| 4.1. | As a general approach, the Commission will apply the following methodology when determining the administrative penalty that a firm will be liable to pay for contravening sections 13A(1) and/or 13A(3) of the Act. |
| 4.2. | This methodology will be applied in the following way: |
| 4.2.1. | Step 1: Determination of the nature or type of contravention; |
| 4.2.2. | Step 2: Determination of the base amount; |
| 4.2.3. | Step 3: Duration of the contravention; |
| 4.2.4. | Step 4: Consideration of factors that might mitigate and/or aggravate the amount reached in step 3, and |
| 4.2.5. | Step 5: Rounding off this amount if it exceeds the cap provided for in section 59(2) of the Act. |
| 4.3. | Step 1: Determination of the nature or type of contravention |
| 4.3.1. | The Commission will first look at the nature of the conduct which gave rise to the failure to notify and/or prior implementation contravention. A failure to notify or prior implementation contravention can take different forms and the Commission will consider how the failure to notify and/or prior implementation occurred. |
| 4.3.2. | In the event that the relevant conduct is a section 4(1)(b) contravention, such as if the merging parties are competitors and agree on prices or, allocate customers prior to approval of a merger being granted, the Commission will assess such conduct under section 4(1)(b), and any such penalty will be determined under the Commission’s Guidelines for the Determination of Administrative Penalties for Prohibited Practices.7 |
| 4.3.3. | Should the Commission determine that the relevant conduct is wilful or deliberate, these guidelines will not apply to such conduct and Commission will seek the maximum allowable penalty as stipulated in section 59(2) of the Act as well as a divestiture, where appropriate. |
| 4.3.4. | For the sake of clarity, it should be noted that no amount is calculated under step 1 of the methodology of these guidelines. |
| 4.4. | Step 2: Determination of the base amount |
| 4.4.1. | The Act requires that an intermediate or large merger must be notified to the Commission and such merger may not be implemented until it has been approved, with or without conditions, by the relevant competition authorities. |
| 4.4.2. | Under this step, the base amount for the calculation of the administrative penalty for failure to notify and/or prior implementation of intermediate or large mergers, will be an amount equal to double the applicable filing fee.8 |
| 4.5. | Step 3: Duration of the contravention(s) |
| 4.5.1. | Once the Commission has established the base amount, for each month of the contravention i.e. duration, it will add to the base amount an amount calculated in accordance with the formulae set out below. |
Contraventions not exceeding a year
| 4.5.2. | For contraventions that do not exceed a year, each month of the contravention will attract an additional amount equal to 50% of the base amount. The applicable formula is as follows: |
(50% × base amount) × number of months of contravention
Contraventions exceeding a year but less than 2 years
| 4.5.3. | For contraventions that exceed a year but less than 2 (two) years, each month of the contravention will attract an additional amount equal to 75% of the base amount. The applicable formula is as follows: |
(75% × base amount) × number of months of contravention
Contraventions exceeding 2 years
| 4.5.4. | For contraventions that exceed 2 (two) years, each month of the contravention will attract an additional amount equal to 100% of the base amount. The applicable formula is as follows: |
(100% × base amount) × number of months of contravention
| 4.5.5. | For the sake of clarity, the amount derived in this step will be added to the base amount calculated in step 2. |
| 4.6. | Step 4: Aggravating and Mitigating Factors |
| 4.6.1. | Once the amount in step 3 has been determined, the Commission will adjust this figure based on the relevant aggravating and mitigating factors as contemplated in section 59(3)9 of the Act. |
| 4.6.2. | This assessment will consider all of the factors contemplated under section 59(3) of the Act. The weighing of aggravating and mitigating factors may result in the amount derived in step 3 being upwardly or downwardly adjusted, depending on the circumstances of each case. |
Aggravating factors
| 4.7. | The factors which the Commission may consider as aggravating include, but are not limited to: |
| 4.7.1. | If the parties failed to notify the merger transaction in order to take advantage of a time-bound merger deal or to avoid the merger approval process at the outset; |
| 4.7.2. | If the parties were negligent; |
| 4.7.3. | If the parties were trying to avoid scrutiny of the transaction by the competition authorities; |
| 4.7.4. | If the duration of the contravention subsisted for an extended length of time; |
| 4.7.5. | If the transaction resulted in the substantial lessening of competition or raises public interest concerns; |
| 4.7.6. | If there was an undue and unexplained delay by the parties in approaching the Commission once the parties had become aware of their contravention of section 13A; |
| 4.7.7. | If the parties derived profits from the contravention of section 13A(1) and/or (3) which profits they were not entitled to unless they had obtained prior approval from the competition authorities; |
| 4.7.8. | If the parties have previously been found to have contravened any other provisions of the Act; |
| 4.7.9. | If the parties delayed or obstructed or failed to co-operate with any investigations of the contravention by the competition authorities; and/or |
| 4.7.10. | If the merger was terminated without first informing the Commission of the concerned merger and with the purpose of avoiding scrutiny by the competition authorities. |
Mitigating factors
| 4.8. | The factors which the Commission may consider as mitigating include, but are not limited to: |
| 4.8.1. | If the parties were proactive in approaching the Commission with information of the possible contravention of section 13A of the Act; |
| 4.8.2. | If the parties co-operated with the investigations of the competition authorities; |
| 4.8.3. | If the parties sought competition law advice on the transaction; |
| 4.8.4. | If the parties were bona fide in their failure to notify the transaction; |
| 4.8.5. | If the parties exhibited a high degree of transparency in their dealings with the Commission; |
| 4.8.6. | If the parties provided full evidence, such as documents, under their control and/or possession of the contravention which was relevant to the Commission; |
| 4.8.7. | If the parties demonstrated willingness to expeditiously conclude a settlement with the Commission; |
| 4.8.8. | If the merger does not raise any competition or public interest concerns; |
| 4.8.9. | If the parties have not been found to have previously contravened the Act; and/or |
| 4.8.10. | If the parties have already paid the filing fee to the Commission. |
| 4.9. | Step 5: Consideration of the Statutory Limit |
| 4.9.1. | As stipulated in section 59(2) of the Act, the administrative penalty may not exceed 10% of the firm’s annual turnover in the Republic and its exports from the Republic during the firm’s preceding financial year. |
| 4.9.2. | The Commission will have regard to the acquiring and transferred firms’ combined turnover during their preceding financial year. |
| 4.9.3. | The Commission will have regard to the firms’ audited financial statements. Where audited financial statements are not available, the Commission may consider any other reliable records reflecting the merging parties’ turnover or estimate the turnover based on available information. |
| 4.9.4. | Where the administrative penalty determined above exceeds the maximum allowable limit of 10% of the combined annual turnover of the acquiring and transferred firms during their preceding financial year, the Commission will apply the maximum allowable administrative penalty. |
| 4.9.5. | The preceding financial year that the Commission will generally consider for the purposes of the statutory cap, will be the financial year preceding that in which the administrative penalty is imposed. If there is no turnover in that preceding financial year it shall be the year in which the parties last traded. |
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| 8 | The Tribunal has indicated that a turnover based methodology for calculating penalties in failure to notify and/or prior implementation cases may be inappropriate. |
| 9 | See Competition Commission v Standard Bank of South Africa Ltd (FTN228Feb16) at para 27 and the remaining factors listed under section 59(3) of the Act. |
