The competition commission wants to investigate smaller “digital” companies in South Africa
The Competition Commission plans to investigate the merger and acquisition of smaller digital companies in South Africa.
In an official gazette published on Friday (May 7), the Commission stated that although larger mergers are subject to supervision, these smaller companies are often below the size threshold for automatic investigations.
“There is an increasing risk that the growth of digital players will adversely affect innovation through the increasing number of acquisitions of new, innovative companies, especially when these digital companies act as gatekeepers in multiple markets,” the Commission said.
“There are concerns that these potentially anti-competitive acquisitions may escape government control before they generate sufficient revenue to trigger a merger notification under the revenue thresholds due to the acquisitions occurring early in the target’s life.”
The commission said it will now look into whether a small merger requires stand-alone notification.
The Commission must be informed of all small mergers and acquisitions where either the acquiring company, the target company, or both are active in one or more digital markets, provided that at least one of the following criteria is met:
- The consideration for the acquisition or investment exceeds R 190 million if the target company operates in South Africa.
- The consideration for the acquisition of part of the target company is less than R 190 million, but effectively values the target company at R 190 million (e.g. the acquisition of a 25% stake in R 47.5 million), provided that Target Company operates in South Africa and as a result of the acquisition the acquiring company gains access to commercially sensitive information of the target company or exercises significant influence over the target company within the meaning of Section 12 (2) (g) of the Act;
- At least one of the parties involved in the transaction has a market share of 35% or more in at least one digital market.
- The proposed merger will result in a combined post-merger market share in which the merged company will gain or strengthen market dominance within the meaning of the Competition Act.
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