THINKING ABOUT A MERGER? THE COMPETITION ACT REQUIRES MORE THAN A COMPETITION ANALYSIS

A company finds a willing buyer. Its shareholders agree to sell. The buyer agrees to the price. The transaction makes commercial sense. In the South African context, however, this represents merely the baseline of the inquiry.

The traditional approach to assessing a merger has been to focus on factors such as competition, market share and price. Section 12A of the Competition Act 89 of 1998 requires the Competition Commission and Competition Tribunal to consider the associated public-interest effects of a merger, including the impact of the merger on employment, smaller and historically disadvantaged businesses, particular industries or regions and ownership.

For businesses considering a merger, this means that the public-interest element should form part of the commercial strategy from the outset, as it may materially influence how the transaction is structured and implemented.

WHAT DOES THIS MEAN IN PRACTICE?

A useful example is illustrated by the Competition Tribunal's approval of Premier Group Limited's acquisition of RFG Holdings Limited (‘Premier/RFG’).

The Tribunal approved the merger in March 2026, subject to conditions relating to employment, enterprise and supplier development, employee participation and monitoring.

The employment conditions illustrate why the public-interest considerations should be addressed early in the transaction process. The merger is subject to Premier and RFG not retrenching any employees as a result of the merger, during the prescribed moratorium period. The conditions in effect do not prevent ordinary employment decisions such as voluntary retrenchments and separation arrangements, voluntary early retirement, ordinary resignations and dismissals for misconduct or poor performance. However, a retrenchment occurring during the moratorium period is presumed to be merger-specific unless the merging parties can demonstrate otherwise. It is imperative for parties contemplating a merger to consider what operational changes the transaction is likely to produce and whether those changes may be regarded as being merger specific.

The same principle applies beyond the mere idea of employment. The Premier/RFG conditions further require the merged business to increase its annual enterprise and supplier development spending by 17%. The increased development spending exceeds the individual entities combined expenditure in the financial year preceding approval and are required to maintain the increased level for three years post implementation. The additional expenditure is to be directed to Premier’s Driver Ownership Programme, which aims to support historically disadvantaged truck drivers by providing funding to procure and maintain vehicles. In addition, thereto, to contract with those drivers to create opportunity through distributing products through delivery routes. The beneficiaries of said programme are required to be historically disadvantaged persons whose annual turnover does not exceed R50 million.

The imposed conditions require qualifying employees of RFG Holdings Limited to become beneficiaries of the Premier Group Limited BEE Trust within one year of implementation, on the same terms and conditions presented to qualifying employees of Premier Group Limited

The significance for businesses cannot be overstated enough. The conditions attached to a transaction could materially shape how the merged business will operate post-merger.

THE LENS THROUGH WHICH A MERGER SHOULD BE APPROACHED

Section 12A(1A) is particularly important. It requires the Commission or Tribunal to consider public-interest grounds regardless of its determination on whether the merger substantially prevents or lessens competition.

The parties therefore cannot approach the merger on the basis that:

If there is no competition problem, there is no regulatory problem.

The analysis is in fact broader. When structuring a transaction, parties should be asking questions such as:

• What will the transaction mean for employment?

• Will the transaction affect the ability of smaller or historically disadvantaged businesses to participate or expand in the market?

• Will the transaction affect ownership or employee participation?

• Will particular regions or industries be affected?

• Could the way the transaction is implemented create public-interest concerns?

• Are there potential conditions that should be identified and considered when negotiating the transaction itself?

These questions are not only relevant to the legal representatives preparing the competition filing. A failure to appreciate their significance at an early stage can affect transaction risk, implementation planning, negotiations and ultimately the commercial value of the deal.

The Constitutional Court has clearly articulated that competition law cannot be considered in isolation from South Africa’s constitutional framework. In Competition Commission of South Africa v Mediclinic Southern Africa (Pty) Ltd and Another [2021] ZACC. The Court upheld the prohibition of a hospital merger where the evidence indicated that the transaction would increase tariffs and reduce choice for patients, particularly vulnerable uninsured patients. The judgment emphasised that the public consequences of commercial transactions cannot simply be ignored in the realm of competition law.

The broader lesson for businesses is clear: public interest considerations should not be treated as a regulatory afterthought. They form part of the legal and commercial framework within which a merger must be structured, negotiated and ultimately implemented.

By Jarryd Thurston

(Candidate Attorney)

09 September 2026

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