On 7 May 2021, the Competition Commission ("Commission") issued Draft Guidelines on Small Merger Notification ("the Guidelines") for public comment. The draft Guidelines reinforce the existing approach of the Commission to the notification of small mergers that may result in anti-competitive effects as well as introducing new requirements for parties entering into transactions in the digital markets.

A small merger is classified as one which does not meet the prescribed monetary thresholds which trigger compulsory merger notification and approval. The current monetary thresholds for compulsory notification are where the combined value of the merging parties' annual South African turnover and/or assets (in any combination) equals or exceeds R600 million and the annual South African turnover or the asset value of the target firm is at least R100 million. Where these thresholds have not been met, it is not compulsory for the parties to notify the Commission of their transaction. However, if the Commission is of the view that the small merger may substantially prevent or lessen competition or is unjustifiable on public interest grounds, it may within a period of 6 months from the implementation of the transaction, require the parties to notify the transaction for approval.

The current Guidelines on small mergers require parties under investigation or who have previously been prosecuted for prohibited practices to inform the Commission of their proposed transaction.

The new Guidelines add to this and state that parties to qualifying transactions in the digital markets should inform the Commission of their proposed merger. These transactions must meet at least one of the following criteria:

  • the consideration for the acquisition/investment exceeds R190 million, provided the target firm has activities in South Africa;
  • the consideration for the acquisition of a part of the target firm is less than R190 million but indicates that the value of the target firm is R190 million, provided the target firm has activities in South Africa and, as a result of the acquisition, the acquiring firm gains access to commercially sensitive information of the target firm or exerts material influence over the target firm;
  • at least one of the parties to the transaction has a market share of 35% or more (indicating dominance) in at least one digital market; or
  • the proposed merger results in a combined post-merger market share which sees the merged entity gain or reinforce dominance over the market.

If the transaction meets any of the criteria, the merging parties should inform the Commission of that merger. This is done by way of a letter which describes the merger, the markets in which the parties participate and which indicates the parties' intent to implement the merger. The Commission will then decide whether or not the parties need to formally notify the merger by submitting a full merger filing.

These Guidelines emphasise the Commission's intent to place greater scrutiny on digital markets. Should these Guidelines come into force without any substantial change, those parties wishing to acquire companies in digital markets must be mindful of the new requirements.

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.