South Africa Competition Commission: ZA Small Merger Thresholds Increased

• The Competition Commission has proposed amendments to its Guidelines on Small Merger Notification, increasing the monetary thresholds for small mergers.
• The revised large merger notification thresholds that came into effect earlier this year necessitated corresponding changes to the existing Small Merger Guidelines.
• The amended Small Merger Guidelines apply to all small mergers, regardless of sector or industry, and identify specific circumstances where notification is expected before implementation.
• The increased financial criteria may require more transactions to be notified, even if previously exempt, and lawyers and compliance officers should review their clients' transactions accordingly.

The amended Small Merger Guidelines continue to apply to all small mergers, regardless of sector or industry, and identify specific circumstances where the Commission expects notification before implementation.

The Competition Commission has proposed amendments to its Guidelines on Small Merger Notification, which will increase the monetary thresholds for small mergers. This change is a direct result of the revised large merger notification thresholds that came into effect earlier this year. The existing Small Merger Guidelines were benchmarked against these regulated thresholds, and the upward revision necessitated corresponding changes. As a result, the proposed amendments focus solely on increasing the financial criteria for notifying small mergers to the Commission. This shift in threshold values may require more transactions to be notified, even if previously exempt. Lawyers and compliance officers should review their clients' transactions against these new criteria to ensure compliance with the updated guidelines.

The Competition Act 89 of 1998 provides the framework for merger control in South Africa, including the power for the Commission to require notification and approval of small mergers. Section 13(3) of the Act allows the Commission to call in a small merger within six months after implementation if it believes the merger may substantially prevent or lessen competition or cannot be justified on public interest grounds. The amended Small Merger Guidelines continue to apply to all small mergers, regardless of sector or industry, and identify specific circumstances where the Commission expects notification before implementation. These instances include when the acquiring firm's turnover or asset value exceeds the large merger combined threshold, currently ZAR 9.5 billion, and at least one of the following criteria is met in respect of the target firm.

The increased monetary thresholds for small mergers may have significant implications for dealmakers and companies operating in South Africa's digital economy. The Commission's concern that potentially anti-competitive acquisitions in digital or technology markets may escape regulatory scrutiny due to the early stage of target firms' development is a key driver behind this change. By increasing the financial criteria, the amended Small Merger Guidelines aim to prevent future competition with incumbents and lessen competition by strengthening the portfolios of dominant companies. South Africa's approach forms part of a broader recalibration of African merger control regimes to address the realities of the digital economy.

Lawyers and compliance officers should be aware of the increased monetary thresholds for small mergers in South Africa, which may require notification to the Competition Commission even if previously exempt. They should review their clients' transactions against these new criteria.

Source: Original reporting via Webber Wentzel