Edition 32 • June 2009

In this Edition Page 1 - 4 The Unraveling of a The Unraveling of a Fertiliser Cartel as settles with the Commission on a Record Fine Fertiliser Cartel as

Page 2 Editorial Note Sasol Settles with the

Page 5 Commission on a Record ICN Merger and Unilateral Conduct Workshops Fine

Page 6 R250 million, representing 8% of its Practitioners meeting Sasol Nitro division’s turnover. Below we briefly discuss the cases as well as the Commission’s approach to this Page 7-8 settlement. Merger between Much , Gauteng Asphalt, Road Seal and The Nutri-Flo Complaint Road Seal Properties

In November 2003, Nutri-Flo, a small Page 9-10 fertiliser blender and distributor (a The Competition Act and Professional customer of Sasol), lodged a complaint Associations with the Commission alleging that three large fertiliser suppliers in South , Sasol, Kynoch and Omnia, were Page 11-12 engaged in collusion by dividing the The Organisation for Economic Co- markets for various fertiliser products operation and Development and the such as Limestone Nitrate Global Forum on Competition, 2009 (LAN) and by fixing prices of LAN and other fertiliser products. Further, By: Tembinkosi Bonakele Nutri-Flo alleged that Sasol had Page 13-14 abused its dominance by engaging Competition Commission of South in excessive pricing in respect of LAN On 20 May 2009 the Competition Africa against Senwes Limited and Ammonium Nitrate Solution (ANS) Tribunal (‘the Tribunal’) confirmed and in exclusionary conduct through the settlement agreement between an effective margin squeeze. the Competition Commission (‘the Page 14-15 Commission’) and Sasol Chemical Competition Commission Initiates During its investigation of the complaint Industries (‘Sasol’). The settlement Investigation into Cycle Cartel the Commission noted that concerns covers the Nutri-Flo (collusion) of anti-competitive behaviour, and complaint against Sasol, Omnia collusion in particular, in the fertiliser Fertiliser and Yara and Page 16 industry had long been highlighted by the Commission initiated investigation Merger thresholds the Competition Board (a predecessor against Sasol for collusion with to the existing competition authorities) Foskor. It does not cover any abuse of in its 1998 decision in the then Page 17 dominance issues or what is sometimes proposed merger between Sasol and Brimstone and Sea Harvest Merger referred to as unilateral conduct. In and Chemical terms of the settlement agreement Industries Limited (AECI). Sasol admitted to contravening Page 18-19 Section 4(1)(b) (covering collusion) Mergers and Acquisitions Summaries of the Competition Act (‘the Act’) and >>Continued on page 3 agreed to pay a penalty of just over

1 Editorial Note

The past three months have seen During 2007 the Commission the motivation for the Commission’s much activity in the food sector for initiated another complaint, this time recommendation and the Tribunal’s the competition authorities and this against Sasol and Foskor (Pty) Ltd, final decision. This matter again is reflected in the cases covered in following a merger which pointed to a illustrated the need for a holistic the June edition of the newsletter. collusive agreement between the two approach to the food sector involving Food became a priority sector companies in the phosphoric acid both enforcement and merger for the Competition Commission industry. This matter was referred assessments. (“Commission”) following our to the Tribunal as a consent order observation of the impact food together with the settlement reached Outside the food sector we have price hikes were having on the poor in the above fertiliser case, for the covered several notable mergers and and the uncovering of the bread Tribunal’s confirmation. the much publicised alleged bicycle and milk cartels. It became clear cartel. We also continue to learn much that a holistic assessment of the Both of the above matters have from our international relations. In this entire food value chain was needed implications for food prices as fertliser regard, the past few months have with the aim of understanding the is a major input in the food value chain been very active with conferences competition and other factors at play while phosphoric acid is a major input taking place within the International and initiating investigations where this in the production of fertiliser. In this Competition Network (ICN) and was warranted. The result was the newsletter we set out the details of the Organisation for Economic Co- establishment of an inter-divisional both cases and the long road which operation and Development (OECD). food team in early 2008 which has finally lead to the settlement of both Here we detail some of those since been studying and making matters. This settlement was historic learnings as well as a report of how interventions in the food value chain in that Sasol’s penalty was the highest we influence the current thinking in from an enforcement, merger and amount ever agreed between the the development of competition law advocacy perspective. Within the Commission and a respondent. around the world. food sector, the main focus areas of the food team are the grain milling & The Senwes matter, which is also There is much more to gain from this baking, dairy, vegetable fats and , covered in this edition, also has edition of the newsletter, for example poultry, and pelagic fish industries. implications for the price of grain in our article on lessons for professional South Africa. Here we summarise the associations. We hope you enjoy The leading case in this month’s main findings of the Tribunal following this newsletter as you have previous newsletter however was, for the most the Commission’s referral of this case. editions. Please contact us on the part, completed before even the bread The Tribunal found that Senwes had details set out if you need any more and milk cartels were uncovered. contravened the Competition Act 89 information. The case against Sasol Chemical of 1998, as amended, by denying Industries Limited (“Sasol”), Omnia grain traders the benefit of an annual Limited (“Omnia”) and Yara storage discount which they had Nandi Mokoena South Africa (Pty) Ltd (“Yara”) began previously enjoyed. Editor-in-Chief in 2003 after complaints from two companies operating in the fertiliser Staying with the food theme, we industries. The Commission completed also cover the merger between this investigation and referred it to the Business Venture Investments No. Competition Tribunal (“Tribunal”) for 1311 (“Newco”) and Sea Harvest adjudication in 2005. In this matter Corporation (“Sea Harvest”) in which the Commission alleged that Sasol, Newco, a subsidiary of Brimstone Omnia and Yara had colluded to fix intended to acquire the entire issued prices and divide markets while Sasol share capital of Sea Harvest. The had also abused its dominance in the Commission recommended that the fertiliser industry. Tribunal approve this merger without conditions. This edition gives a brief report on the analysis in the case and

