S.A. Competition Tribunal imposes record fine for missed merger filing in healthcare

By AAT guest author Meghan Eurelle

On 7 April 2016, the South African Competition Tribunal (“Tribunal”) confirmed that merger parties Life Healthcare Group Proprietary Limited and Joint Medical Holdings Limited had entered into a consent agreement with record-breaking consequences.  The two hospital groups admitted to not complying with the Competition Act, 1998 (“the Act”) by failing to notify the competition authorities of their merger and to obtain the required approval prior to the merger being implemented; and subsequently agreed to jointly pay an administrative penalty of 10 million Rand, or approximately U.S. $690,000.  (Interestingly, the parties also conceded that they were guilty of fixing the price of services back in 2004 but the Tribunal dropped these charges.)

The R10-million administrative penalty is a record amount for gun-jumping, or the failure to notify the competition authorities of a merger.  Previously, the highest penalty for a failure to notify was just over R1-million. The new record penalty follows numerous warnings by the Competition Commission (“Commission”) that it intended to materially increase penalties for failure to notify mergers — says Andreas Stargard, an antitrust practitioner with Pr1merio advisors, “South Africa has a suspensory merger-notification system, like most international antitrust regimes do.  And unlike other African countries, such as Senegal or Mauritius, the domestic S.A. competition legislation prohibits transacting parties from effecting the transfer of control or beneficial ownership prior to obtaining clearance from the authorities.”

In terms of the Act, transactions that are defined as “intermediate mergers” and “large mergers” must be notified to the Commission and may only be lawfully implemented if it has been approved, with or without conditions, by the relevant competition authorities. Small mergers do not have to be notified in the ordinary course and may be implemented without approval unless required by the Commission.

Merger notification thresholds in South Africa remain as follows:

In light of the above, it serves as an important reminder to parties that they ensure compliance with the competition authorities and the Act so as to avoid costly consequences.