Worldwide, competition policy has established itself as a major instrument of economic policy and regulation. In September 1999, the Competition Act (the Act) came into operation in South Africa. However, since it came fully into effect, practice has revealed a need for review. As a result, the legislature recently enacted the Competition Second Amendment Act 2000 (the Amendment Act), which came into effect on February 1 2001.
In terms of section 3(1) of the Act, all economic activity within, or having an effect within, South Africa is subject to the provisions of the Act, save for a few exceptions.
Previously, section 3(1)(d) excluded from the jurisdiction of the Act "[a]cts subject to or authorized by public regulation". This created uncertainty regarding the jurisdiction of the Act where entities are subject to industry specific regulation in terms of other legislation.
The Amendment Act removes section 3(1)(d) from the Act and the competition authorities now have concurrent jurisdiction with sector-specific regulators.
A new category of mergers
The Act created two categories of notifiable mergers: "intermediate mergers" and "large mergers". However, low thresholds for the determination of the categories of mergers caused the Competition Commission to consider a large number of mergers that posed no significant competition policy concerns.
The Amendment Act introduces the concept of a "small merger", which is any merger that falls below the threshold for an intermediate merger. The parties to such a merger may implement it without seeking approval from the Commission. However, the Commission may, for a period of six months after the merger, require the parties to a small merger to notify the transaction if it raises competition concerns or cannot be justified on public interest grounds. The parties may not then further implement the merger until it has been approved.
A party to a small merger may voluntarily notify the Commission of that merger at any time.
Definition of a merger
Previously, the merger definition referred to the acquisition or establishment of control over "all significant interests" in the business of other parties. Interpretation of the phrase "all significant interests" proved problematic. Accordingly, the phrase was removed from the new definition, which reads as follows: "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".
In terms of the Act, the minister was required to determine notification thresholds for intermediate and large mergers, as well as a threshold for the application of abuse of dominance provisions.
The merger thresholds have been adjusted with effect from February 1 2001 as described next.
As stated above, there is a new category of small mergers, which are those that fall below the threshold for an intermediate merger.
An intermediate merger is one in which
- the "combined figure" is R200 million ($25 million) or more; and
- the annual turnover or assets of the target firm is more than R30 million.
- the threshold for a large merger remains unchanged as follows:
- the "combined figure" is R3.5 billion or more; and
- the annual turnover or assets of the target firm is more than R100 million.
Note that the "combined figure" is the highest of:
- the combined annual turnover of the parties in, into or from the Republic;
- the combined assets of the parties in the Republic; or
- the annual turnover of the one and the assets of the other.
Filing fees were formerly considered to be too high, and have been adjusted as follows:
- no fee is payable for filing a merger notice for a small merger;
- the filing fee for an intermediate merger is no longer set on a sliding scale but is now set at R75,000, whereas before it could have been as high as R250,000; and
- the fee for a large merger has been substantially reduced, from R500,000 to R250,000.
The above filing fees are exclusive of value-added tax.
Mergers may be notified at any time, but may not be implemented until approval by the Commission is obtained.
There are minor changes to the time periods for the approval of mergers.
A complainant may seek interim relief immediately upon filing a complaint.
The level of proof for the granting of interim relief to complainants has been changed from a balance of probabilities to proof of a prima facie right.
A process for determining confidentiality of information has been introduced.
The amendments to the Act materially affect the reach and application of the Act. The competition authorities and the Department of Trade and Industry have, to a certain extent, taken account of the difficulties encountered with the Act until now. The increase in the thresholds, and the lowering of the filing fees in relation to mergers, must in particular be welcomed.
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