Page 36 - EngineerIt January 2021

INDUSTRY AND TECHNOLOGY

SA Competition Commission plans

to zoom in on digital markets

By Burton Phillips, Partner at Webber Wentzel authorities and cannot be implemented
prior to such approval being granted.
he Competition Commissioner, during the Transactions falling below these
TCommission's Annual Conference (in thresholds (referred to as small
November 2020), noted that the Commission mergers) can be notified to the
will take a "decisive and proactive stance to Commission voluntarily - but can be
ensure the balance of economic forces favour a implemented without prior approval.
shift to facilitating entry and a more competitive The Commission may, however, call for
digital economy". a notification of a small merger on
Proposed changes for the industry may be suspicion that a small merger could
far-reaching and may include a possible result in the substantial lessening or
requirement for dominant tech companies to preventing of competition.
inform the Commission of all acquisitions, even - In the UK, the March 2019 report on inform of the Commission of the transaction
those falling below the prescribed thresholds Unlocking Digital Competition noted that to enable it to decide whether to call for a full
for mandatory merger notification to the over the last 10 years the five largest tech merger notification by the parties. If it does,
authority. All players in the tech / digital firms made more than 400 acquisitions such transaction would be subject to review
markets space will need to be aware of the globally – but none of these were by the Commission and may be prohibited or
heightened focus of the competition authorities prohibited and some not even scrutinised have conditions imposed. It is unclear how
on this sector. Not only will this bring a change by their competition authorities. the Commission will identify these dominant
in transaction costs and deal time-lines – but • Parties to tech transactions are often based firms as this largely depends on how the
also many more mergers being prohibited or offshore with no presence and little or no relevant markets are defined. The list may
approved with conditions. revenue in a particular country at the time include well-known players such as
The Commission's recently published paper of the acquisition to establish jurisdiction. Facebook, Alphabet's Google, Netflix,
on Competition in the Digital Economy notes The Facebook/WhatsApp merger is cited as Naspers, Amazon, Uber, Airbnb as well as
that there may have been under-enforcement of an example of such a transaction. The network and telecommunications
merger control laws in digital markets to date. merger was not notifiable to South African infrastructure firms such as Vodacom, MTN
One of the ways in which the Commission plans competition authorities as WhatsApp did and Telkom making any acquisition of a local
to promote competition, inclusive growth, not generate any turnover in, into or from target tech company.
increased and meaningful employment and South Africa. • Adding digital markets to the Commission's
shared prosperity in the sector is through more • The traditional tools and theories of harm list of priority sectors, which means that the
stringent merger regulation of the industry. used in merger review are not appropriate Commission will allocate greater resources
Statistics published by the SA Commission for tech-related-mergers. The and subject digital mergers to greater
indicate that out of the 87 notifiable mergers consideration of factors such as defining scrutiny. The additional scrutiny on these
relating to digital markets from 2011 to 2019, the relevant markets, market shares, mergers could result in lengthy merger
none were prohibited; 82 were approved foreclosure, barriers to entry and public reviews which will have to be factored into
unconditionally and 5 conditionally approved. interest factors need to be suitably deal timetables. In the case of global digital
The proposed merger between MIH and adjusted and developed to take into mergers, the Commission seeks to ensure
WeBuyCars was the first in this space to be account the fast moving dynamics of that global digital mergers that are
prohibited, following a decision by the digital markets, including innovation, the notifiable in South Africa are notified to the
Competition Tribunal in March 2020. This use of multiple platforms, consumer Commission in parallel with notifications
decision appears to have encouraged the reach, data usage, the use of free services submitted to competition authorities in
Commission to scrutinize more closely mergers or platforms and digital advertising. other jurisdictions. This will allow the
in the digital space. Commission to engage and collaborate with
The Commission is developing a strategy to global competition authorities and consider
Some of the common reasons for the perceived address these issues. Key merger control any conditions imposed by such authorities
under-enforcement in the sector are: related measures suggested by the authority at and its application in South Africa.
• Many transactions in the digital space may this stage include: • Publishing a practice note on the
fall below the financial thresholds for • Introducing a requirement for dominant assessment of mergers in digital markets to
mandatory notification. This results in digital firms to inform the Commission of all deal with the competition and public
numerous small start-up digital companies small domestic acquisitions, including interest assessments, and a guidance note
being acquired without any scrutiny by the investments in start-ups and global on how the assets of digital companies
competition authorities. acquisitions of target companies with a local should be evaluated for purposes of
- In South Africa, acquisitions meeting presence (i.e. generating turnover in, into or determining whether transactions fall
certain prescribed financial thresholds from South Africa). At this stage, the proposal within the financial thresholds for
must be approved by the competition is for such notification to merely serve to mandatory notification. n

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