Extensive amendments proposed to merger filing forms
Shawn van der Meulen, Hoosein Mayet and Elisha Bhugwandeen unpack the new rules of the Competition Commission.
Comprehensive amendments have been proposed to the merger filing forms for the first time in many years, which will make the preparation of merger notifications substantially more onerous and time-consuming for merger parties.
On 25 March 2021, the Minister of Trade, Industry and Competition published an invitation for public comment on the proposed amendments to the forms, rules and regulations of the Competition Commission (Government Gazette No.44319).
If the amendments are accepted, firms will have to provide extensive information relating to the effect of the merger on public interest considerations, as well as more detailed information on their proposed transactions.
The proposed amendments integrate the comprehensive range of amendments introduced by the Competition Amendment Act 2018 into the merger forms. The Amendment Act introduced measures aimed at addressing high levels of economic concentration and the promotion of a greater spread of ownership, as well as the effective participation of small, medium and micro-sized enterprises (SMMEs) and firms owned and controlled by historically disadvantaged persons (HDPs), in the economy.
The minister has also proposed amendments to the exemption forms and introduced a new form relating to access to confidential information.
Are the new merger filing forms already in effect?
No, not yet. Stakeholders and interested parties are invited to submit comments regarding the proposed changes by 23 April 2021.
What are some of the key proposed amendments to the merger filing forms?
1) Merger Notice Form CC4(1) will require merger parties to provide additional detailed information on each of the public interest considerations outlined in section 12A(3) of the Competition Act. This will, among other things, include information relating to:
- the effect of the merger on a particular industrial sector or region, including the impact on local production or manufacturing, local or regional supply chains, social and upliftment projects, local resources or inputs, regional sustainability and public policy goals;
- the effect on employment, including the number of employees that are likely to be affected, the affected employees’ skill level or position, details of the rational process followed to determine the number of jobs to be lost and any countervailing public interest arguments that may mitigate the negative effects on employment;
- the ability of SMEs or HDP firms to effectively enter into, participate in or expand within the market and if the merger will raise barriers to entry for these firms in any relevant markets;
- the ability of national industries to compete in international markets; and
- the promotion of a greater spread of ownership, in particular whether the merger increases levels of ownership by HDPs and workers in firms in the market (and if not, reasons for this), information on whether employee share schemes are in place and the extent of employee participation at board level.
2) In terms of the proposed amendments to the Statement of Merger Information Form CC 4(2), additional documents and more detailed information will need to be submitted relating to the transaction such as the contemplated timing of suspensive conditions.
Additional information and documents will also need to be provided if the merged entity’s market shares will be equal to or more than 35% post-merger, as well as details of the ability of any party to the merger to appoint directors at another firm operating in a related market.
While the clarity provided by the proposed amendments to the relevant merger forms is welcomed, an unfortunate outcome is likely to be that the preparation of merger notifications will become substantially more onerous for parties to notifiable mergers, potentially resulting in delays and higher costs of transactions in South Africa.
The proposed reintroduction of advisory opinions
The minister has also issued proposed regulations on non-binding advisory opinions (NBAOs) (Government Gazette No.44309 dated 23 March 2021). This is a welcome move, since parties have not been able to request advisory opinions from the Competition Commission for several years.
It is proposed that a request for an NBAO will cost medium enterprises R20,000 and other market participants R50,000. Several other entities such as small enterprises and constitutional institutions will be exempted from paying a fee. The proposed regulations emphasise that a NBAO does not constitute a decision of the Competition Commission, and that it has no binding legal effect on the Competition Commission, the Competition Tribunal, the Competition Appeal Court, or the requesting party.
We will continue to keep you updated regarding the status of these amendments. Any interested stakeholders wishing to submit comments on the proposed amendments by 23 April 2020 are welcome to speak to us. For further information, please do not hesitate to contact the competition/antitrust team.