2 Subsequent to its investigation, the to exclusively manufacture phosphoric of section 4(1)(b) of the Act and Commission found that Sasol and acid for Foskor. This effectively meant proposing to settle the abuse of its competitors had contravened that Sasol ‘agreed’ not to compete with dominance conduct (this cannot be section 4(1)(b) of the Act in that Foskor in the phosphoric acid market. covered by the CLP). Foskor was they had entered into a framework The Commission recommended that granted leniency and negotiations of agreements, arrangements and the merger be prohibited because over abuse of dominance conduct understandings which had the it was likely to lead to substantial are the subject of ongoing settlement effect of constructing and dividing lessening or prevention of competition discussions. the market such that Sasol became in the phosphoric acid market, as the exclusive supplier of LAN. The these were the only two firms which Towards the end of 2008 Sasol filed a Commission’s investigation revealed supplied the South African market marker application for fixing prices of that collusion was, amongst other with almost all its phosphoric acid various fertiliser products. (Note that things, facilitated through a network requirements. The parties then because leniency is granted to the first of committees and clubs, namely decided to withdraw the merger, but person to approach the Commission, the Import Planning Committee, the continued with the TMA. the CLP permits a person who wants to Nitrogen Balance Committee and the apply for leniency but is still collecting Export Club. These committees were The Commission noted that the the required information to apply for used by the respondents to exchange effect of the TMA would be what it a marker to reserving a space as commercially sensitive information sought to prevent by blocking the the first applicant for leniency). At and to reach agreements on prices, merger, elimination of competition the same time Sasol informed the export volumes and market division in the supply of phosphoric acid. Commission that it was conducting by allocating customers, suppliers Accordingly, the Commission initiated a competition law compliance review and territories for a range of fertiliser an investigation into the TMA. During of its activities and it would approach products including , potash, its investigation the Commission the Commission and fully cooperate urea, -based fertilisers and received a further complaint from if it finds any wrongdoing on its part. LAN. In addition, the Commission animal feeds producers in which The marker application was rejected found that the cartel enhanced similar issues were raised. The animal on the basis that the marker was too Sasol’s ability to exert market power feeds producers further alleged that wide in its scope and was in respect – unchallenged by the big players Foskor charged excessive prices in of matters that were pending before who were then part of the cartel. In the phosphoric acid market. the Tribunal. Shortly thereafter Sasol this regard the Commission found also applied for a marker in relation to that Sasol had engaged in excessive The Commission found that the TMA the division of markets by allocating pricing and exclusionary conduct. resulted in phosphoric acid buyers, suppliers, territories or specific types The case was referred to the Tribunal such as animal feed in 2006, but at the time of publication producers who used the settlement had not been heard by to be Sasol customers, the Tribunal on merit, owing in large being forced to stop part to the pre-trial legal battles and sourcing from Sasol procedural challenges confronted and to purchase from by the Commission in attempting Foskor. Further, Sasol to combine various fertiliser cases refused to sell its against Sasol - with each having its surplus phosphoric acid own complexities. to these customers and referred them to Foskor. The Phosphoric Acid The Commission found Investigation this conduct amounted to collusion on the part In April 2005, Sasol and Foskor filed of Sasol and Foskor. a large merger notification with the Commission in terms of which Foskor Corporate Leniency would acquire the production and and Settlement storage assets utilised by Sasol in the manufacturing and sale of phosphoric In May 2008 Foskor acid, an input into fertiliser products applied for leniency such as mono-ammonium phosphate in terms of the and di-ammonium phosphate. During Commission’s Corporate the investigation of this merger the Leniency Policy (‘the Commission discovered that Sasol CLP’) in respect of and Foskor had already entered into the TMA and related a toll manufacturing agreement (‘the conduct, admitting TMA’) in terms of which Sasol agreed to the contravention

3 of goods in export markets in respect fell short of expressly admitting that competitive behaviour in the fertiliser of phosphoric acid. This marker was the committees were in fact used for markets. It did not do nearly enough, also rejected by the Commission price fixing - Sasol denied throughout if anything, to uncover what later on the basis that leniency had that the committees such as the proved to be a modus operandi of its been granted on the first company Nitrogen Balance Committee were fertiliser business. Secondly, when to approach the Commission, used for price fixing. Sasol settled the complaint was lodged to the namely Foskor. Subsequently Sasol on a penalty of 6% of Sasol Nitro’s Commission and investigated, Sasol provided more specific information turnover (amounting to around R188 management had an opportunity to to the Commission which revealed million). On the eve of the confirmation ask their fertiliser division managers that Sasol, Omnia and Kynoch had of the settlement agreement Sasol some tough questions. Again, it did engaged in fixing prices, dividing approached the Commission with not do nearly enough to uncover what markets by allocating customers and evidence showing that the committees was later shown to be a systematic goods, and collusive tendering for were in fact a vehicle for price fixing conduct by successive generations certain fertiliser products between and market allocation (and monitoring of managers. For cooperation to 1996 and 2004. adherence to the agreements), which be meaningful, it has to be timely, it now fully admitted. Consequently, and must provide information to the Sasol entered into discussions with the Commission revised the fine to 8% competition authorities, saving them the Commission with the view of of Sasol Nitro’s turnover (amounting to the time and resources in investigating settling the Nutri-Flo complaint and the just over R250 million). the cases. phosphoric acid investigations. Given the similarities in the nature of the In revising the penalty upwards, The conclusion of the settlement conduct in the Nutri-Flo and phosphoric the Commission had to balance a agreement, whilst representing a acid cases, both in which Sasol and number of important issues. The breakthrough in dealing with problems its competitors acted to undermine Commission noted that Sasol has in this very important market, is not competition in the respective product cooperated, provided it with the the end. The Commission must still markets, the Commission agreed relevant information and was willing to bring its case against the remaining that the settlement agreement would enter into a settlement. However, and respondents, Omnia and Kynoch. The encompass both matters in so far as crucially for the Commission, Sasol’s Commission must also continue with they involve collusion. cooperation came late. Sasol had pursuing the abuse of dominance many opportunities to uncover the cases, and an appropriate remedy A culmination of these discussions conduct. Firstly, Sasol management addressing the pricing problems, was a settlement agreement that was should have been alerted to possible whether through settlements or the filed with the Tribunal on 6 May 2009, collusion in its fertiliser business as Tribunal, must be found for the pricing where Sasol admitted to contravening early as 1998, when the Competition of fertiliser. Regardless, the cartel has section 4(1)(b) of the Act, although it Board raised concerns of anti- unravelled.

4 ICN Merger and Unilateral Conduct Workshops

assessment of evidence obtained during merger investigations and the principles of determining appropriate remedies were also key plenary topics. Grace Mohamed from the Commission gave a presentation on how South Africa implements its merger control provisions.

