When should parties notify the Competition Commission of a merger
In terms of section 13A(3) of the Competition Act 89 of 1998 (the ?Act?), parties to an intermediate or large merger may not implement that merger until it has been approved, with or without conditions, by the either the Competition Commission, Tribunal or Appeal Court.
The question now arises as to what does ?implementation' entail. Unfortunately the Act does not define ?implementation' and it has become necessary to look at case law in order to determine whether any of the three forums have considered such definition.
It would seem as if the Competition Appeal Court gives us the best indication of what is meant by implementing a merger in its decision in Harmony v Goldfields.
It is argued that it appears from the definition of ?acquiring firm' and ?target firm' that the notification in terms of section 13A(1) is the ?transaction' in terms of which control will be acquired. The decision further states that once such a transaction presents the essential features of a merger, it will be notifiable.
It thus follows that as soon as notification arises, a party may continue with its proposal to effect a merger, but it is prohibited from implementing the merger. The question thus is whether there was a proposal to implement a transaction that, when so implemented, will involve the acquisition of control. If the answer is yes, then the parties must notify the transaction and will not be allowed to implement the merger. It would seem that having drafted all of the necessary contracts and making those contracts conditional upon approval of the merger, would not constitute ?implementation' of the merger. Neither ought the fact that moneys could already be held in trust or secured by bank guarantee as long as no transfer takes place before approval.
Each situation has to be considered separately and within its own context, but the following should constitute the implementation of a merger:
- transfer of shares,
- structuring the transaction in two separate legs, where the first leg is implemented and unseverable from the second leg, such as where a company's book debts are sold before the actual shares are transferred,
- where a shareholders or board decision has been taken which cannot be revoked,
- acting in a manner which purports that a party has already merged.
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