Mergers Under The Microscope: Where Public Interest Meets Market Power

South Africa’s merger control regime occupies a unique position in comparative competition law by requiring that public interest considerations be assessed alongside traditional competition analysis as part of the statutory merger evaluation process. As stated in section 12A of the Competition Act 89 of 1998 (hereinafter referred to as the “Act”), these provisions reflect the legislature’s intent to address structural inequalities and socio-economic exclusion in the South African economy in the post-apartheid era.

The Statutory Framework: Competition and Public Interest Parity

Under the Act, the assessment of a notifiable merger requires a dual inquiry by the Competition Commission and the Competition Tribunal. First, the authorities must determine whether the merger is likely to result in a substantial prevention or lessening of competition. Second, they must assess the merger’s impact on specified public interest considerations.

Importantly, the public interest inquiry is not secondary to the competition analysis. South African jurisprudence confirms that both limbs enjoy equal statutory standing and must be independently and substantively evaluated when determining whether a merger should be approved, approved with conditions, or prohibited.

Section 12A(3) of the Act identifies five public interest factors:

1. The effect of the merger on a particular industrial sector or geographic region;
2. The effect on employment;
3. The ability of small and medium-sized enterprises, and firms owned or controlled by Historically Disadvantaged Persons (hereinafter referred to as “HDPs”), to enter, participate in, or expand within the market;
4. The ability of national industries to compete internationally; and
5. The promotion of a broader spread of ownership, particularly to increase ownership by HDPs and workers.

Origins and Evolution of Public Interest Considerations

Public interest considerations formed part of the merger control regime from the enactment of the Act. Their inclusion reflected a deliberate policy choice to align competition law with South Africa’s broader socio-economic transformation objectives, rather than focusing exclusively on market efficiency.

The 2019 amendments to the Act strengthened this framework by introducing a more explicit and, in certain respects, affirmative dimension to the public interest inquiry. In particular, merging parties are now expected not merely to avoid negative public interest outcomes, but in appropriate circumstances to advance economic inclusion — especially through enhanced HDP and worker ownership.

In a context of persistent structural inequality, the competition authorities have consistently emphasised that public interest scrutiny is integral to the normative foundations of South African competition law, which consciously integrates efficiency, equity, and economic transformation.

The HDP Ownership Requirement and the 2024 Guidelines

Among the public interest factors, the promotion of ownership by HDP’s has become a central feature of merger review practice. The concept of HDPs encompasses individuals and entities disadvantaged by unfair racial discrimination prior to the constitutional era.

In March 2024, the Competition Commission issued the Revised Public Interest Guidelines. Although not legally binding, the Guidelines indicate that section 12A(3)(e) is interpreted as imposing a positive obligation on merging parties to demonstrate measurable increases in HDP or worker ownership — even where no competition concerns arise.

The Guidelines further provide that all notifiable mergers must be assessed for their impact on ownership distribution and may be made subject to conditions designed to secure transformational outcomes. This approach applies equally to foreign-to-foreign transactions involving South African businesses, underscoring the broad reach of the public interest inquiry.

Practical and Procedural Implications

The growing prominence of public interest considerations – particularly HDP ownership – has significantly reshaped merger practice.

Enhanced public interest submissions:
Merger filings are now expected to include detailed analyses of the transaction’s impact on employment, HDP participation and ownership, and the position of small and medium-sized enterprises. This extends the evidentiary burden beyond traditional competition analysis.

Public interest conditions:
Conditional approvals have become increasingly common. The competition authorities may require commitments such as equity ownership arrangements, divestitures, or supplier development initiatives to secure public interest objectives. In several significant transactions, approvals have been subject to substantial public interest undertakings.

Timing and predictability:
Expanded public interest scrutiny has implications for transaction timelines and certainty. The issuance of guidelines and practice notes reflects efforts to improve clarity and predictability while maintaining transformative objectives.

Judicial guidance:
Recent appellate decisions have clarified that each statutory public interest factor must be assessed distinctly yet weighed holistically in determining whether a merger is justified. This reinforces the structured and substantive nature of the inquiry.

Challenges and Criticisms

Despite broad support within policy circles for public interest integration, the HDP requirement has not been without critics. Some argue that imposing ownership conditions in all mergers may discourage investment, particularly where transactional scope is limited or where equity transfers are complex. Others call for greater transparency and legal certainty regarding how thresholds for “measurable increases” are determined. These debates continue both in legal practice and within parliamentary oversight forums.

Take Away

South Africa’s merger control framework embodies a distinctive blend of competition and transformation objectives, reflecting the constitutional commitment to economic inclusion and redress. Public interest considerations — especially as they relate to HDP’s — are now firmly entrenched as a material component of merger assessments. Practitioners and stakeholders must therefore approach merger filings with a comprehensive strategy that integrates competitive analysis with robust public interest commitments. As jurisprudence evolves and practice standards mature, the balance between inclusion and investment will remain central to the effective enforcement of South African merger policy.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.