The Competition Commission of South Africa is becoming increasingly concerned with the coordinated effects in mergers.
Worldwide, there is increased concern by competition authorities that mergers could result in market participants aligning their behaviour due to the consolidation in the industry.
In South Africa, this trend is also being observed.
Collusion
The Competition Commission of South Africa in 2016 prohibited the proposed acquisition by packaging manufacturer Corruseal of Boxlee and Price Pak, based on coordinated effects concerns.
In light of the ongoing collusion investigation in the affected market, the Commission found that coordination was likely as increased vertical integration in the industry made it easier to coordinate in the downstream market. The merging parties appealed this decision but decided in May 2017 to abandon the transaction before the appeal could be heard by the Tribunal.
In June 2017, the CCSA bucked the international trend of approval when it prohibited the proposed merger in which Nippon Yusen Kabushiki, Mishui O.S.K Lines Ltd and Kawasaki Kisen Kaisha Ltd propose to merger their container liner shipping businesses to form a joint venture.
This prohibition was based entirely on a perceived likelihood of coordinated effects arising based on a history of collusion in an adjacent market.
Cartel conduct
During June 2017, the CCSA also prohibited a proposed merger between two firms involved in the market for the manufacturing of polypropylene-based mining support bags, Timrite (Pty) Ltd and the Mining Bag Division of Tufbag (Pty) Ltd.
This was on the basis that the transaction will potentially facilitate and enhance market allocation arrangements in the industry.
Interestingly the merging parties are already in a joint venture for the manufacturing of polypropylene-based mining support bags and it is unclear why a further consolidation of these businesses would have exacerbated any risks of coordinated effects in this market.
In July 2017 the CCSA prohibited a proposed merger between Jasco Electronics Holdings Limited, a provider of smart technology and solutions, and Cross Fire Management (Pty) Ltd, a company active in the fire protection systems market. A Jasco subsidiary is also active in the fire protection industry.
The Commission found that the further concentration in the market is likely to perpetuate existing cartel conduct in this market – conduct that the CCSA is currently prosecuting.
Prohibition
The CCSA also imposed conditions on a merger between VKB Milling Proprietary Limited and Progress Milling (Lydenburg) (Pty) Ltd.
The conditions are aimed at preventing the exchange of competitively sensitive information in light of concerns regarding the merger creating concentration in the white maize market and increasing the probability of collusion taking place in this market (a market that the CCSA believes is already conducive to collusion).
In July 2017, the CCSA also recommended a prohibition to the Tribunal for the proposed large merger between one of the three largest private hospital operators in South Africa, Mediclinic South Africa (Pty) Ltd, and Matlosana Medical Health Services (Pty) Ltd stating that the CCSA has concern regarding concentration in the market (although specific coordinated effects were not mentioned).
Leana Engelbrecht | Senior Associate: Competition and Antitrust Practice | Baker McKenzie | leana.engelbrecht@bakermckenzie.com | www.bakermckenzie.com |