Calulo Investments (Pty) Ltd and Another v FFS Refineries (Pty) Ltd (91/LM/Oct12) [2013] ZACT 42 (19 April 2013)

Calulo Investments (Pty) Ltd and Another v FFS Refineries (Pty) Ltd (91/LM/Oct12) [2013] ZACT 42 (19 April 2013)

The Tribunal found that the proposed merger would result in Investec and Calulo jointly controlling FFS Calpet, which would solely control FFS. The main competition concern was the potential for input foreclosure in the supply of LO2 to brick manufacturers competing with Corobrik, given Investec's interests in Corobrik. The Tribunal accepted the Commission's analysis that FFS had market power in the relevant geographic markets and that the merged entity could have an incentive to foreclose competitors. To address this, the Tribunal imposed behavioural conditions requiring FFS to supply LO2 to existing brick customers on non-discriminatory terms, with pro rata reductions in case of supply...

Citation
[2013] ZACT 42
Parties
Applicant: Calulo Investments (Pty) Ltd; Applicant: Investec Bank Limited; Respondent: FFS Refiners (Pty) Ltd
Court
Competition Tribunal
Jurisdiction
South Africa
Judgment Date
19 April 2013
Case Number
91/LM/Oct12
Procedural Posture
Merger Application / Conditional Approval After Hearing
Outcome
Conditional approval of the merger subject to behavioural conditions.
Judges
A Wessels, M Mazwai, A Roskam
Legal Topics
Input Foreclosure, Vertical Merger, Restraint of Trade, Public Interest, Behavioural Conditions
Competition Law Commercial and Corporate Input Foreclosure Vertical Merger Restraint of Trade Public Interest Behavioural Conditions

Case Brief

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Parties

Calulo Investments (Pty) Ltd

Applicant

Investec Bank Limited

Applicant

FFS Refiners (Pty) Ltd

Respondent

Procedural Posture

Merger Application / Conditional Approval After Hearing

Legal Issues

  1. 1 Whether the proposed merger would result in anti-competitive input foreclosure in the downstream face brick market.
  2. 2 Whether the restraint of trade clause in the merger agreement is reasonable and justifiable.
  3. 3 Whether the merger raises any public interest concerns, including employment effects.

Ratio Decidendi

The Tribunal found that the proposed merger would result in Investec and Calulo jointly controlling FFS Calpet, which would solely control FFS. The main competition concern was the potential for input foreclosure in the supply of LO2 to brick manufacturers competing with Corobrik, given Investec's interests in Corobrik. The Tribunal accepted the Commission's analysis that FFS had market power in the relevant geographic markets and that the merged entity could have an incentive to foreclose competitors. To address this, the Tribunal imposed behavioural conditions requiring FFS to supply LO2 to existing brick customers on non-discriminatory terms, with pro rata reductions in case of supply...

Court Disposition

Conditional approval of the merger subject to behavioural conditions.

Orders

  • FFS shall continue supplying its existing brick customers with LO2 on non-discriminatory terms regarding trading conditions, price, volume, and quality, except for reasonable allowances reflecting differences in cost, manufacture, distribution, sale, promotion, storage, delivery, or variations in raw material...
  • In the event of an unanticipated reduction in LO2 production, FFS shall apply any reduction in supply volumes on a pro rata basis according to volumes supplied to existing brick customers in the preceding 12 months.