Chemical Services Limited and Chemiphos S.A (Pty) Ltd (100/LM/Dec04) [2005] ZACT 25; [2005] 2 CPLR 436 (CT) (26 April 2005)

Chemical Services Limited and Chemiphos S.A (Pty) Ltd (100/LM/Dec04) [2005] ZACT 25; [2005] 2 CPLR 436 (CT) (26 April 2005)

The Tribunal found that while the merger would not substantially lessen competition in the broad chemical manufacturing and distribution markets due to low combined market shares, significant vertical concerns existed in the supply of white phosphoric and polyphosphoric acid, where Chemiphos held an estimated 85% market share. The lack of effective substitutes, high barriers to entry, and unreliable import alternatives heightened the risk of customer and input foreclosure, potentially disadvantaging downstream competitors. To address these risks, the Tribunal imposed conditions requiring the merged entity to continue supplying all Chemiphos customers on non-discriminatory terms and at...

Citation
[2005] ZACT 25
Parties
Applicant: Chemical Services Limited; Respondent: Chemiphos S.A (Pty) Ltd
Court
Competition Tribunal
Jurisdiction
South Africa
Judgment Date
26 April 2005
Case Number
100/LM/Dec04
Procedural Posture
Large Merger Review / Conditional Approval
Outcome
Merger conditionally approved subject to specified supply and pricing conditions for three years.
Judges
David Lewis, Yasmin Carrim, Thandi Orleyn
Legal Topics
Vertical Integration, Customer Foreclosure, Input Foreclosure, Market Definition, Merger Conditions, Barriers to Entry
Competition Law Commercial and Corporate Vertical Integration Customer Foreclosure Input Foreclosure Market Definition Merger Conditions Barriers to Entry

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Parties

Chemical Services Limited

Applicant

Chemiphos S.A (Pty) Ltd

Respondent

Procedural Posture

Large Merger Review / Conditional Approval

Legal Issues

  1. 1 Does the proposed merger between Chemical Services Limited and Chemiphos S.A (Pty) Ltd substantially prevent or lessen competition in relevant chemical markets?
  2. 2 Are there vertical concerns regarding customer or input foreclosure in the supply of white phosphoric and polyphosphoric acid?
  3. 3 Are the proposed conditions sufficient to address potential anti-competitive effects arising from the merger?

Ratio Decidendi

The Tribunal found that while the merger would not substantially lessen competition in the broad chemical manufacturing and distribution markets due to low combined market shares, significant vertical concerns existed in the supply of white phosphoric and polyphosphoric acid, where Chemiphos held an estimated 85% market share. The lack of effective substitutes, high barriers to entry, and unreliable import alternatives heightened the risk of customer and input foreclosure, potentially disadvantaging downstream competitors. To address these risks, the Tribunal imposed conditions requiring the merged entity to continue supplying all Chemiphos customers on non-discriminatory terms and at...

Court Disposition

Merger conditionally approved subject to specified supply and pricing conditions for three years.

Orders

  • The merger is approved in terms of section 16(2)(b) of the Competition Act subject to the condition that the merged entity shall continue to supply all Chemiphos customers sourcing white phosphoric and polyphosphoric acid at the price and volumes supplied as at 26 November 2004, subject to compliance by customers...
  • In the event of production stoppages, Chemiphos shall re-schedule supply of polyphosphoric and phosphoric acid on a non-discriminatory, pro-rata basis.