ABSTRACT
9.6. CASES OVERVIEW
The merging parties anticipated a retrenchment figure of less than 10% of staff at management level and various head offices. There would be no need for head offices because each depot would be operated independently by the shareholder of the acquiring firm. The Commission's conclusion was therefore, that the transaction did not raise competition concerns and that the proposed transaction would minimise job losses.
9.6.2 TIlE CASE OF MONDI (LTD) AND KOIILER CORES& TUBES
The Commission recommended a prohibition of the merger between the companies before the Competition Tribunal.
Mondi Limited, a wholly owned subsidiary of Anglo American, notified the commission of its intent to acquire Kohler Cores & Tubes as an alternative to starting its own cores and tubes manufacturing business. An objection from Dive~sified Core & Tubes was subsequently lodged in terms of which it was claimed that the merger would be financially detrimental to its business. Following an investigation, the Commission recommended a prohibition of the merger because the transaction would have given rise to only a vertically integrated entity in the cores and tubes manufacturing industry.
The Commission found that the merger entity's dual position as supplier of paper and core board, and as a competitor in the cores and tubes arena, would be likely to create a channel of conflict in the market. Using its strong market position as supplier of raw material, the merger entity might have been able to raise the manufacturing costs of cores and tubes, and this may have marginalized their market position as suppliers of cores and tubes in the higher end of the market.
Furthermore, the Commission found that the merger would result in foreclosing existing and potential suppliers' paper and core board. The Commission was also concerned that the proposed merger would facilitate collusive behaviour as far as the supply of paper and core board was concerned. Both the upstream (supply of paper in this case) and downstream (cores and tubes industry) markets had to be conducive to the exercise of market power. The Commission concluded that both markets were highly concentrated and, as stated, the merger might have created a structure that could give rise to both the foreclosure and raising of rivals'
costs. The fundamental problem with the merger, therefore, would have been structural and its foreclosure would have effects on the customers of both parties.
The Commission found that potential job losses would not have been sufficient to raise significant public interest concerns.
9.6.3 THE CASE OF UNTI..EVER SOUTH AFRICA AND ROBERTSON'S FOODS The Commission recommended the conditional approval of the large merger between Unifoods, a division ofUnilever SA, and Robertsons Foods. The recommendation was subject to the approval of the Competition Tribunal.
Key Unilever brands within the processed food industry include, amongst others, Royco (soup, sauces, mixed.) and Oxo (black spreads). Robertsons, also in the processed food market, has amongst its key brands Knorr (soups, sauces) and Marmite and Bovril (black spreads).
The competition analysis identified serious competition concerns in a number of product markets, for example packet soup, soya mince, seshebo mixes, salad dressing, recipe mixes and dry marinades. It revealed that there was a very high level of concentration within these product markets because in all markets one of the two brands, either Royco or Knorr, is dominant. An exception was black spreads, which are branded differently. The serious levels of concentration would not be offset by any pro-competitive gains, including significant countervailing. Furthermore, significant barriers to entry existed in the form of access to retailers, distribution and merchandising, branding, and the portfolio of products.
The Commission concluded, therefore, that given the high combined market shares and/or dominance of the parties in the nine relevant markets identified by the Commission, together with the fact that barriers to entry were high and countervailing power was not sufficient to promote competition outcomes, the merger, as proposed, would lead to a substantial lessening or prevention of competition in the market.
The Commission further considered whether any alternatives could be imposed that would alleviate the competition concerns. The parties made certain proposals to the Commission with
the view to lessening the competitive effects of the transaction. After recelvmg the proposal, the. Commission was not satisfied that the anti-competition effects or concerns would be resolved. Unifoods would retain dominance in all of the processed foods markets.
As a result, agreement on the recommendations was not reached between the parties and the Commission The Commission therefore recommended the following:
• Unifoods was to divest itself of the whole product portfolio currently marketed under the Royco and Oxo brands, including the sub-brands.
• The divestiture was to be to a viable third party, approved by the Commission.
• The divestiture was to take place within six months of the Tribunal's decision if the merger were approved.
The Tribunal approved the agreement between the Commission and the parties involved.
CHAPTER TEN: LOCAL ECONOMIC RESPONSES TO INDUSTRIAL MIGRATION