In the area of unilateral conduct, the main work in recent years has been in assessing the laws and interpretations across jurisdictions of different categories of conduct. This area of competition law is one with a relatively high degree of diversity and hence the work of the working group to date has largely focused on assessing By: Grace Mohamed and Simon Roberts and understanding this. The annual workshop is particularly important in providing a forum where practitioners South Africa is a leading participant Working Group (UCWG) and the can grapple with the questions in the International Competition Mergers Working Group (MWG), in through often robust debate. Network (ICN), an organization Washington and Taipei respectively. which brings together competition Both were attended by representatives The main topics of the workshop held authorities from around the world. from a large number of agencies, as on 23 and 24 March were: assessing In the main areas of work, mergers, well as practitioners. dominance and/or substantial market cartels, unilateral conduct, and power; criteria for assessing the advocacy, there are Working Groups The mergers work of the ICN is relatively durability of market power; assessing which examine different approaches, advanced in terms of examining the anti-competitive effects and share experiences, and identified legal and economic standards applied foreclosure; and, predatory pricing. recommended practices where in different jurisdictions. A substantive In each of these areas papers have appropriate. The learning from these part of the Taipei Workshop focused already been adopted by the ICN groups includes specific areas such on the analysis of competitive effects in the Annual Conference in 2008 as corporate leniency. in merger investigations through and hence the focus was more on a merger hypothetical case which the application in cases. This was In the first quarter of 2009 workshops encouraged the exchange of practical furthered in breakout sessions using were held by the Unilateral Conduct experiences among participants. The hypothetical case scenarios.

Simon Roberts from Commission presented in a plenary on ‘Dominance, Durability and State- created monopolies’, highlighting the importance of taking into account how firms had come to be dominant and the many factors which could mean dominance endured and effective entry was hindered. These concerns are especially notable in smaller economies with high levels of concentration and a legacy of state support for major firms.

5 Pracitioners Meeting

the transition which became effective documents is indeed confidential. 1 April 2009. Confidential information is defined in the Act as trade, business or industrial A topic that was discussed at some information that belongs to a firm, has length was the Commission’s approach a particular economic value and is to “double transactions”, these are not generally available to or known by transactions that occur back to back others. and the question was asked whether or not it is required of parties to notify Another important topic discussed two transactions to the authorities includes the Commission approach instead of one transaction. Examples, to ailing or failing firms in particular of these types of transactions are in the current economic climate. where financial institutions acquire The Commission was requested to a controlling interest in a firm with provide an indication whether or the intent of disposing of it either not it could facilitate fast tracking By: Maarten van Hoven entirely or partially, or where firms transactions which involve firms that acquire control and thereafter enter are in financial difficulty and urgently into subsequent transactions for needs assistance. In response thereto The legal profession has been involved purpose of empowerment or financial the Commission explained that it will in development of the Competition reasons. The Commission advised assist where it can within the provisions law jurisprudence from the inception practitioners that various factors ought of the Act and in the event that no of the Competition Act in 1998. The to be considered in the decision to file obvious competition issues arise Commission recognizes the profession one or two to transactions with the the Commission will do everything as an important stakeholder in the Commission. These factors included possible to expedite the approval enforcement of the Competition Act in whether the transactions are divisible of the transaction. Once again the that it acts as an intermediary advisor from each other and whether or not Commission informed practitioners of to firms exposed to the provisions of there is a time delay between the the benefits of interacting in advance the Competition Act. various stages of the transaction. The with the Commission with these types Commission advised practitioners of transactions. The Commission is of the view that they should approach the that frequent (non case specific) Commission in advance in discussing In summary the meeting with interaction with practitioners assist the these transactions and in particular in practitioners was practical and Commission in better understanding the manner in which the filling should informative. The Commission the challenges firms face in be made. undertook to issue guidelines or interacting with the Commission and notes on the Commission’s approach equally it provides an opportunity for Another topic discussed related to to certain aspects discussed in the Commission to explain certain of confidential information supplied to order to facilitate compliance. It its procedural and policy positions in the Commission and claimed by firms. was agreed that these meetings be applying the Competition Act. From Although confidential information must held on a quarterly basis and that both perspectives these meetings are be respected and is very important every alternative meeting be held in welcomed. to the Commission in fulfilling its . The next meeting is mandate in that the Commission is likely to be held in July 2009. Should On 12 March 2009 the Mergers & able to ensure that the information it you wish to form part of the mailing list Acquisitions Division and members is provided would remain confidential please forward your e-mail address to of the Strategy and Stakeholders to the Commission, it often also [email protected]. Division of the Commission met impacts on the manner in which the with various representatives of the Commission can interact with third legal fraternity in Pretoria. Various parties. Parties often claim information issues were discussed including or documents as confidential for the aspects relating to merger filings sake of protecting the information, and documents that are required in whereas the information is often not support of these notifications. Other confidential as defined in the Act. The issues that were discussed were the Commission cautioned practitioners imminent increase of the lower and not to apply a blanket approach to higher merger notification thresholds confidentiality to documents when and the Commission’s approach to only a paragraph or two of the

6 Merger between Much Asphalt (Pty) Ltd, Gauteng Asphalt (Pty) Ltd, Road Seal (Pty) Ltd and Road Seal Properties (Pty) Ltd

The acquisition by Much Asphalt production market and constitutes (Pty) Ltd (Much Asphalt) of Gauteng a small proportion of most asphalt Asphalt (Pty) Ltd (Gauteng Asphalt), suppliers’ businesses. The parties Road Seal (Pty) Ltd (Road Seal) and have a relatively small presence in By: Mfundo Ngobese Road Seal Properties (Pty) Ltd (RS this market. Properties) presented the Commission with an opportunity to assess the The parties sought to differentiate the Gauteng is the industrial heartland concentration levels in Gauteng in asphalt market into high-end and low- of South Africa. Increasing demand the markets for the production and end. They submitted that the high-end on our road infrastructure due to supply of asphalt, and provision of market refers to more technologically economic growth of recent times asphalt laying/paving services. The advanced asphalt used on freeways, induced the custodians of our merger presented horizontal overlaps runways, race tracks etc. They note highways and byways such as in the production and supply of both that low end asphalt is the basic the South African National Roads cold and hot mix asphalt products. product used primarily by the private Agency (SANRAL) and municipalities In addition, it was going to result sector on driveways and sidewalks. to spend more on maintaining and in vertical integration since Much building new roads in Gauteng and Asphalt’s asphalt manufacturing Even though the Commission other regions of the country. High activities are upstream of Road Seal’s concurred with the parties that there levels of concentration throughout asphalt paving / laying services. are distinct product markets for high- the road construction value chain and end and lower-end asphalt products, its concomitant effects on prices and In connection with the overlapping it found that the lower-end asphalt quality is one of the factors inimical production and supply of cold mix market is not restricted to driveways to efficient allocation of government asphalt the Commission found that and sidewalks but includes municipal resources and ultimately consumer cold mix asphalt constitutes a small and secondary roads. In addition, welfare. proportion of the entire asphalt high end producers like Much Asphalt

