitors of the parties to get their views on the merger, sending out questionnaires to the parties or other market participants, conducting interviews or conference calls with relevant stakeholders, conducting site visits (if necessary) and meeting with the parties. Consultations with the Commission prior to filing a merger are not required. However, should the parties wish to meet with the Commission prior to filing, such a meeting can be arranged. These consultations may be helpful in extremely time-sensitive transactions, or transactions that are likely to have a substantial public interest impact (eg, significant job losses).
Once the investigating team has finalised its investigation, it will submit a report to the Commission’s Executive Committee for decision making.
What is the statutory timetable for clearance? Can it be speeded up?
See question 11 for the statutory periods for clearance in respect of intermediate and large mergers. The Commission published service standards for the review of mergers according to complexity. The table below summarises the Commission’s service standards. These periods are not binding on the Commission and merely serve to indicate the typical time period within which the Commission seeks to review mergers.
Type of merger
Parties’ market share is below 15%, no complex control structure and no public interest concerns arise
20 business days
Transactions involving actual or potential competitors, parties in a vertical (supply) relationship, where the parties hold more than a 15% market share, or raising public interest concerns
45 business days
Transactions involving close competitors, high market shares, and requiring specific documents and information from parties (in addition to the prescribed documents and information) as well as third parties
60 business days (intermediate merger)
120 business days (large merger)
Although the Commission aims to finalise Phase 3 large mergers within 120 business days, these can often take much longer to finalise, particularly in circumstances where third parties have raised issues with the merger. There is no formal process in terms of which the merger review period can be fast tracked. However, with mergers that are extremely time sensitive and where delays could result in significant consequences, such as job losses or the closure of a firm, the parties can meet with the Commission prior to filing or during the investigation to explain the challenges and work with the Commission in an attempt to expedite the review.
Substantive assessmentSubstantive test
What is the substantive test for clearance?
The substantive test has two legs, a competition assessment and a public interest assessment. The competition assessment considers whether the merger is likely to substantially prevent or lessen competition in any relevant market, and if so, whether the merger can be justified on the basis of any technological, efficiency or other pro-competitive gains that outweigh the anticompetitive effect of the merger. The public interest assessment considers the effect of the merger on certain public interest grounds set out in the Act.
In considering whether a merger is likely to substantially prevent or lessen competition, the competition authorities must assess the strength of competition in the relevant markets, and the probability that the firms in question would behave competitively or cooperatively, by taking into account any relevant factors, including:
- whether the merger is likely to result in the removal of an effective competitor;
- the actual or potential level of import competition;
- ease of entry into the relevant market;
- the level and trends of concentration and history of collusion in the market;
- the degree of countervailing power in the market;
- market dynamics such as growth, innovation and product differentiation;
- the nature and extent of vertical integration in the market; and
- whether the business of part of the business of a party to the merger has failed or is likely to fail (the failing firm defence).
Three further factors that the Amendment Act introduces are: (i) the extent of ownership by a party to the merger in another firm or other firms in related markets; (ii) the extent to which a party to the merger is related to another firm or other firms in related markets, including through common members or directors; and (iii) any other mergers engaged in by a party to a merger for such period as may be stipulated by the Commission.
In considering whether the merger can be justified on public interest grounds, the Commission or Tribunal must consider the effect of the merger on:
- a particular industrial sector or region;
- the ability of small businesses, or firms controlled by historically disadvantaged persons to become competitive; and
- the ability of national industries to compete in international markets.
Once the Amendment Act comes into effect, firms would also need to consider the promotion of a greater spread of ownership, in particular to increase the levels of ownership by historically disadvantaged persons and workers in firms in the market.
Is there a special substantive test for joint ventures?
No. The same substantive test (see question 19) is applied to all transactions.Theories of harm
What are the ‘theories of harm’ that the authorities will investigate?
The theories of harm investigated by the competition authorities typically depend on the type of merger being considered. In the context of horizontal mergers, the authorities will generally consider whether the transaction will result in any unilateral effects (ie, whether, post-merger, the parties will have the ability to profitably increase prices or otherwise unilaterally exercise market power) or coordinated effects (ie, whether the merger will increase the ability of the parties to coordinate their behaviour with that of their competitors). In this regard, the authorities also consider whether mergers are likely to result in information sharing between competitors because of firms having common shareholding or ownership in competing firms.
In vertical mergers, the primary theory of harm is whether the merger is likely to result in the foreclosure of any competitors of the merging parties at any level of the supply chain and whether this is likely to result in the substantial lessening or prevention of competition. This theory of harm is typically of concern when one or both of the parties have high market shares in their respective market or markets, or is a large customer or supplier of third parties within the supply chain, such that the vertical integration of the merging parties would result in competitors being foreclosed from the relevant market. In the case of mergers involving firms in different product markets and no vertical relationship (conglomerate mergers), the authorities will consider whether the merger gives rise to any conglomerate or portfolio effects. This includes considering whether the merged entity could foreclose competitors through tying, bundling products, exclusive arrangements or otherwise give the merged entity market power.Non-competition issues
To what extent are non-competition issues relevant in the review process?
