Bayne Investments (Pty) Ltd and Clidet 451 (Pty) Ltd (90/LM/Aug07) [2008] ZACT 6; [2008] 1 CPLR 96 (CT) (21 January 2008)

Bayne Investments (Pty) Ltd and Clidet 451 (Pty) Ltd (90/LM/Aug07) [2008] ZACT 6; [2008] 1 CPLR 96 (CT) (21 January 2008)

The Tribunal found that the merger would result in vertical integration between Steinhoff International/PG Bison and Woodchem, raising significant foreclosure concerns in the particle board market due to high barriers to entry and limited alternatives for rivals. The evidence showed that input foreclosure would be profitable for the merged entity, as imports of formaldehyde resin are costly and limited, and demand for particle board is relatively price inelastic. The Tribunal rejected structural remedies, finding them impractical given the integrated nature of Woodchem's plant. Instead, it imposed behavioural conditions requiring Woodchem to supply existing and new customers on a...

Citation
[2008] ZACT 6
Parties
Applicant: Bayne Investments (Pty) Ltd; Respondent: Clidet 451 (Pty) Ltd
Court
Competition Tribunal
Jurisdiction
South Africa
Judgment Date
21 January 2008
Case Number
90/LM/Aug07
Procedural Posture
Merger Application / Conditional Approval
Outcome
Merger conditionally approved subject to behavioural supply conditions for eight years.
Judges
Y Carrim, L Reyburn, U Bhoola
Legal Topics
Vertical Integration, Input Foreclosure, Supply Conditions, Barriers to Entry, Non Discriminatory Supply, Merger Remedies
Competition Law Commercial and Corporate Vertical Integration Input Foreclosure Supply Conditions Barriers to Entry Non Discriminatory Supply Merger Remedies

Case Brief

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Parties

Bayne Investments (Pty) Ltd

Applicant

Clidet 451 (Pty) Ltd

Respondent

Procedural Posture

Merger Application / Conditional Approval

Legal Issues

  1. 1 Whether the proposed merger would result in input foreclosure in the formaldehyde resin market.
  2. 2 Whether the merger would facilitate collusion or co-ordination among downstream competitors.
  3. 3 Whether barriers to entry in the upstream and downstream markets would exacerbate anti-competitive effects.

Ratio Decidendi

The Tribunal found that the merger would result in vertical integration between Steinhoff International/PG Bison and Woodchem, raising significant foreclosure concerns in the particle board market due to high barriers to entry and limited alternatives for rivals. The evidence showed that input foreclosure would be profitable for the merged entity, as imports of formaldehyde resin are costly and limited, and demand for particle board is relatively price inelastic. The Tribunal rejected structural remedies, finding them impractical given the integrated nature of Woodchem's plant. Instead, it imposed behavioural conditions requiring Woodchem to supply existing and new customers on a...

Court Disposition

Merger conditionally approved subject to behavioural supply conditions for eight years.

Orders

  • Woodchem must continue to supply Sonae Novobord (Pty) Ltd with resin at the price, volumes, and quality specified in the supply agreement dated 4 October 2007.
  • On written request, Woodchem must enter into supply agreements with any particle board producer, subject to production capacity, raw material availability, product specifications, and credit profile, on non-discriminatory terms.