7 and Raubex are already supplying the The Commission did not dispute that In addition, the Commission found lower-end of the market. there is an overlap in the Tshwane that the acquisition of Gauteng region, however, even if the 50 km Asphalt removes the only remaining However, since Gauteng Asphalt is radius from a plant is regarded as the non-vertically integrated supplier of not involved in the high-end market economic area of supply, there is still asphalt in the lower-end of the market the main consideration was whether substantial overlaps between Gauteng and a potential supplier in the high- Much Asphalt and other suppliers Asphalt’s and Much Asphalt’s plants, end market. involved in the high-end market should other than Witbank, for a significant be considered as part of the lower- part of the Gauteng region. Strategic documents obtained from end market as well. Manufacturers the parties seemed to indicate that operate in the high-end market Further the Commission found that that there is a general cooperative can easily switch to or increase their even if the geographic market were commercial behaviour between production of lower-end products to be defined as more local than competitors in the affected market. market since no additional investments Gauteng, in the region(s) in which the The Commission was of the view that or technical expertise is required and parties have recognised an overlap there could be a strong likelihood that as such should be considered as in their activities there is only one the proposed transaction will facilitate competitors in the lower end of the independent supplier, i.e. Raubex, or make future coordination easier to market. that they could face. Accordingly, sustain. Removal of Gauteng Asphalt even in such region(s) the merger as one of the three manufacturers of The parties submitted that chemical, leaves only two suppliers as it is in the asphalt in Gauteng that sell to the rheological and physical properties of entire Gauteng market. open market, would have resulted in hot mix asphalt require that it is applied a clear increase in concentration, and on the road at a specific elevated In the overlapping geographic was likely to make a collusive outcome temperature. This generally translates market the Commission found that easier to achieve and/or sustain. into a time frame of approximately 4 the merging parties will have an hours from the time of manufacture to estimated combined market share of Regarding the vertically related the time of application or a maximum between 65% and 80% in the market markets, the Commission found that distance of about 200km from the for the production and supply of hot the transaction is unlikely to result in plant to the paving site. In addition, mix asphalt to the open market. The either customer or input foreclosure. the parties noted that high transport Commission found that there are fairly In connection with the former the costs limited the area in which a plant significant barriers to entry in the Commission found that if Road Seal can competitively supply. The parties market for the production and supply uses its maximum paving capacity, submitted that Gauteng Asphalt’s of asphalt primarily arising from access this will amount to 18% of Much products are available in areas North inputs such as aggregates and also Asphalt’s supply of asphalt in the of Johannesburg and into the Pretoria environmental impact assessment Gauteng. Regarding input foreclosure metropolitan and Tshwane area (“the that need to be undertaken. the Commission found that the Tshwane region”). merged entity is unlikely to have the incentive to foreclose 87% of its business that is accounted for by third party pavers.

On the whole, the Commission concluded that the transaction, if consummated, was likely to substantially prevent or lessen competition in the Gauteng market for production and supply hot-mix asphalt in both the lower and higher ends of the asphalt supply market.

8 The Competition Act and Professional Associations

activity to understand how some of their trade practices may fall foul of “An agreement between, or concerted the Act. practice by, firms, or a decision by an association of firms, is prohibited At the outset, it must be noted that if it is between parties in a horizontal the mere existence of a professional relationship and if it involves any of association or affiliation to a particular the following restrictive horizontal professional association is not in practices: itself a competition concern. In fact, the Commission recognises that (i) directly or indirectly fixing a professional associations may be purchase or selling price or any beneficial vehicles which firms may other trading condition; By: Mulalo Shandukani use to, inter alia, address common industry issues, share non-proprietary (ii) dividing markets by allocating industry information and coordinate customers, suppliers territories, or Various professional associations their submissions to policy makers for specific types of goods or services; exist in the different South African the general betterment of the industry. or industries. The common mandate of such associations is to determine, However, the Commission is also (iii) collusive tendering promote and maintain professional aware that professional associations standards and or business could be, and sometimes are, used Professional fees 2 ethics amongst professionals. In as fora to exchange and discuss executing this mandate, professional commercially sensitive information Professional associations often put 4 associations should encourage their resulting in competitors agreeing to fix in place rules that their members members to adhere to good corporate prices, output and trading conditions, must abide by. Not all rules will raise governance which would, amongst divide markets and engage in collusive competition concerns. However, some other things, necessitate compliance tendering. Given that the operational rules are inherently problematic as they with competition legislation of the nature of a professional association promote anti-competitive behavior. Republic. is to bring competitors together, The most common one of these is the professional associations must take publication of guideline tariffs of fees As a creature of statute, the Competition heed of the provisions of section 4 of for use by association members. The Commission (“the Commission”) is the Act which prohibits various forms Competition Tribunal Commission has mandated to act against practices of cartel conduct. previously found that the publication that have the effect of substantially of a “Tariff Fee Guideline” by an lessening or preventing competition Competition risks for professional association constitutes a “decision in contravention of the provisions associations by an association of firms” which of the Competition Act 89 of 1998, involves direct or indirect price fixing as amended (“the Act”). The Act A professional association is usually in contravention of section 4(1)(b)(i) is not sector-specific and applies comprised of individual members of the Act. Recommended prices, like to all economic activity within, or who are in the same line of business fixed prices, may have a significant 5 having an effect within the Republic1. and are, therefore, regarded as negative impact on competition . First, 3 Accordingly, it is important for all competitors . As such they must recommended prices may facilitate the professional associations whose adhere to the provisions of section coordination of prices between service members are engaged in economic 4(1)(b) of the Act which states that: providers. Secondly, they can mislead

1 Section 3(1)

2 See Richard Whish, Competition Law 5th Ed, at page 488.

3 Competition Commission and two others v United South African Pharmacies and others 04/CR/Jan02 at page 8; See also section 1(xiii) of the Act

4 The Act defines rules to include public regulations, codes of practice and statement of principle

5 Competition in Professions- OFT March 2001

6 See for example the Competition Commission v the Association of Pretoria Attorneys 2002AUG157, at para 5.1. of the Consent Order which was endorsed by the Competition tribunal , prohibiting the publication of the “Guideline for Attorneys and Own client Fees”