When determining whether a merger can or cannot be justified, the Act prescribes that the authorities must consider certain public interest issues. See question 19. Public interest issues are therefore a critical part of the merger review process.
The Commission’s Guidelines on the Assessment of Public Interest Provisions in Merger Regulation sets out the general approach that the Commission will follow and the information the Commission is likely to require in respect of each of the public interest factors listed in question 19. In terms of the Guidelines, the Commission will assess the effect of the merger on each of the relevant public interest factors with reference to whether: (i) the effect is merger specific; (ii) substantial; and (iii) there are any remedies or conditions to address the negative public interest effect.
The effect of mergers on employment is a key concern for the competition authorities. Most mergers resulting in job losses (often even in cases where job losses are not substantial) are approved subject to one or more conditions relating to employment. For example, moratoriums on the number of job losses, commitments to train or re-skill staff, commitments to redeploy staff in other areas of the parties’ businesses or providing counselling and assistance in finding alternative employment.
Generally, public interest issues arising from a merger are addressed by way of conditions. Other conditions imposed by the Tribunal to address public interest concerns include:
- commitments by the merging parties to maintain local production facilities, head offices and supply or sourcing relationships;
- establishing supplier development funds for technical and financial support and assistance for small and medium sized businesses or businesses owned by historically disadvantaged groups;
- establishing skills development and training programmes; and
- commitments to make a specified investment within a certain period of time post-merger.
To what extent does the authority take into account economic efficiencies in the review process?
To the extent that a merger is likely to substantially prevent or lessen competition, the Act requires the authorities to consider whether there are any technological, efficiency or other pro-competitive gains: (i) resulting (or likely to result) from the merger; (ii) which outweigh the negative effect of the merger on competition; and (iii) which would not likely be achieved without the merger. In terms of approach, given that efficiencies are only relevant in transactions that are likely to result in a substantial lessening or prevention of competition, efficiency arguments need not be raised upfront, and parties often wait until the Commission has expressed a view as to the effect on competition before raising any efficiency arguments.
In the Trident Steel/Dorbyl transaction, the Tribunal adopted the following two-pronged approach to assessing efficiencies: (i) where efficiencies can be qualitatively and quantitatively verified, it need not be shown that consumers will benefit from a merger (ie, evidence of consumer benefit will be less compelling); and (ii) where efficiencies are not clearly verifiable, pass-through or benefit to consumers must be illustrated.
The most recent Tribunal decision dealing with efficiencies is the Pioneer Hi-Bred/Pannar Seed transaction. The merger was taken on appeal to the CAC by the parties after initially being prohibited by the Tribunal (it was considered a three-to-two merger). On appeal, the CAC found that without the merger the business of the South African-based Pannar Seed would decline and ultimately fail. This would result in a loss of significant and important resources. The CAC also found that the merger would result in the market leader being constrained and will ultimately result in long-term dynamic efficiency improvements, improvements in the quality of seed produced and ensure competitive pricing. The merger was ultimately approved by the CAC, subject to various conditions, some of which were aimed at achieving these efficiencies.
Remedies and ancillary restraintsRegulatory powers
What powers do the authorities have to prohibit or otherwise interfere with a transaction?
The Commission, in the case of small and intermediate mergers, or Tribunal, in the case of large mergers, can approve, approve subject to conditions or prohibit a merger. Parties to an intermediate merger can ask the Tribunal to reconsider a decision by the Commission to prohibit or approve a transaction subject to conditions, whereas a decision by the Tribunal can be appealed to the CAC.
In terms of the Amendment Act, the Commission or Tribunal may make any appropriate decision regarding any condition relating to their prior approval of a merger.Remedies and conditions
Is it possible to remedy competition issues, for example by giving divestment undertakings or behavioural remedies?
It is possible to remedy competition issues with divestment undertakings or behavioural remedies. The remedies are typically prepared by the merger parties with input from the Commission and both the Commission and Tribunal have a preference for the remedies to be tested with market participants before issuing a decision.
Over the 2017/18 financial year, seven mergers were approved subject to divestment undertakings. Some prominent examples include the Bayer/Monsanto, Dow/DuPont, and Media24/Novus mergers.
