Merger clearance in South Africa is not easy, nor quick. That may be a take-away from observing the recent clearance by the South African authorities of the DowDuPont global merger of equals covering markets for agricultural products, material sciences and chemicals as well as specialized health and electrical products. The merger was cleared some 15 months from the date of filing and then subject to detailed conditions.
We know that each merger will present its own features and issues. But, as in other multinational mergers considered by the competition authorities, certain points arise from the present merger to be considered by those who may be involved in similar transactions.
First, it is important to understand the counterfactual and theory of harm you are dealing with. The counterfactual, a term used to describe the likely position the relevant markets would be in absent the merger, is a necessary and legislatively mandated tool for merger evaluation. For the authority to determine whether the proposed merger will substantially lessen or prevent competition, it must understand fully what the market would look like without the merger. The Commission can then evaluate the merger based upon a theory of harm appropriate to the circumstances. This means they will assess what possible harm to competition will arise from the merger.
If the counterfactual is not clear, or is based upon speculation only, the theory of harm cannot be substantiated. Moreover, in that case, any remedies which are proposed – whether by the parties or the Commission – to address the theory of harm cannot be properly evaluated. This is far from an exact science, especially as one is seeking to predict future behaviour of the parties and others, in markets which are dynamic and environments which change.