9 consumers about reasonable prices. arrangement to show the presence association whose rules contain Also, it is accepted in international of any technological, pro-competitive a restriction that has the effect of antitrust law that even if recommended or efficiency gains that outweighs substantially preventing or lessening prices are meant to serve as a guide, the accompanying anti-competitive competition in market to apply to be they have the effect of becoming effect. exempted from the provisions of Part A the ruling price as they encourage of Chapter 2 of the Act. The Act defines competitors to align prices6. In the Information Sharing rules to include public regulations, end, price competition is eliminated codes of practice and statement completely, leaving consumers with Depending on the type of information of principle. The Commission may limited or no choice at all. shared and also the market structure either grant or refuse to exempt all of a particular industry where or part of the rules of a professional Besides professional fee guidelines members of an association are active, association for a specified period if, being a competition concern for it is generally permissible to exchange having regard to international applied competition authorities, professional aggregated industrial information norms, any restriction contained in associations must also be aware that relating to less commercially sensitive the rules is reasonably required to agreements or arrangements involving variables7. However, it is advisable maintain professional standards or price fixing, market allocation and/ for professional associations to the ordinary function of the profession. or collusive tendering amongst avoid sharing information or meeting Unless professional rules containing competitors are per se prohibitions discussions relating to or leading to competition restrictions have been in terms of section 4(1)(b) of the Act commercially sensitive topics such duly exempted by the Commission, and as such do not allow room for as pricing, costs, market allocation, they leave the professional transgressors to raise a defense. production, market shares, discount association open to investigation and Alternatively, an arrangement or or payment terms to customers, consequently the possibility of the agreement between competitors not business strategy, bidding tactics, imposition of a hefty administrative caught under section 4(1)(b) may be and allocation of markets8. penalty. subject to a rule of reason analysis under the Section 4(1)(a) general Recourse for Professional prohibition if it substantially lessens Associations or prevents competition in a market. A rule of reason analysis allows parties Item 1 and 2 of Schedule 1 of the to an anti-competitive agreement or Act make provision for a professional

7 The Antitrust Guidelines for Collaborations Among Competitors dated April 2000 8 Competition Law and Trade Associations, Speech by John Pecman, Acting Senior Deputy Commissioner of the Canadian Competition Bureau, 2008 Property & Casualty Industry Insurance Forum

10 The Organisation for Economic Co-operation and Development and the Global Forum on Competition, 2009

protectionism and reduced Mr Dave Lewis of the Competition competition law enforcement; Tribunal of South Africa contributed By: Nandi Mokoena as a panelist in this latter session. The − Competition law and policy is representatives from the South African flexible enough to deal with the competition authorities presented on This year, from 16 to 18 February financial crisis; how the Competition Commission of 2009, the Organisation for Economic South Africa (“Commission”) came to Co-operation and Development − A good relationship between prioritise the food industry and what (‘’OECD”) focused on the competition competition authorities and sector matters had already been finalised as response to the global economic regulators is essential. part of the food study. crisis. Consequently the round table discussions of the OECD centered − The temporary crisis framework The GFC heard that the Commission mainly on financial sectors and each must avoid harm to competitors, had a three pronged strategy on the competition authority’s response to consumers and the competitive food price crisis. The first prong the changing financial and economic process; was a proactive strategy in which climate. The discussion was, as the Commission conducted several usual, vibrant and informative. The − Competition authorities will need studies to identify competition OECD’s summary of deliberations to adapt to the new environment concerns and launch investigations. highlighted 22 points which emerged without changing their standards; The second part of the strategy from the 2 day meeting of country and was case work in both enforcement representatives, the most notable of and merger regulations. Information which were the following: − Regulation is going to expand derived from these cases was fed and competition authorities have into the proactive approach of the − The financial sector is at the heart a role in ensuring that regulation, Commission. The third leg, still to of every well-functioning market whether new or existing, is be developed further, was to monitor economy but it is also vulnerable consistent with competition conduct after discovery of cartels and to systemic loss of trust; principles. other anti-competitive conduct, and to engage with other regulatory bodies − The current crisis resulted from Following the OECD meeting on the and institutions. failures in financial market financial crisis, the Global Forum on regulation, not failure of the market Competition (“GFC”) took place on 19 Food as a priority sector itself or of competition; and 20 February. The agenda of the GFC included discussions concerning The Competition Commission of − Competition and stability can co- the role of the competition authorities South Africa selected, amongst other exist in the financial sector; in the management of economic sectors, the food sector as one of its crises, with a particular focus on the priorities. The underlying logic for − Competition helps make food industry; competition policy and selecting priority sectors was so that the financial sector efficient the informal economy; and challenges the Commission could be proactive and ensure that rescue and faced by young competition and direct its resources so that it stimulus packages benefit final authorities. South Africa participated could have the most impact. consumers; in the discussions and was specifically asked to share its experience with Prioritisation was also prompted by − Stability in the financial sector responding to the food price crisis the rapid increase in food prices. should not be achieved through which impacted on South Africa.

11 The aim was to disentangle the anti- Initial work included a scoping exercise the Commission aimed to contribute competitive conduct from the other analysing price and other trends in towards competitive agricultural causes of food price increases. In food had been completed focusing markets in South Africa working with this regard, the Commission selected on the identified subsectors. The other arms of government and other five sub-sectors that had the greatest purpose of the scoping exercise was stakeholders. bearing on food security for the poor to identify the nature of competition while exhibiting concerns about concerns in each sector and evaluate While the Commission had engaged in possible anti-competitive conduct, the need for more in depth studies. a broad range of activities to mitigate namely grain milling & baking, dairy, Changes in structure including the food crisis, the key question vegetable fats and oils, poultry, and previous mergers and acquisitions remained as to the extent to which the fish. In addition, the Commission had in the various sub-sectors were also work undertaken by the Commission investigations under way in recent evaluated. had improved competition in sectors years into fertilizer prices, with two in which cartels were discovered cases being referred to the Tribunal. More in-depth studies had also been and prosecuted. This question undertaken into some of the products could be answered in the abstract The Commission established a multi- leading to recommendations for but required a more in-depth study divisional Food Team in early 2008 formal investigations in some areas, of the sub-sectors to determine the with members drawn from all of the while cases were already underway impact of the work undertaken by the main divisions such as enforcement, following complaints received in Commission. In addition, competition mergers, compliance (now strategy others. Issues related to retail were policy was but one instrument in and stakeholder relations), and also being considered. government’s arsenal to improve the policy & research. The cross- competitiveness of agriculture. For this cutting Team was responsible for The South African competition authority reason, competition policy depended driving the Commission’s strategy representatives concluded by stating on other policy interventions to change on the food sector, including but not that the Commission of South Africa the structure and conduct of the limited to refining the Commission’s had adopted a proactive strategy to agriculture value chain. For instance, broad strategy into attainable confront the food crisis. The report high levels of concentration in the goals, overseeing investigations, presented to the GFC reflected on input, processing, manufacturing undertaking research studies, and the key activities of the Commission and retail levels required more active ensuring a coherent and coordinated in this area in light of the dimensions, policies to encourage entry of new response across all divisions. nature and causes of the food price players. crisis in South Africa. Ultimately,

