There have been various Competition Tribunal (“Tribunal”) and Competition Appeal Court (“CAC”) decisions relating to acquisition of control and the following are summaries of some of the key decisions:
1. Bulmer SA (Pty) and Stellenbosch Farmer’s Winery Group (“SFW”) / Distillers Corporation (SA) Ltd and Others (Tribunal Case: 94/FN/Nov00); and Distiller Corporation (SA) Ltd / Bulmer SA (Pty) Ltd Case No: 08/CAC/May01
This case is significant in that a distinction was made between direct and indirect control and it addressed the issue of the merging parties forming part of a single economic entity. In making its determination of whether the parties where part of a single economic entity, the Tribunal in this instance found that it was necessary for shareholders to have a “common controlling mind” in order for the ultimate change of control argument to succeed. This was found to be lacking pre merger and hence the Tribunal held that the proposed transaction was notifiable.
The CAC dismissed the argument that only where ultimate control changes it is the case that a merger has occurred and is notifiable. The CAC held that the definition of a merger should be widely construed and could include the transaction as contemplated in the case in point. The CAC found that the merging parties were separate legal entities pre merger and therefore the transaction was held to fall within the meaning of section 12(1) of the Act.
2. Ethos Private Equity Fund IV / the Tsebo Outsourcing Group (Pty) Ltd Tribunal Case No: 30/LM/Jun03
This case is significant in that it reaffirmed the principle that a firm can be controlled by more than one person at the same time and established the principle that a firm will be deemed to have sole control of another firm if it acquires more than 50 percent of the shareholding of that firm, irrespective of the fact that there was no de facto change of control. Although a shareholder may be deemed to have acquired control by virtue of an acquisition of a majority stake there could still exists factual ‘joint control’ at the same time.
The Tribunal found that the proposed transaction amounted to a merger and that it was thus notifiable. The Tribunal found that there are certain “bright lines” set out in the Competition Act, which when crossed, constituted a merger. Although Tsebo only increased its shareholding from 49.9% to 53.8%, the transaction was a merger.
3. Competition Commission / Edgars Consolidated Stores Ltd (Edcon) and Retail Apparel Group (RAG) Tribunal Case No: 95/FN/Dec02
This case is significant in that direction was given by the Tribunal in terms of what constitutes the “whole or part of a business” as contemplated in Section 12 of the Act. The Tribunal noted that the acquiring firm intended to the secure the book debt of the target firm because it gave it access to a significant client base which was likely to boost Edcon’s market share. The Tribunal in this case held that the acquiring firm was acquiring, “more than a bare asset that would enhance its competitive position” in the relevant market and hence the merger was notifiable to the Commission.