Category: competition policy

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Call for papers on economic regulation, competition and regional development

CALL FOR PAPERS: 4th ANNUAL COMPETITION AND ECONOMIC REGULATION (ACER) WEEK, SOUTHERN AFRICA, CONFERENCE 19 & 20 July 2018, Johannesburg, South Africa

The National Energy Regulator of South Africa, the Competition Commission South Africa and the University of Johannesburg’s Centre for Competition, Regulation and Economic Development are honoured to host the 4th Annual Competition and Economic Regulation (ACER) Week, Southern Africa. ACER provides a valuable platform for competition authorities and regulators to share knowledge, keep abreast of key developments across the region, and build networks for collaboration between agencies. ACER week combines targeted courses on 16-18 July 2018, running concurrently, and the conference on 19 & 20 July 2018.

The conference seeks to address issues of direct interest to competition authorities, economic regulators and industrial policy practitioners in Southern Africa.

Abstracts for proposed conference papers are invited on issues of economic regulation, competition and regional development. While there is a focus on Southern Africa, papers are welcome on these issues with reference to other jurisdictions. The papers will be selected from the abstracts submitted.

Papers are especially invited which fall within the following key themes:

  • Industrial development, structural transformation and creating more competitive markets
  • The opening-up of local and regional markets – experiences in renewable energy and gas markets
  • Cost allocation regarding cross-border energy infrastructure
  • Contemporary regulatory challenges for telecoms, and transition to smart cities and a digital economy
  • Assessing prudency in asset procurement and operational expenditure, and the impact on tariffs
  • Competing on whose merits? A new competition policy agenda to tackle inequality, concentration and participation
  • Competition and regional integration: developing institutions and an effective regime for assessing regional mergers and prosecuting cross-border cartels
  • Market inquiries – realistic or overloaded expectations?
  • 20 years of the South African Competition Act – critical reflections

Abstracts should be no more than 250 words. Abstracts may be submitted to infoccred@uj.ac.za on or before 2 April 2018. Acceptance of papers will be communicated by 13 April 2018. Final papers must be submitted by 29 June 2018.

For more information, please visit CCRED website: https://www.competition.org.za/acerweek2018/

Queries can be directed to Lauralyn Kaziboni. Tel: +27 11 559 7516. E-mail: lauralynk@uj.ac.za

Author: CCRED

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competition policy Featured

Netcare acquires mental health group, with conditions

The Competition Tribunal has approved the merger of Netcare Group and mental health care provider Akeso Group subject to conditions relating to pricing and divestiture by Netcare of its Rand Hospital and Bell Street Hospitals to address concerns raised by the Competition Commission.

Both parties are active in the provision of private healthcare in South Africa with an overlap in mental healthcare. The primary acquiring firm, Netcare, operates a private hospital network in South Africa and the United Kingdom and has licenses for psychiatric beds in its acute hospitals. Target firm Akeso is a group of in-patient clinics that provide individual, integrated and family orientated treatment for a range of mental health, psychological and addictive conditions. The Akeso Group’s mental health hospitals are located throughout South Africa.

In terms of the conditional approval:
Netcare shall maintain the base tariff currently implemented at Akeso facilities as agreed to between Akeso and various medical aid schemes;
Netcare will not seek to alter the tariff classifications used at Akeso facilities for any existing treatment modalities;
Netcare will honour Akeso’s existing contractual agreements with medical aid schemes with regard to ARMs (Alternative reimbursement models);

The post transaction annual tariff increases for fee-for-service reimbursement at Akeso will be tied to the tariff increase negotiated by Netcare with medical aid schemes in respect of its acute hospitals.

Netcare will dispose of Rand Hospital and Bell Street Hospital which both presently have psychiatric health beds to a purchaser which is able to prove to the Commission that it has the requisite resources and incentive to develop the hospitals as a viable and active competitive forces in competition with Netcare and other competitors.

The Competition Commission had initially recommended to the Tribunal that the merger be prohibited concluding that the deal was likely to cause a substantial lessening of competition. The Commission said the merger would result in significant combined market shares in the provision of mental healthcare services in a local market in Gauteng, with the merged entity likely to exercise market power.

In response to questions raised by the Tribunal, the merging parties tendered further conditions to the merger which the Commission accepted would adequately address the concerns raised. The Commission thus reversed its recommendation from prohibition to approval subject to conditions.

The Tribunal will give its reasons for its decision in due course.

