SOUTH AFRICA
Abstract
On 17 April 2009, the Competition Commission ("the Commission") published guidelines on small merger notifications (General Notice 386 of 2009) ("the Guideline"), which sets out the Commission's new approach to the notification of small mergers.
Small merger notification thresholds
A "small merger", which does not meet the specified financial thresholds as set out in the Competition Act, ordinarily need not be notified to the Commission and can thus be implemented without Commission approval.
Section 13(3) of the Competition Act 89 of 1998 ("The Competition Act") sets out the legal test on the basis of which the Commission could require the parties to a small merger to notify that merger. Section 13(3) states that, within six months after a small merger is implemented, the Commission may require the parties to that merger to notify the Commission of that merger if, in the opinion of the Commission, the merger may substantially prevent or lessen competition or cannot be justified on public interest grounds. In this event, the merging parties may take no further steps to implement that merger until Commission approval is granted.
The Guideline
In terms of the Guideline, the Commission is required to evaluate whether a small merger requires notification on its own merits, within the guidance provided by section 13(3) of the Competition Act. In addition, in terms of the Guideline "the Commission will require the notification of all small mergers which meet any of the following criteria:
* at the time of entering into the transaction any of the firms, or firms within their group, are subject to an investigation by the Commission in terms of Chapter 2 of the Act [i.e. relating to "prohibited practices"]; or
* at the time of entering into the transaction any of the firms, or firms within their group, are respondents to pending proceedings referred by the Commission to the Competition Tribunal in terms of Chapter 2 of the Act." (our emphasis)
According to the Guideline, where a small merger falls into one of these categories, parties to the small merger are advised to voluntarily inform the Commission in writing, by way of a letter, of their intention to enter into the transaction. The Commission will then inform the parties in writing whether or not they would be required to notify the small merger to the Commission in the prescribed manner and form.
The question that arises is whether the mere satisfaction of the criteria set out in the Guideline falls within the purview of the legal test set out in section 13(3) of the Competition Act. Would the mere satisfaction of the criteria contained in the Guideline take away the merging parties' right to implement a small merger without approval if no notice in terms of section 13 has been issued to the merging parties? It is submitted that there is an inconsistency between the requirements for notifiability of a small merger as set out in section 13(3) of the Competition Act, vis-a-vis the further criteria for notifiability as set out in the Guideline. It is further submitted that the Guideline could, for this reason, potentially be regarded as ultra-vires.
Conclusion
Based on the preceding analysis, we are of the opinion that unless the Commission satisfies the legal test as set out in section 13(3) of the Competition Act, it will have no legal basis for requiring parties to a small merger to notify that merger on the basis of the criteria set out in the Guideline.

By: Nkonzo Hlatshwayo and Maria Celaya of Webber Wentzel