Despite the international sub-prime crisis and a slowing
South African economy, a significant number of mergers have
been notified to the South African competition authorities this
year. Practitioners in South Africa have suggested that the
Competition Act should be amended in order to facilitate a
simpler and more efficient merger approval process.
Unfortunately, however, the Competition Amendment Bill recently
presented to Parliament by the Department of Trade and Industry
focuses on enforcement (particularly in relation to cartels and
complex monopolies) and makes hardly any mention of the
procedures in terms of which merger transactions are cleared by
the competition authorities.
The Competition Tribunal's website indicates that it
reviewed 57 large mergers between January and July this year
(compared with 48 during the same period last year). The
Competition Commission's merger filing case numbers
reflect that more than 3800 proposed transactions have been
notified to date. Although the competition authorities maintain
that their review periods are generally in line with
international benchmarks, there are fears that their increased
workload may impact on their ability to review transactions
efficiently and speedily. Clearly, timing is of the essence in
many commercial transactions, for example, in the context of
cross-border, private equity and black economic empowerment
Some while ago, the Department of Trade and Industry
proposed raising the monetary thresholds for compulsory
notification set out in regulations to the Act. These have not
been adjusted since 2001, and so as deal values have increased
over the past 5 years, so have the number of merger
transactions requiring notification. Raising the thresholds
would mean that fewer deals have to be reviewed by the
competition authorities. This amendment to the regulations to
the Act is expected to be published soon, although there is no
clarity yet on what the amended thresholds might be.
There are a number of ways in which the merger review
process could be streamlined. Firstly, provision should be made
for 'short-form' merger filings and streamlined
review paths. At present, although the Commission has published
Fast-Track Guidelines for the expedited review of uncomplicated
mergers, this procedure only applies to intermediate mergers
which meet the fairly narrow criteria set out in the guideline.
There is no fast-track procedure for large mergers, even if
they clearly do not pose any competition law or public interest
concerns. Ideally, only mergers which raise substantial
competition law or public interest concerns should be notified
in terms of the 'long-form' filing and be
subject to detailed review by the Tribunal. The Commission
should thus decide on all uncomplicated acquisitions, even if
the deal value classifies them as large mergers. The Tribunal
should, however, retain oversight over the review path which
each transaction follows, and could require transactions filed
using the short-form filing to be converted to a long-form
filing, if necessary.
South Africa should also introduce a formal pre-merger
notification procedure, so that parties can obtain a formal
view from the Commission on whether a proposed transaction may
pose serious competition concerns, and deal with them, prior to
notifying their transaction. It might also be feasible for
South Africa to introduce a 'safe harbour' or
'de minimis' exception, similar to that
afforded to the United Kingdom's Office of Fair Trading
(OFT) in terms of the Enterprises Act. This exception permits
the OFT to decide not to refer a transaction to the UK
Competition Commission if it believes that the market concerned
is not of sufficient importance to justify a referral. This
would avoid merger reviews where the costs involved would be
disproportionate to the size of the market affected by the
The drafters of the South African Competition Act recognised
that effective merger control plays an essential role in
maintaining healthy competition in the South African economy.
At the same time, however, lengthy and costly merger review
procedures may stifle deal-making and reduce
efficiency-enhancing merger activity. They can also frustrate
foreign investors. It is thus hoped that the DTI will also give
careful consideration to amendments to the merger provisions of
the Act in the near future.
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general guide to the subject matter. Specialist advice should
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