Over the same period, 17 mergers were approved subject to a range of behavioural remedies, primarily relating to information exchange and cross-directorships or shareholdings. In these instances, the mergers were approved subject to undertakings not to exchange competitively sensitive information and limitations on the appointment of common directors. Over the last few years, there have been noticeable increases in the number of mergers approved subject to these types of conditions, which are primarily aimed at preventing coordinated conduct between competitors and other potentially collusive activities.
Other common behavioural remedies include the obligation to amend restraint of trade clauses, notify additional acquisitions, implement competition compliance policies, and continue existing supply arrangements.
What are the basic conditions and timing issues applicable to a divestment or other remedy?
The time periods relating to the implementation of remedies are usually agreed between the parties and the Commission, but the Commission typically requires that the remedies be implemented within a short period of time following approval.
What is the track record of the authority in requiring remedies in foreign-to-foreign mergers?
The competition authorities do not have a different approach in assessing foreign-to-foreign mergers compared to mergers involving local firms. However, see question 8, relating to the potential implications relating to foreign acquirers over local firms.Ancillary restrictions
In what circumstances will the clearance decision cover related arrangements (ancillary restrictions)?
It is not uncommon for the competition authorities to impose behavioural conditions that cover ancillary restrictions such as restraint of trades. For example, the scope or duration of the restraint could be limited. Generally, the competition authorities require that restraints of trade be reduced to three years.
Involvement of other parties or authoritiesThird-party involvement and rights
Are customers and competitors involved in the review process and what rights do complainants have?
The customers and competitors of the merger parties are typically contacted by the Commission as part of its investigation of a merger. Depending on the complexity of the matter, the Commission may issue detailed information requests and ask customers and competitors to respond thereto.
Customers and competitors may also contact the Commission during the investigation period and make submissions on a voluntary basis and without being approached or asked to do so by the Commission.
As explained above, large mergers are adjudicated by the Tribunal after a public hearing is held. The hearing represents a further opportunity for third parties to make submissions in circumstances where they do not agree with the Commission’s recommendation. However, only the Minister of Economic Development and trade unions or employee representatives of the parties have an automatic right of participation in merger proceedings. Other third parties will need to make a formal application to intervene and demonstrate that they have a material interest in the matter and can assist the Tribunal (by providing relevant information through discovery of documents, oral submissions or witnesses) in its adjudication of the matter. In practice, this is a low threshold.Publicity and confidentiality
What publicity is given to the process and how do you protect commercial information, including business secrets, from disclosure?
Parties can claim information as being confidential if the information comprises of ‘trade, business or industrial information that belongs [to the party], has a particular economic value, and is not generally available to or known to third parties’. The Commission may not disclose information over which a confidentiality claim has been filed. Third parties seeking access to information that has been claimed as confidential must apply to the Tribunal for an order granting them access to such information. The Tribunal will consider whether the information is confidential and make an appropriate order.
The Commission does publish a list of mergers filed, although this list is not frequently updated, and there is some publicity around the adjudication of mergers. The Commission issues weekly media statements wherein it identifies which intermediate mergers have been approved or prohibited by providing a concise summary of each adjudicated merger. The Commission is also required to publish in the government gazette a notice of its decisions and will make available to the merger parties a confidential version of its reasons for decision. In respect of large mergers, the Commission will in its media statement also indicate whether it has recommended that a particular merger be approved or prohibited.
The Tribunal issues weekly media statements indicating which large mergers will be heard by it in the coming week. The Tribunal’s decision and reasons for decision are published on its website, but its reasons do not contain confidential information. The confidential version of its reasons for decision is only made available to the merger parties.Cross-border regulatory cooperation
Do the authorities cooperate with antitrust authorities in other jurisdictions?
The Commission has concluded memorandums of understanding (MoU) with several competition authorities, but there is no formal requirement for the competition authorities to cooperate. Irrespective of whether MoUs have been signed, the Commission does cooperate with other competition authorities where multijurisdictional mergers have been filed and in particular when there is a high-profile merger. In this regard, the authorities will exchange information relating to market definition, theories of harm and conditions to remedy competition or public interest concerns.
Judicial reviewAvailable avenues
What are the opportunities for appeal or judicial review?
The merger parties can ask the Tribunal to reconsider a decision by the Commission, whereas decisions by the Tribunal can be appealed to the CAC. The Commission cannot appeal decisions by the Tribunal. See question 29.Time frame
What is the usual time frame for appeal or judicial review?
Appeal or review proceedings can take up to six months to complete from the date on which the appeal or review application is filed. The Tribunal and the CAC rules prescribe the time periods within which such applications must be brought and the various answering and replying pleadings filed. Once pleadings have closed, the Tribunal or CAC will set down a date for the hearing of the appeal or review. Matters of an urgent nature can be expedited depending on the reasons for the urgency and the availability of the relevant decision-making body.
