The Competition Commission (Commission) of South Africa has released its revised guidelines on small merger notification which primarily aim to assist the Commission in clearly identifying small mergers and acquisitions in digital markets.
The revised guidelines respond to increased concerns that acquisitions of new, innovative companies in digital markets may be escaping regulatory scrutiny due to the acquisitions taking place at an early stage in the life of the target companies.
“The guidelines will further address concerns that target companies may be acquired before they have generated sufficient turnover or accumulated capital assets to trigger mandatory merger notification,”
the Commission said in a press release.
Small mergers do not require mandatory notification, but in terms of Section 13(3) of the Competition Act 89 of 1998, the Commission may require, up to six months after the small merger has been implemented, that such mergers be notified and approved by the Commission.
According to the new guidelines, 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 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.
• Mergers and share acquisitions where the acquiring firm’s turnover or asset value alone exceeds the large merger combined asset/turnover threshold (which is currently R6.6 billion) and at least one of the following criteria are met for the target firm:
1 The consideration for the acquisition or investment exceeds the combined asset/turnover threshold for intermediate mergers (currently R190 million),
2 The consideration for the acquisition of a part of the target firm is less than the R190 million threshold but effectively values the target firm at R190 million or more.
Parties to small mergers must inform the Commission in writing of their intention to enter into the transaction and provide sufficient detail on the acquiring and target firms, the proposed transaction, and the relevant markets in which the firms compete.The revised guidelines can be accessed here