11 May 2016 by Cliffe Dekker Hofmeyr Competition Alert

Highest fine to date for failure to notify a merger and prior implementation

On 7 April 2016, the Competition Tribunal (Tribunal) confirmed a consent agreement entered into between the Competition Commission (Commission), Life Healthcare Group (Proprietary) Limited (LHG) and Joint Medical Holdings Limited (JMH) in terms of which LHG and JMH agreed to pay an administrative penalty of R10 million – the highest fine ever imposed to date for a failure to notify a merger.

In this case, despite LHG not having a majority shareholding in JMH, the Commission found that no major business decision regarding JMH’s business would be taken without LHG’s approval, including its budget, the appointment of key employees and items of major capital expenditure. Importantly, the Commission found that this quality of LHG’s control over JHM constituted a merger in terms of s12(1) of the Competition Act, No 89 of 1998 (Act).

Since the threshold for a large merger was met, the Commission found that LHG and JMH failed to give notice of the merger as required by Chapter 3 of the Act and proceeded to implement the merger without Tribunal approval, in contravention of s13A(3) of the Act. This failure to notify a merger and prior implementation was admitted by both LHG and JMH which subsequently entered into a consent agreement with the Commission. Moreover, LHG disinvested from JMH.

In addition, the Commission found that LHG and JMH agreed that all their prices would be set jointly, with all price negotiations being conducted by LHG on its own behalf and on behalf of JMH, in contravention of s4(1)(b)(i) of the Act. However, in return for their admission pertaining to prior implementation of the merger absent approval, the Commission agreed (in an addendum to the consent order) not to pursue a price-fixing case against the parties.

Written by Yusrah Ehrenreich and Natalie von Ey

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