A violation of the amended South African Competition Act No. 89 of 1998 (the “Competition Act”) occurs when a notifiable merger is implemented without first receiving approval from the Competition Commission of South Africa (“Commission”), and the parties may be subject to administrative fines as well as possible implementation injunctions. The following requirements for the notifiability of mergers must be understood by all parties involved in transactions.
In terms of the Competition Act, a merger is notifiable to the Commission if it meets the following three criteria:
- jurisdiction test – the merger must constitute economic activity within, or having an effect within, South Africa;
- control test – the merger must constitute a “merger” as defined in section 12 of the Competition Act; and
- threshold test – the merger must meet the thresholds of assets and turnover values established in the Competition Act.
Jurisdiction
The Competition Act applies to all economic activity within, or having an effect within, South Africa.
Control test
In terms of section 12(1) of the Competition 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. A merger can be achieved in any manner, including through the (i) purchase or lease of the shares, an interest or assets of the other firm in question; or (ii) amalgamation or other combination with the other firm in question. Section 12(2) sets out a list of situations in which a person will be deemed to control another firm.
Threshold test
Identifying whether the transaction exceeds specified financial limits is the next stage in a merger notifiability examination. Even if it constitutes a merger, a transaction that does not exceed these limits does not require the consent of the competition authorities and may be carried out without it.
