Where an acquiring firm intends to acquire a target firm, and such merger or acquisition constitutes a merger as defined in section 12 and meets the thresholds for an intermediate or large merger under section 11 of the Competition Act 89 of 1998 (“Competition Act”), the parties are generally prohibited from implementing the transaction prior to obtaining the requisite approval from the competition authorities.
Competition law in South Africa imposes strict merger control obligations on parties to qualifying transactions. Failure to comply can result in severe penalties — including administrative fines of up to 10% of annual turnover and divestiture orders requiring the unwinding of the transaction. This article explains when a merger is notifiable, the thresholds that apply, the prohibition on pre-implementation, and the consequences of jumping the gun.
When Is a Merger Notifiable in South Africa?
To determine whether a transaction is notifiable under the Competition Act, a two-stage enquiry must be undertaken:
Stage 1: The Definitional Enquiry — Does the Transaction Constitute a Merger?
The first enquiry is whether the contemplated transaction constitutes a “merger” as defined in section 12 of the Competition Act. For purposes of the Act, a merger occurs when one or more firms directly or indirectly acquire or establish direct or indirect control over the whole or part of the business of another firm.
Importantly, the terms of the transaction must be considered carefully to establish whether a firm acquires control over another. Where the transaction has this effect — regardless of the mechanisms giving rise to such control — the transaction constitutes a merger. This means a merger may occur:
- Intentionally — through a deliberate acquisition of shares, assets, or control.
- Unintentionally — where a transaction structure results in control being acquired without the parties explicitly intending a merger.
A merger can arise through various mechanisms, including the purchase of shares, the acquisition of assets, the conclusion of a management agreement, or any other arrangement that confers control over another firm’s business.
Stage 2: The Financial Threshold Enquiry — Does the Merger Meet the Prescribed Thresholds?
The second enquiry considers whether the merger meets the financial thresholds applicable to intermediate or large mergers under section 11 of the Competition Act. These thresholds, which are determined by the Minister of Trade, Industry and Competition in consultation with the Commission, are periodically revised and published in the Government Gazette to reflect prevailing economic conditions.
Merger Thresholds in South Africa (Effective 1 May 2026)
The merger thresholds in South Africa are assessed based on the combined annual turnover or asset value of the merging firms, as well as the turnover or asset value of the target firm being transferred.
Intermediate Merger Thresholds
A transaction is classified as an intermediate merger where:
| Threshold | Combined Turnover/Assets | Target Firm Turnover/Assets |
| Lower threshold | At least R1 billion | At least R200 million |
Large Merger Thresholds
A transaction is classified as a large merger where:
| Threshold | Combined Turnover/Assets | Target Firm Turnover/Assets |
| Higher threshold | At least R9.5 billion | At least R280 million |
Where a transaction meets or exceeds the prescribed thresholds, it must be notified to the Competition Commission prior to implementation. In such instances, the parties are prohibited from implementing the merger unless and until the requisite approval has been obtained in accordance with Chapter 3 of the Competition Act.
Transactions that fall below both thresholds are classified as small mergers and do not require mandatory notification, although voluntary notification may be appropriate in certain circumstances where the transaction raises competition concerns.
The Merger Approval Process in South Africa
Once a merger is classified as notifiable, the merger approval process under the Competition Act requires the parties to submit a merger notification to the Competition Commission for investigation and assessment.
Intermediate Mergers
For intermediate mergers, the Commission investigates and assesses the transaction. The Commission may:
- Approve the merger without conditions under section 14(1)(b).
- Approve the merger subject to conditions designed to address competition concerns.
- Prohibit the merger where it is likely to substantially prevent or lessen competition.
Large Mergers
For large mergers, the Commission investigates and makes a recommendation to the Competition Tribunal, which then decides whether to approve the merger, with or without conditions, or prohibit it under section 16(2). The Competition Tribunal’s decision may be appealed to the Competition Appeal Court under section 17.
Only after the requisite approval has been obtained — whether from the Commission, the Competition Tribunal, or the Competition Appeal Court — may the parties proceed to implement the merger, subject to any conditions imposed and the outcome of any appeal.
Prohibition on Implementation Prior to Approval (Section 13A)
Section 13A(3) of the Competition Act is central to merger control in South Africa. It is designed to ensure that potentially anti-competitive transactions are assessed before the market effects of such transactions may be realised.
The section specifically provides that a notifiable merger may not be implemented until such time as it has been approved, with or without conditions, by:
- The Competition Commission in terms of section 14(1)(b) (for intermediate mergers).
- The Competition Tribunal in terms of section 16(2) (for large mergers).
- The Competition Appeal Court in terms of section 17 (for appeals).
What Constitutes Implementation?
The prohibition includes direct implementation of the transaction and may, depending on the circumstances, include conduct that:
- Transfers control of the target firm before approval has been granted.
- Effectively integrates the merging parties’ operations — such as combining management, sharing commercially sensitive information, coordinating pricing, or restructuring operations.
- Exercises control rights acquired pursuant to the transaction before approval.
