New merger rules coming for businesses in South Africa
South Africa’s Competition Commission has announced plans to increase scrutiny on mergers in the technology sector, which may have previously gone unnoticed.
This comes as the Commission has proposed amendments to the 2022 small merger notification guidelines and has called for public comments.
The Competition Commission is tasked with ensuring that businesses in South Africa operate fairly and do not take part in anti-competitive behaviour.
This can include limiting business competition by acquiring new businesses which could potentially threaten to take market share.
The proposed amendments would respond to “concerns that potentially anti-competitive acquisitions in digital or technology markets are escaping regulatory scrutiny,” the commission said in a statement.
The commission is particularly concerned about acquisitions that happen when a business is still in its early days, before it would have to disclose a mandatory merger notification.
According to current guidelines, businesses only have to disclose mergers once they have generated enough turnover or reached a certain capital threshold.
This means that potentially unfair mergers can occur when businesses are still young, before they reach these mandatory disclosure thresholds.
As a result, the Commission has proposed that mergers be disclosed based on several new criteria.
This includes whether any business involved in the merger is currently under active investigation by the Commission or is a respondent in pending proceedings.
It would also include whether the acquiring business alone exceeds the existing turnover or capital thresholds for merger disclosure.
The proposed amendments would also require the target firm to meet specific acquisition- and investment-related criteria.
The proposed changes are specifically aimed at addressing anti-competitive issues in South Africa’s technology sector.
The commission has argued that this sector has been able to shield itself from scrutiny due to the small size of businesses being acquired.
While these businesses are small, this is largely because they are newly founded, leaving them with very little revenue at the time of a merger.
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