16 May 2010 by

Commission publishes new timelines for consideration of mergers and new filing requirements

In 2002, the Competition Commission published service standards which aimed to indicate in advance the likely outputs which could be expected in finalising cases. The service standards as published in 2002 indicated that the turnaround time for phase 1 (non-complex) mergers was 20 business days, for phase 2 (complex) mergers was 25 business days and for phase 3 (very complex) mergers was 45 business days.

In 2004, the Commission introduced a 'fast track' procedure to facilitate the prompt finalisation of unproblematic mergers. The Commission committed itself to a turnaround time of 20 business days provided certain minimum criterion were met by the merger parties.

According to the Commission's published standards, the Commission has not been able to meet the above turnaround times particularly for phase 2 (complex) and phase 3 (very complex) mergers. For instance, in 2009, the average turnaround time for phase 2 (complex) mergers was 51 days as opposed to the initially indicated 25 days and phase 3 (very complex) was 65 days instead of the initially indicated 45 days.

As a result, the Commission reconsidered its turnaround times (taking into consideration its capacity, expected volume of merger notifications and increased complexity of transactions) and proposed new service standards which, in the Commission's view, are realistic, measurable and achievable. In terms of the new standards, phase 1 (non-complex) mergers shall be considered in 20 business days, phase 2 (complex) mergers shall be considered in 45 business days and phase 3 (very complex) mergers shall be considered in 60 business days.

The Commission defines phase 1 (non-complex) mergers as transactions that do not raise any competition issues. These are transactions where there is no product or service overlap between the activities of the parties, or if there is an overlap, the parties' combined market share is below 15%. Phase 1 (non-complex) mergers have no complex control structures and no public interest issues arise from the proposed merger.

Phase 2 (complex) mergers involve transactions between direct or potential competitors or between customers and suppliers where the parties hold market share in excess of 15% in their respective markets. The transactions generally involve challenges which include defining the relevant market/s, multiple product or geographic markets, markets which are subject to deregulation and/or raise public interest issues.

Phase 3 (very complex) mergers are transactions which are likely to create or result in a substantial prevention or lessening of competition. For instance, mergers between leading market participants in any one of the markets in which the parties compete will be classified as phase 3 (very complex) mergers. Phase 3 mergers will necessitate a thorough investigation including obtaining specific documents and information from the merger parties (over and above the complete filing of documents and information) and third party industry participants. The 'fast track' procedure described above has now been abolished.

According to the Commission, the criteria set was too high and very few matters technically qualified for fast tracking. In addition, the proposed new service standards for phase 1 (non-complex) mergers is 20 business days which is the same standard the Commission had set for 'fast tracking', hence it was not necessary to retain this procedure.

Importantly, the turnaround times in the new service standards apply to complete filings. The Commission has prepared a practice note on what is required for purposes of a complete merger notification. Basically, parties have to comply with the minimum filing requirements required by the Act, the Rules and relevant CC forms. Failure to file a complete filing will result in a Notice of Incomplete Filing being issued to the filing firm. The consequence of an incomplete filing is that the time period for the consideration of a merger by the Commission stops. The period for consideration of the merger will only commence once the filing is complete.

Chris Charter, Director, Competition
Scarlate Nkiwane, Associate, Competition

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