Since the inception of the Competition Commission in 1999 firms
which meet certain turnover or asset values have had to notify the
competition authorities of their intention to merge or face
possible penalties of up to 10 per cent of their turnover and the
prospect of having to unbundle their newly acquired business.
The Minister of Trade and Industry recently gazetted new merger
thresholds and fees effective from 1 April 2009. In terms of the
new thresholds merging parties which have a combined annual
turnover or assets below R560 million and where the annual turnover
or asset value of the target firm is below R80 million will no
longer have to notify the Competition Commission of their intention
to merge as a matter of course. This is unless their proposed
transaction is likely to impact negatively on competition in any of
the markets in which the firms operate.
If firms are concerned that a proposed transaction below the
threshold is likely to raise competition concerns, it would be wise
to voluntarily notify the Commission, rather than face the prospect
of having to divest after the transaction has been implemented. The
Competition Commission has the power to require parties to notify
such mergers up to six months after implementation if it believes
that the proposed transaction will negatively affect competition
and cannot be justified on public interest grounds.
The increase in the merger notification thresholds is
significant when compared to the thresholds that the Commission has
applied until now. The new values are more than one and a half
times greater than the thresholds that have applied until now.
Fortunately, the increase in merger notification fees has not
shown a commensurate increase. The notification fees for an
intermediate merger have increased by a third.
As from April 2009 mergers will be classified as intermediate if
they cross the thresholds mentioned above. If the combined assets
or turnover value of the firms is above R6.6 billion and the asset
or turnover value of the target firm is above R190 million a merger
will be classified as large and the requisite filing fee will
increase by 40 per cent to R350 000.
The increase in the merger notification thresholds is a positive
move in terms of Competition legislation and a welcome relief for
business in the present economic climate. It reduces the regulatory
burden and allows many more businesses to implement their
transactions without having to wait for regulatory approval.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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