18 July 2014 by Cliffe Dekker Hofmeyr

Parties in a merger should ensure that their conduct is not construed as a form of prior implementation

In September 2010, Dunlop Industrial Products Proprietary Limited and Rema Tip Top Holdings South Africa Proprietary Limited notified the Competition Commission (Commission) of a transaction, as required in terms of the Competition Act (Act).   During its investigation, the Commission established that the merging parties had engaged in activities that constituted the implementation of a compulsorily notifiable transaction without the requisite approval having been obtained, this being in contravention of the Act.  In particular, the Commission found that, amongst other things, a senior executive of the acquiring firm had been engaging in the day-to-day operations of the target firm and the merging parties were already marketing themselves as a single entity.  Against this background, the parties conceded to the allegations of prior implementation levelled by the Commission and agreed to pay an administrative penalty of R500 000.  This was reduced to a consent agreement, which was made an order of the Competition Tribunal on 09 July 2014.

Typically, administrative fines have been levied by the authorities in respect of failures to notify transactions to the Commission at all.  However, this case demonstrates that, even after notification, the risk of exposure to an administrative penalty still exists if a transaction is implemented prior to approval being obtained.  Merging parties should therefore take care to ensure that its conduct is not construed as a form of prior implementation during the course of the Commission's investigation into the notified transaction.

 

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