Enforcement practice and future developmentsEnforcement record
What is the recent enforcement record and what are the current enforcement concerns of the authorities?
As at the time of writing, the Commission’s merger clearance statistics for its most recent financial year (March 2019) were not available. During its previous financial year (ending March 2018), the Commission finalised 388 merger investigations, 325 mergers were approved without conditions, 52 with conditions and 12 were prohibited during this period.
The Commission has identified certain sectors that it considers priority sectors. In the context of mergers, these are sectors that the Commission views as having high levels of concentration. These sectors include food and agro-processing, infrastructure and construction, mining, energy, financial services, ICT, pharmaceuticals, transport and intermediate industrial products. In terms of the Amendment Act, the competition authorities are mandated to address economic concentration and to promote economic transformation. Therefore, going forward, the competition authorities, in the context of mergers, will focus particularly on addressing concentration levels in these sectors as well as the participation by small, medium and micro-sized businesses in the economy and ownership or control of businesses by historically disadvantaged groups.
The Commission is also conducting a number of market inquiries in different sectors. These include private healthcare, data services, public passenger transport, liquefied petroleum gas and the grocery retail sector. Although these inquiries are distinct from the Commission’s merger investigations, mergers in these sectors are likely to attract closer scrutiny.Reform proposals
Are there current proposals to change the legislation?
The Amendment Act was signed into law on 14 February 2019 and will become effective on a date to be proclaimed by the President. The Amendment Act provides, inter alia, for changes to the merger control rules and the introduction of national security clearance for certain deals involving foreign purchasers. As noted in question 19, the Amendment Act introduces additional factors to be considered by the authorities in assessing the competition and public interest factors.
The national security clearance provision provides for the President to constitute a Committee with powers to intervene in respect of mergers involving foreign acquiring firms, and which may adversely affect the country’s national security interests. The President is required to publish a list of national security interests, taking into account factors such as the potential impact on defence capabilities, sensitive technology, infrastructure security, supply of critical goods and services, foreign surveillance risks, foreign relations, terrorism and national stability. A foreign firm filing a merger would be required to file a notice with the Committee.
The amendments are aimed at achieving the government’s objectives of dealing with the high levels of economic concentration in South African markets, and the lack of transformation of the ownership (by historically disadvantage groups) demographics of South African businesses. This is likely to result in the authorities seeking various conditions or undertakings from parties aimed at achieving these objectives.
Update and trendsKey developments of the past year
What were the key cases, decisions, judgments and policy and legislative developments of the past year?Key developments of the past year36 What were the key cases, decisions, judgments and policy and legislative developments of the past year?
A number of key merger-related decisions have been handed down over the past year:
- In the SABC/Multichoice case, the extent of the Commission’s investigatory powers was challenged. The parties contended that the Commission was limited to a ‘desktop study’ of the case and could not investigate any further or interview witnesses. However, the Constitutional Court confirmed that the Commission may investigate transactions to determine whether they constitute or give rise to a notifiable merger.
- In the Murray & Roberts/Aton case, the CAC delivered a significant judgment on shareholder voting rights. In particular, the CAC ruled that an acquirer, in a hostile merger context where merger approval by the competition authority remains outstanding, is not prohibited from acquiring and voting shares in a target company, provided there is no acquisition of control.
- In the Competition Commission/HCI case, the CC confirmed that the approval of a merger is a one-off affair. The Court held that the need for notification of a merger is triggered when a firm acquires control of another and once approval for such merger is granted, no further investigation is allowed other than to confirm that assurances made and conditions placed by the Commission have indeed been met.
- In May 2019, the CAC is expected to hand down its judgment on the mining merger involving Sibanye-Stillwater and Lonmin. The appeal was launched by the Association of Mineworkers and Construction Union, who allege that the Tribunal failed to take into consideration its submissions on the merger, particularly in relation to employment concerns.
The Amendment Act being signed into law has been one of the most important legislative developments of the past year, and, in fact, is one of the most significant developments in South African competition law since the Act came into force. This historic development marks the beginning of a new era of competition law, which is significantly more public-interest focused.
As noted in question 26, the Amendment Act provides, inter alia, for changes to the merger control rules (particularly the public interest assessment) and the introduction of national security clearance for certain deals involving foreign acquirers. Whether these changes will have an effect on potential M&A transactions depends on the deal in question. Parties will need to be sensitive to the government’s objectives of tackling high levels of economic concentration in South African markets, and the lack of transformation of the ownership demographics of South African businesses.
The Commission has also gazetted final Guidelines for the determination of administrative penalties for failure to notify mergers and implementation of mergers contrary to the Act. The Guidelines present the general methodology that the Commission will follow in determining administrative penalties in cases where parties fail to notify a merger or implement a merger without the approval of the competition authorities. See question 12.