12 Competition Commission of South Africa against Senwes Limited Senwes is engaged both in grain a different price for the same service, storage and trading. The Commission namely long term storage, Senwes alleged that Senwes induced farmers was guilty of price discrimination in not to trade with other trader rivals by terms of section 9(1) of the Act. In the making representations concerning course of the case the Commission storage costs. The inducement itself also alleged that the differential tariff took different forms. In the first place constituted a ‘margin squeeze’ by it was alleged that an annual cap an integrated firm dominant in the on storage fees (at 100 days) was upstream market for grain storage, only available to farmers if they sold so as to exclude non-integrated rivals By: Ngoako Moropene to Senwes. If the grain had been in the downstream market for trading stored for more than a 100 days, in contravention of section 8(d), and the farmer sold to a third party, alternatively 8(c). On 20 December 2006 a complaint then storage at the daily tariff for the against the respondent, Senwes full period would be incurred. If the In all these allegations where Limited (“Senwes”) was referred by farmer sold to Senwes then only 100 dominance is an essential element, the Competition Commission to the days would be charged. the Commission alleged that Senwes Competition Tribunal for adjudication, is dominant in the storage market following the complaint lodged by In addition, the Commission alleged and leveraged this dominance into CTH Trading (Pty) Ltd (“CTH”) on 2 that even before the 100 day period, the downstream market for trading, December 2004. The Tribunal ruled farmers were told that if they sold their a market where it conceded that on the case on 3 February 2009, grain to Senwes they would receive a Senwes whilst a significant player is although the hearing on remedies has reduced storage charge and hence not dominant player. been postponed until the two appeals Senwes could make them a more lodged against the findings have competitive offer for their grain even Tribunal Judgment been determined. pre-cap. The Tribunal found that the complaint The complaint against Senwes was in The Commission alleged that the in respect of the inducement has essence about abuse of a dominant inducement abuse constituted a not been established because, position to exclude competitors in two contravention of section 8(d) (i) of the although the Commission has main forms, through inducement of Act, alternatively 8(d) (iii), alternatively proved that representations made customers/suppliers and through a 8(c). The Commission also alleged by officers of Senwes amounted to ‘margin squeeze’. that by charging farmers and traders inducement to customers not to deal with rivals of Senwes’ trading arm, the anti-competitive effect had not been established on a balance of probabilities.

The Tribunal found that the complaint in respect of margin squeeze had been established and that this amounted to a contravention of section 8(c) of the Act, but not sections 8(d) or 9(1).

In the final paragraph of its decision, the Tribunal requested that the Commission report Mr Jacobus Albertus Pretorius to the relevant authorities to be prosecuted for committing perjury during the Tribunal proceedings.

13 The Tribunal also indicated it will in As per the Tribunal’s decision, the case to SAPS Commercial Crimes due course hold a separate hearing Commission has approached the Unit in Pretoria. She has directed in respect of remedies. This has Director of Public Prosecution (“the registration of case and allocation subsequently been delayed by DPP”) in Pretoria and laid charges of an investigating officer, and will Senwes filing an application for for perjury against Mr Pretorius, in personally prosecute the case by leave to appeal the whole Tribunal view of reinforcing the message to securing attendance of the accused judgment, except for the order made the South African public at large that through J175 summons. against Mr Pretorius for committing proceedings before the competition perjury, and requesting a stay of the authorities are of grave importance remedies hearing. Subsequently, the and are not to be treated lightly. The Commission filed an application for DPP allocated this matter to one of leave to cross-appeal. the prosecutors who referred the Competition Commission Initiates Investigation into Cycle Cartel

meetings, indicate that the following accessories such as clothing, were inter alia agreed upon: helmets and nutritional supplements. Retailers in South Africa obtain their - There are too many retailers and stock from the wholesalers, who “shops should not under-cut each import the products from various other”. international sources, as there appear to be no significant manufacturers of - Gross margins for cycling bicycles and cycling accessories in By: Sipho Mtombeni accessories were to be increased the country. from 50% to 75%. The investigation revealed that The Competition Commission has - Margins on bikes to increase from there had been discussions and uncovered a possible cartel operating 35% to 50%. meetings between cycle retailers. amongst local cycle retailers after Furthermore, wholesalers appear to being alerted to information in the - Timing of the price increases. indicate recommended retail prices form of minutes of a meeting allegedly (RRPs) at which the retailer is to on- held in Midrand in September 2008. Based on this information, the sell the product to the end consumer. This meeting appears to have been Commission was concerned that The RRPs are worked out to yield between firms in the cycling industry the abovementioned conduct could approximate markups of 35% for including retailers and wholesalers. amount to a contravention of section bicycles and 50% for accessories 4(1)(b)(i) of the Competition Act and from the wholesale price. Of concern The minutes were posted on ‘The thus initiated an investigation in March is that, although the prices are Hub’ website, which is a forum for 2009. Summonses were subsequently ostensibly only recommended, the various parties involved in the sport issued against two of the major cycle retailers were under the impression of cycling. The minutes indicated that retailers who appeared to have been that to divert from that price would the meeting was held to discuss the behind the conduct. However, it later mean cuts in supply. state of the cycle retailers, specifically emerged that more entities were concerns that the industry was not involved and the Commission has At the meeting of September 2008 performing well economically, as expanded its investigation to include retailers met along with some well as possible solutions to deal these firms. wholesalers in order to discuss with the problems. These included proposals to change the “industry getting the cycle shops to agree on The Retailers norms” to increase the mark-ups the prices and margins to be made on as described above. There were cycling equipment and accessories The Commission’s investigation several means discussed in order to as a solution to reviving the industry. started with the cycle retailers, i.e. achieve this goal. For example, one Extracts from the minutes of the retailers of bicycles, and cycling of the suggestions was to collectively

14 increase the retail prices to the role of the cycling wholesalers. As issues and such association was end consumers, as well as to have mentioned above, the wholesalers ultimately not formed. However, the wholesalers advertise their products had for years been providing RRPs Commission remains concerned with higher RRPs. Discussions had to retailers through price lists. Even about the discussions. gone further to suggest a date for though this may not necessarily fall such price increase being 1 October foul of the Act, as the RRP appeared The Commission continues its 2008. not to be binding, the combination investigation of this and the fact that the RRPs Another major concern discussed were advertised to the public, made With the information received since the in the meeting was the role of the it difficult for retailers to go against original initiation implicating more cycle “Discount Stores”, which are the low the recommended prices. As such retailers and even some wholesalers, cost retailers who offer products to the it appears as though the RRPs were the Commission has widened the public at significant discounts. Some adhered to, and some retailers even scope of its investigation. of the retailers (and wholesalers) were alleged that they had no freedom to concerned about the number of the price outside the RRPs provided by Ultimately this case points to the fact Discount Stores in the market and that the wholesalers. The Commission is that cartel activity is quite a common these stores were offering significantly investigating this aspect to examine if feature in the South African economy low prices, thus impacting negatively the wholesalers could be involved in and does not only extend to major on the margins in the whole industry. the practice of retail price maintenance industries in the economy, but to Some solutions suggested to this in contravention of Section 5(2). smaller industries as well. With the problem included influencing some Commission’s continued focus on of the major wholesalers to stop The Commission also established cartels as priority, this matter sends supplying these discount stores, that the wholesalers had been in a resounding message to all firms or limiting the numbers and areas discussions with each other in an in any industry that the Commission in which the discount stores could attempt to form an association, to deal will continue to carry out its mandate operate. with industry problems such as import to ensure an effective and efficient duties, wholesalers’ relationships with economy for all. The Wholesalers cycle dealers, participation in cycling expos, etc. These discussions were During the course of the investigation however fruitless, as no consensus greater clarity emerged on the could be reached on some of the