A failure to comply with this prohibition exposes the parties to significant regulatory consequences, irrespective of whether the merger ultimately would have been approved had it been properly notified.
The Competition Commission’s Investigative Powers (Section 13B)
Section 13B of the Competition Act confers broad investigative powers on the Competition Commission in relation to merger control:
- The Commission may direct an inspector to investigate any merger and may designate one or more persons to assist in such investigation, ensuring a comprehensive factual and economic assessment.
- The Commission is empowered to require any party to a merger to provide further information in respect of the transaction, reinforcing the ongoing duty of full and frank disclosure throughout the merger review process.
- Any person — whether or not a party to or participant in the merger proceedings — may voluntarily submit documents, affidavits, statements, or any other relevant information pertaining to the merger.
These powers ensure that the Commission can conduct a thorough assessment of the transaction’s likely impact on competition, even where the parties have failed to cooperate fully or where third parties hold relevant information.
Consequences of Failure to Notify or Premature Implementation
Where the Competition Commission finds that parties have implemented a notifiable merger without prior notification or approval, the Competition Tribunal is empowered to impose significant sanctions.
Administrative Penalties (Section 59)
In terms of sections 59(1)(d)(i) and 59(1)(d)(iv), the Competition Tribunal may impose an administrative penalty where the parties:
- Fail to notify a merger as required by Chapter 3 of the Competition Act.
- Implement a merger without the approval required by the Competition Act.
Under section 59(2), the penalty may not exceed 10% of the relevant firm’s annual turnover in the Republic and its exports from the Republic during its preceding financial year. This penalty reflects the seriousness with which non-compliance is treated by the competition authorities.
The imposition and amount of an administrative penalty are determined by the Competition Tribunal, taking into account the factors listed in section 59(3), including:
- The nature, duration, and extent of the contravention.
- Any loss or damage suffered as a result of the contravention.
- The behaviour of the respondent — including whether the contravention was deliberate or inadvertent.
- The level of cooperation provided to the Commission during its investigation.
- Whether the respondent has previously been found to have contravened the Competition Act.
The penalty is aimed at deterring parties from bypassing the mandatory notification and approval process for notifiable mergers.
Divestiture and Reversal of Implemented Mergers (Section 60)
In addition to administrative penalties, the Competition Tribunal has remedial powers under section 60(1), which allows the Tribunal to make a range of corrective orders aimed at restoring competitive conditions or reversing the effects of the unlawful implementation.
These powers include:
- Ordering a party to the merger to sell any shares, interest, or other assets acquired pursuant to the merger.
- Declaring void any provision of an agreement to which the merger was subject.
These remedies are structural in nature and are intended to unwind or reverse the effects of a merger that has been implemented unlawfully. In practice, this may result in significant commercial disruption, particularly where integration has already taken place between the merging parties — including combined IT systems, merged workforces, consolidated operations, and commingled assets.
Practical Lessons for Mergers and Acquisitions in South Africa
Parties contemplating mergers and acquisitions in South Africa should consider the following practical guidance:
- Assess notifiability early — conduct a two-stage enquiry (definitional + financial) before signing the transaction agreement.
- Structure the transaction with conditions precedent — make closing conditional on obtaining Competition Commission approval.
- Avoid gun-jumping — do not exercise control rights, integrate operations, or share competitively sensitive information before approval.
- Notify promptly — file the merger notification as soon as practicable after signing to minimise delay to closing.
- Cooperate fully with the Commission — provide complete and accurate information, and respond timeously to any requests for further information.
- Consider voluntary notification — even where a transaction falls below the thresholds, voluntary notification may be appropriate if the transaction raises competition concerns.
- Obtain legal advice early — engaging a competition law attorney at the deal-planning stage can help identify notifiability issues, structure the transaction to minimise gun-jumping risk, and manage the approval process efficiently.
Conclusion: Don’t Jump the Gun on Merger Approval
The merger control provisions contained in Chapter 3 of the Competition Act impose strict obligations on parties to intermediate and large mergers in South Africa. Once a transaction constitutes a merger and meets the prescribed financial thresholds, the parties are prohibited from implementing the notifiable merger prior to obtaining the requisite approval from the competition authorities.
Failure to comply with the notification and approval requirements may expose the parties to significant regulatory consequences, including:
- Administrative penalties of up to 10% of the relevant firm’s annual turnover in the Republic and its exports from the Republic during its preceding financial year.
- Divestiture orders requiring the sale of acquired shares, interests, or assets.
- Invalidation of merger-related agreements.
Parties contemplating mergers and acquisitions in South Africa should carefully assess whether a proposed transaction constitutes a notifiable merger and ensure that all necessary approvals are obtained prior to implementation in order to mitigate both regulatory and commercial risk.
For expert assistance with merger notification, Competition Commission approval, and competition law compliance in South Africa, contact SchoemanLaw Inc. Our experienced commercial law attorneys will guide you through every step — from threshold assessment and notification to engagement with the Competition Commission and Competition Tribunal.
