SIYABULELA MAKUNGA | How we work on merger review process

The duration to decide the merging and acquisition of companies is often flooded with public discourse among industry players and policymakers.

However, some of the opinions expressed were indicative of why the Competition Commission should never renege in its advocacy and public awareness missions. Educating and raising awareness on the work of the commission, is to us, not a tick-a-box exercise, but a legislative mandate preserved in the Competition Act 89 of 1998 (as amended).

As a people-centric public institution that thrives on transparency, accountability and good governance, we remain committed to open engagement and criticism of the work that we do, particularly when such criticism is backed by facts and evidential data.

It is for this reason that we make this attempt to demystify our merger control and review processes. Most importantly, we want to ensure that external stakeholders, including business, potential investors and the public, understand the merger review process and associated turnaround times.

The myth of “unnecessary delays” contradicts our facts as the commission has steadily been concluding reviews at a much faster rate than four years ago. Let’s unpack this more. Once a merger notification is received, our team of skilled and experienced analysts first categorise these mergers according to their “complexity”.

Phase I mergers have no or insignificant overlap in the merging parties’ activities and are not expected to raise any significant competition concerns but may still raise public interest concerns.

Phase II mergers are more complex and describe a merger where the parties may overlap in their activities, which may give rise to both competition and public interest concerns.

Phase III mergers are considered very complex when the parties have an overlap in activities and potentially high market shares post-merger, thus requiring more in-depth analysis by our expert team.

The commission’s target turnaround times are set at levels below what is afforded in the Competition Act, legislation or associated guidelines. How fast are our analysts reviewing mergers?

Phase I merger reviews, for example, took an average of 18 days to conclude in 2019. In 2023, the dedicated team had completed these merger reviews within an average of 12 weekdays.

The target turnaround time for Phase II mergers is 45 days, we averaged 41 days to complete this type of merger review in 2023. Phase III mergers are further divided between small or intermediate mergers and large mergers.

For small or intermediate mergers our target turnaround time is 60 days – we typically completed these reviews within 56 days last year. The review of large Phase III mergers was concluded on average within 99 days in 2023. The target turnaround time is 120 days. These numbers indicate that our consistency, collective effort, and increasingly streamlined processes have enabled the team to achieve improved merger review turnaround times.

For complex cases, where there are many consultations with different stakeholders who might be affected by the merger or a merger between two competitors who operate in the same or a concentrated industry, we will conduct a thorough review, which might at times mean that the review process is longer than the averages listed above.

Why? These types of mergers also often require protracted engagements with merger parties to ensure they can address and adequately remedy the concerns stakeholders have raised.

How does this compare to competition regulators in other jurisdictions? According to the Global Competition Review, 287 mergers were filed in SA in 2023. Of these, 89% required in-depth review, taking an average of 48 days to complete.

Comparatively, competition authorities in Italy and Belgium completed a similar number of reviews within 53 and 40 days, respectively. Our turnaround times illustrate the strength and capacity of the commission in merger control and assessments.

The process does, however, not end with our merger review. After the commission’s analysts have completed the merger investigation, and in the case of intermediate and small mergers, the Competition Commission will issue a certificate approving the merger, approving the merger subject to conditions or prohibiting a merger.

If the Competition Commission takes a decision, with which the merging parties do not agree, they can appeal the decision before the Competition Tribunal.

And if the decision that is taken by the tribunal is still agreeable to the merging parties, they can appeal before the Competition Appeal Court. In case of large mergers, the Competition Commission will forward its recommendations to the Competition Tribunal, the minister of trade and industry, and the merging parties.

The recommendations must specify whether the merger should be approved, approved subject to conditions or prohibited. Then, the Competition Tribunal takes a final decision on the matter.

If the merging parties do not agree with the decision taken by the Competition Tribunal, they can appeal before the Competition Appeal Court. During this process, other businesses and stakeholders can make submissions, which have the potential to cause a delay in the approval process. We remain committed to conducting merger assessments with the highest standards of transparency, integrity and compliance.

The commission actively encourages business leaders, the public and interested stakeholders to continue to engage the commission on our merger review process as we strive to continue improving our work and executing our mandate.

* Makunga the spokesperson for the Competition Commission of SA