15 Merger thresholds

In addition to the change of thresholds which according to the Commission the Minister also announced that the may significantly affect competition. filling fee payable for intermediate In this regard the Commission and large mergers would increase. has issued guidelines advising The new filling fees for these two the business community in which categories of mergers are: instances they should voluntary inform the Commission of small mergers they • Intermediate merger: R 100 000 enter into. In brief, the Commission • Large merger: R 350 000 requests to be informed of small mergers entered into by firms that are No changes were affected to the subject to chapter 2 investigation and/ manner in which merger thresholds or a respondent before the Competition have to be calculated. Parties still Tribunal in terms of chapter 2 of the required to use the most recent Competition Act. Upon receiving the By: Maarten van Hoven audited financial statements for the information of the transaction the immediate previous financial year. Commission will advise the parties to The Commission has also created that small merger whether or not the In terms of Section 11(1) of the a threshold calculator which could Commission requests them to notify Competition Act 89 of 1998 (“the Act”) be used by business in determining the transaction. The Commission the Minister of Trade and Industry whether or not their proposed mergers believes that by issuing the small in consultation with the Competition are notifiable. merger guidelines, the Commission Commission must determine a lower can proactively (with the co-operation and higher threshold for purpose of In terms of Section 13 and 13A of the of the parties) possibly prevent anti determining small, intermediate or Competition Act there is an obligation competitive effects resulting from large categories of mergers. on parties to intermediate or large small mergers. mergers to notify the Competition During the latter part of 2008 the Commission of those mergers and The merger thresholds have not Minister invited comments from not implement those mergers prior to been amended since 2001. The interested parties to the proposed obtaining the approval or conditional changes were necessitated due to changed thresholds. Although various approval from either the Commission the significant economic growth the submissions were received the or Tribunal respectively. country has experienced over the business community welcomed the last few years. The structure of the proposed changes as it would reduce With regards to small mergers Commission has remained relatively the burden on firms to notify the (transactions that fall below the lower unchanged and merger notifications Commission of transactions. Although threshold) no obligation rests on have increased approximately three according to the Commission there parties to notify these transactions to fold from 2001 to 2008. The amended is no direct correlation between the the Commission and they may also thresholds would have a significant size of a merger and its complexity, implement these transactions without impact on the workload in the or the likely effect it would have on first obtaining approval from the Commission as it is anticipated that competition the Commission accepts Commission. notifications should drop by between that target firms that have a small 30 to 40 percent from 2008 to 2009. turnover or asset base are likely to Section 13 (3) of the Act does, have no significant impact on the however, provide the Commission The reduced workload would likely economy, considering factors such with the right to call upon parties enable the Commission to investigate as barriers to entry and countervailing to a small merger to notify the more vigorously and produce higher powers. Commission of those mergers quality work.

The current merger thresholds (listed in the following table) came into effect Combined turnover / Target firm turnover / as from 1 April 2009. Threshold asset value asset value

Lower threshold R 560 000 000 R 80 000 000

Higher threshold R 6 600 000 000 R 190 000 000

16 Brimstone and Sea Harvest Merger

A diagrammatical illustration of the pre Brimstone or any of its subsidiaries merger shareholding appears below: were precluded from acquiring an interest in businesses similar to or in Brimstone Tiger competition with Sea Harvest.

These types of structures and relationships between shareholders 21% 75% 11% 37% could often lead to firms indirectly allocating markets. Although the merger did not raise any significant Sea Harvest Oceana competition concerns, in that the By: Thabelo Ravhugoni transaction disentangled Brimstone Post merger the structure would look and Tiger in respect of their shareholding in Sea Harvest, the On 23 December 2008, Business as follows: Commission was concerned that the Venture Corporation (Pty) Ltd pre merger relationships governed (“Business Venture”) notified Brimstone Tiger by shareholding and agreements the Competition Commission between the parties could have (“Commission”) of its intention to possibly prevented Brimstone to acquire Sea Harvest Limited (“Sea 100% 11% 37% propose any expansion that could Harvest”). Business Venture is encroach into Sea Harvest’s market jointly controlled by Brimco (Pty) which is possibly in contravention of Ltd (“Brimco”) and Kagiso Strategic Sea Harvest Oceana Section 4(1)(b) of the Competition Investments III (Pty) Ltd (“KSI”). Act. Notwithstanding the above the Brimco and KSI are controlled by Commission has been investigating Brimstone Investment Corporation Oceana and Sea Harvest compete in the markets in which Oceana and Sea Limited (“Brimstone”) and Kagiso the harvesting, supply and marketing Harvest compete and the findings Trust Investments (Pty) Ltd (“Kagiso”) for hake, as well as in the market for from the merger investigation would be respectively. the harvesting, supply and marketing of small pelagic fish (pilchards and used in support of these investigations. According to the Commission the Prior to implementing the transaction anchovy). Pilchards and anchovy are fishing industry is experiencing Sea Harvest was controlled by Tiger considered to be the most important dwindling supply, of pelagic fish as Brands Limited (“Tiger”) in that it species within the pelagic fish a result of reduced quotas. With no held 73,16% of the entire issued category, as anchovy is mainly used reduction in demand for pelagic fish share capital of Sea Harvest. The for fishmeal and pilchards for canning the reduced quotas results in higher balance of 21,52% was indirectly purposes to be sold as a protein prices and coupled with possible held by Brimstone and The Sea alternative to consumers in the retail anti-competitive behavour in the Harvest Employee Trust with 5,32% market. industry will exacerbate the harm shareholding. Whilst Oceana has established its on consumers. The Commission Brimstone is an investment holding presence in small pelagic fish market, has therefore decided to conduct company holding a diverse portfolio Sea Harvest mainly focuses on hake. thorough investigations in the fishing of interests in a number of firms. Oceana has insignificant presence industry. Of particular relevance to this in hake. Similarly, Sea Harvest has transaction is Brimstone’s interest in negligible presence in pelagic fish The Competition Tribunal upheld Oceana Group Limited (“Oceana”). respectively. the Commission’s recommendation Oceana and Sea Harvest operate in and approved the merger without the fishing industry. Uniquely Tiger During the merger investigation, conditions. also has an equity interest in Oceana the Commission found that Tiger and according to the Commission and Brimstone entered into various this interest enables them to exercise agreements, some of which, control over Oceana together with particularly those in relation with Sea Brimstone. Harvest, contained “non- competition” clauses. In terms of these clauses