Find the order and conditions here.

Author: Competition Tribunal

Categories
barriers to entry competition policy Media Release

Not everyone’s cup of tea – Rooibos Limited charged for abuse of dominance

Rooibos Limited, the largest processor of rooibos tea in South Africa, been referred to the Competition Tribunal for prosecution on charges relating to abuse of dominance by inducing rooibos tea farmers not to deal with rooibos tea processors it competes with.

This follows an investigation by the Commission after it received a complaint from a processor of rooibos tea in 2015. The Commission’s investigation focused on Rooibos Limited’s monopolisation of rooibos tea supply from rooibos tea commercial farmers, in order to foreclose its competitors in the processing level of the value chain or prevent the expansion of its rivals in the market.

Rooibos tea only grows in the Mediterranean climate of the Cederberg region’s acidic soils in areas such as Clanwilliam, Graafwater, Citrusdal and others.  Rooibos tea is a unique caffeine-free product containing extremely high levels of anti-oxidants and grows nowhere else in the world.  In view of the fact that rooibos tea is only grown in a small geographic region, its source of supply is limited and access to it by rooibos tea processors is critical for them to remain competitive in the market.

Although there are about 220 rooibos tea commercial farmers all based in the rooibos producing areas in the Western and Northern Cape, only a limited number of rooibos tea commercial farmers contribute the bulk of the total production of rooibos tea which is supplied to rooibos tea processors.  Rooibos tea processors purchase rooibos tea from rooibos tea commercial farmers in bulk and then dry and treat rooibos tea which is then on-sold to the local packers and the export market as a bulk product for packaging into final products and other value added products.

Rooibos Limited remains a dominant player in the processing of rooibos tea by virtue of the fact that it inherited the assets and the monopoly position previously occupied by the Rooibos Tea Control Board, which was established in 1954 by the previous government to, among other things, regulate the marketing, pricing and research in the rooibos tea industry.  Some of the entrants in rooibos tea processing were formed by famers who were discontent with the monopoly position of Rooibos Limited.

 

Historically, rooibos tea processors obtained their supply of rooibos tea from farmers through one-year supply agreements. However, in 2014 Rooibos Limited introduced two exclusionary contracting strategies to lock-in or foreclose the supply of rooibos tea from  farmers, thus starving its competitors of access to a product that only grows in a small geographic region.

  • Firstly, Rooibos Limited entered into long-term supply agreements with farmers for the period 2014-2018. In terms of the agreements, farmers are required to supply stipulated volumes of rooibos tea to Rooibos Limited.
  • Secondly, Rooibos Limited introduced a supply commitment in exchange for farmers gaining access to its production research output. In particular, farmers are required to supply up to half of their production to Rooibos Limited.  Rooibos Limited exploited its research output to lock-in the supply of rooibos tea from farmers after the collapse the research function undertaken by the South African Research Agricultural Council in 2014.

The introduction of these exclusionary contracting strategies locked-in significant volumes of rooibos tea production from commercial farmers in favour of Rooibos Limited and negatively affected its competitors in the market for the bulk processing of rooibos tea.  Subsequently, Rooibos Limited’s volumes of rooibos tea purchased from farmers, which were in serious decline at the time, significantly escalated and its main rival’s purchases of rooibos tea either declined or stagnated, thus threatening the competitive process in this market.

The Commission has referred the complaint to the Tribunal for adjudication. The Commission is seeking an order from the Tribunal declaring that Rooibos Limited has contravened the Competition Act and that the company is liable to pay an administrative penalty equal to 10% of its annual turnover.

“The Commission is concerned of Rooibos Limited’s ongoing anti-competitive conduct, particularly as this hampers the growth of the agro-processing industry in South Africa. Dominant firms have a special responsibility to ensure they do not stifle competition,” says the Deputy Commissioner, Hardin Ratshisusu.

Author: Competition Commission of South Africa

Image: Competition Commission

Categories
competition policy

ArcelorMittal settlement is new and tricky territory for competition authorities

IT WAS a long-running battle that could no  longer go on. The David in this story furiously hopped around Goliath, without  much success, until the giant, for other  reasons, ran out of steam.

For most of the post-apartheid era, the pricing  of steel has been contentious. Steel is important  to any economy with a sizeable manufacturing  sector. Iscor, the predecessor to Arcelor Mittal SA  and a creature of the 1928 South African Iron and  Steel Act, was a strategic link in the apartheid  state’s industrialisation drive. But with privatisation in 1989, the accusation has long been that  the company became at best indifferent, at worst  hostile, to SA’s developmental agenda.