17 Merger and Acquisition Summaries

During the last quarter the prevent or lessen competition in any indented to acquire joint control with Commission considered various high of the markets in which Vodacom or Old Mutual, (which is currently a profile transactions and transactions Vodafone competes. The Commission controlling shareholder) of Masthead which raised significant competition further found that merger would have Distribution Services. Masthead is a concerns. no significant effects on the various brokerage support services firm that public interest aspects listed in the provides brokerage support services Vodafone & Vodacom act. including but not limited to compliance and business management services The Vodafone & Vodacom transaction Sanlam, Liberty and Metropolitan to independent insurance brokers. was considered and approved & Masthead. Masthead also provides distribution by the Competition Tribunal on 25 services to insurance and other February 2009. Prior to the merger, During February 2009 Sanlam, financial services providers including Vodafone through certain subsidiary Liberty and Metropolitan notified a the Sanlam, Liberty, Metropolitan companies, held 50% of the issued transaction in terms of which they share capital of Vodacom. The remaining shares were held by SA (Pty) Ltd (“Telkom”). In terms of the proposed transaction, Vodafone will acquire a further 15% of the issued share capital in Vodacom from Telkom. Telkom will then unbundle the remaining 35% shares which it retains in Vodacom to its own shareholders, who are members of the public. Post- merger, Vodafone will hold 65% of the issued share capital of Vodacom and the remaining shares of Vodacom will be publicly held. Vodafone will exercise sole control over Vodacom post-merger. In its analysis the Commission considered all possible competition and public interest aspects and found that it unlikely that the merger would substantially

18 and Old Mutual for their long-term and this raised potential competition serviced. The segments stretch from and short-term insurance, savings concerns. The Commission found that small and medium sized local fishing and investment products. During the the transaction presents substantial vessels to large container vessels Commission’s in-depth investigation foreclosure concerns as Senmin would and and gas rigs. In addition to the Commission identified the potential have been able to exercise market the different types of vessels different foreclosure in the downstream power in the manufacturing of CMC. types of repairs have to be performed distribution and compliance services Consequently, it would have been on these vessels. These factors impact markets to small independent brokers in a strong position to foreclose its on the market analysis as certain due to the joint control of Masthead rivals in the supply of technical grade market participants are not positioned by the four major insurance firms in CMC to the mines. The transaction to undertake certain projects whereas South Africa. Furthermore according however did present some efficiency others have the ability to perform to the Commission the transaction gains through Senmin’s introduction the services. The primary issue was likely to facilitate information of better research and manufacturing considered by the Competition exchange and possible collusion methods of CMC. However, these Tribunal related to the A Berth facility that may occur through the presence are not brought about by the merger to be controlled by the parties which of the three primary acquiring firms and the anti-competitiveness of the is used for the repair of oil rigs in and Old Mutual on Mastheads’ Board transaction remained overwhelming. Cape Town harbour. According to the post merger. These concerns were Although the imposition of conditions Commission if the parties controlled communicated to the merging parties were considered to alleviate the this facility the parties could foreclose and the merger was subsequently anti-competitive concerns raised competitors from access to this facility abandoned during April 2009 before by Commission, the Commission and thereby substantially prevent Commission could rule on the matter. concluded that such conditions would or lessen competition in this market. Based on the information gathered not allay the foreclosure concerns The Tribunal accordingly approved by the Commission, possible further brought to bear by the acquisition. the transaction subject to certain enforcement investigations may be The main among the reasons was conditions which would remedy the initiated. that the pricing conditions would not potential concerns. preclude the exclusion of downstream Senmin International (Proprietary) rivals. It was the Commission’s view Limited (“Senmin”) & Cellulose that Senmin could still achieve a Derivatives (Pty) Ltd (“Cellulose foreclosure strategy even in the Derivatives”). presence of the supply conditions. As such, the Commission prohibited the During February 2009 the Commission transaction. prohibited the proposed merger between Senmin International DCD Dorbyl and Globe (Proprietary) Limited (“Senmin”) Engineering Works (Pty) Ltd & Cellulose Derivatives (Pty) Ltd (“Cellulose Derivatives”). Senmin During February and March 2009 the is a wholly owned subsidiary DCD Dorbyl and Globe Engineering of Chemical Services Limited Works (Pty) Ltd merger was analyzed (“Chemserve”), which in turn is by the Commission and considered by controlled by AECI Limited. Cellulose the Competition Tribunal DCD Dorbyl Derivatives is the only manufacturer is controlled by Bank Limited of a product called technical grade (“Investec”), Reyapele Investments carboxymethylcellulose (“CMC”) in (Pty) Ltd and Management. DCD South Africa. The technical grade Dorbyl is active in ship repair industry CMC is a depressant used in mines, and is in particular active in the Cape particularly platinum mines for Town harbour. Globe is active in ship mineral extraction. In South Africa, the repair industry in the Cape Town technical grade CMC is distributed by harbour. In terms of the Sale of Shares two companies, namely GM Associates Agreement, DCD Dorbyl intended and Senmin. In essence the approval to acquire 100% of the issued share of the transaction would have granted capital in Globe Engineering. The one entity, Senmin, control over a ship repair market could be split critical input that is required by the into various segments, which relate only other competitor in the market; to different types of vessels to be

19 Towards a fair and efficient economy for all

Where to get hold of us Visit the Competition Commission online at www.compcom.co.za for more information about the Commission and the Act, as well as the rules and amendments to the Act. You may also forward enquiries, comments and letters to:

THE EDITOR Strategy and Stakeholder Relations Division Private Bag X23 Lynnwood Ridge 0040

E-mail: [email protected] Tel: (012) 394 3200 Fax: (012) 394 0166

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© Please note that the information contained in this document represents the views of the authors and does not necessarily constitute the policy or the views of the Competition Commision. Any unauthorised reproduction thereof wil constitute copyright infringement. Persons interested in this information should not base their decisions thereon without obtaining prior professional advice.

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