Repeated calls have been made for the company to adopt a pricing model that would ensure  that downstream, steel-consuming industries  thrive. Instead, for many years, the company  stuck with import parity  pricing, charging local  manufacturers as if they  were importing the steel  from distant and expensive international markets. It has stood accused  of breaching the competition laws through cartel  arrangements with its  competitors, and the  abuse of its dominance  through excessive and  discriminatory pricing.

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Categories
competition policy mergers and acquisitions public policy

MegaBrew deal gets Competition Commission nod, with conditions

Source: Freepik

Press release from the Competition Commission:

COMPETITION COMMISSION CONCLUDES ASSESSMENT OF AB INBEV/ SABMILLER MERGER

The Competition Commission (Commission) has recommended to the Competition Tribunal (Tribunal) that a large merger whereby Anheuser-Busch Inbev SA/NV (AB InBev) intends to acquire SABMiller plc (SABMiller) be approved with conditions. The Commission has found that the proposed merger raises several competition and public interest concerns, and has thus recommended conditions to the Tribunal to address these concerns.

AB InBev is a public company listed on the Euronext Brussels and New York Stock Exchanges. AB InBev is active in the production, marketing and distribution of beer, near beer and soft drink products. In South Africa, AB InBev only supplies beer products and its brands include Corona Extra, Stella Artois, Beck’s Blue and Budweiser which are imported and sold through DGB (Pty) Ltd (DGB), a global distributor of alcoholic beverages.

SABMiller is a public company with a primary listing on the London Stock Exchange and a secondary listing on the Johannesburg Stock Exchange (JSE). Through its subsidiaries, SABMiller is involved in the manufacture, distribution and sale of various types of alcoholic and non-alcoholic beverages. In South Africa, SABMiller is the largest producer of beer products and its main brands include Carling Black Label, Castle Larger, Hansa, Castle Light and Peroni. In addition to beer and non-alcoholic beverages, SABMiller, through  South Africa Breweries (Pty) Ltd (SAB), owns a hop production company (SAB Hop Farms (Pty) Ltd), a barley farming company (SAB Barley (Pty) Ltd), a barley malting company (SAB Maltings (Pty) Ltd) and holds a significant interest in Coleus Packaging (Pty) Ltd, a tin metal crown producer.  SAB, through its subsidiary ABI Bottling (Pty) Ltd, is an authorised Coca-Cola bottler.

Concerns arising from the merger and proposed conditions

The Distell Shareholding

The Commission found that SABMiller, through SAB, holds a significant shareholding in Distell Group Limited (Distell). Distell is the largest producer of ciders in South Africa, followed by SAB. Upon implementation of the merger, AB InBev will be entitled to appoint a certain number of directors to the board of Distell, its direct competitor. The Commission is of the view that this relationship creates a platform for the exchange of commercially sensitive information between AB InBev and Distell. Further, the ownership of an economic interest in a direct competitor is likely to dampen potential competition that could occur between AB InBev and Distell in relation to the production and supply of ciders in South Africa. In order to address the above concerns, AB InBev will divest (i.e. sell off) the Distell shareholding within 3 (three) years after closing date of the transaction.

Coca-Cola and Pepsi bottling arrangements

The Commission found that AB InBev bottles soft drinks for Pepsi in other jurisdictions and will post-merger also bottle soft drinks in South Africa for Coca-Cola. The Commission is concerned that these bottling arrangements for the two global leading soft drinks manufacturers could be a platform for coordination.  In order to address this concern, AB InBev has undertaken to ensure that its employees who are involved in bottling operations for Coca-Cola will not also be involved in its bottling operations for Pepsi, and there will be no sharing of commercially sensitive information between the two.

Supply of tin metal crowns

The merged entity will continue to be the dominant supplier of tin metal crowns through the ownership of Coleus, the sole producer of tin metal crowns in South Africa. The Commission is concerned that the merger will increase the likelihood of the merged entity foreclosing its competitors by refusing them access to tin metal crowns. To remedy this concern, AB InBev has undertaken that it will supply tin metal crowns to third parties for a period of 5 (five) years after closing date of the transaction and that it will not enter into any exclusive agreements nor induce Coleus not to deal with or supply third parties.

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