Daun et Cie AG and Kolosus Holdings Limited (10/LM/Mar03) [2003] ZACT 49 (17 September 2003)

Daun et Cie AG and Kolosus Holdings Limited (10/LM/Mar03) [2003] ZACT 49 (17 September 2003)

The Tribunal found that although the merged entity would have a significant share of the South African wet blue market, the relevant markets for wet blues and automotive leather are international in scope. The procurement practices of multinational OEMs, which are driven by price and quality, ensure that domestic suppliers cannot exercise market power unilaterally. The merger does not enable input or customer foreclosure, as the merged entity remains dependent on external suppliers and customers. Seton's passive equity stake in Kolosus does not confer control or raise horizontal competition concerns. Regarding public interest, the Tribunal acknowledged the risk of retrenchments but...

Citation
[2003] ZACT 49
Parties
Applicant: Daun et Cie AG; Respondent: Kolosus Holdings Limited; Respondent: Competition Commission; Respondent: South African Food and Allied Trade Union (SAFATU); Respondent: South African Clothing and Textile Worker’s Union (SACTWU)
Court
Competition Tribunal
Jurisdiction
South Africa
Judgment Date
17 September 2003
Case Number
10/LM/Mar03
Procedural Posture
Large Merger / Conditional Approval After Hearing
Outcome
Merger conditionally approved subject to employment condition.
Judges
D Lewis, N Manoim, T Orleyn
Legal Topics
Horizontal Merger, Vertical Integration, Input Foreclosure, Customer Foreclosure, Public Interest Employment, Countervailing Power
Competition Law Commercial and Corporate Horizontal Merger Vertical Integration Input Foreclosure Customer Foreclosure Public Interest Employment Countervailing Power

Case Brief

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Parties

Daun et Cie AG

Applicant

Kolosus Holdings Limited

Respondent

Competition Commission

Respondent

South African Food and Allied Trade Union (SAFATU)

Respondent

South African Clothing and Textile Worker’s Union (SACTWU)

Respondent

Procedural Posture

Large Merger / Conditional Approval After Hearing

Legal Issues

  1. 1 Does the merger substantially lessen competition in the relevant markets for raw hides, wet blues, and automotive leather?
  2. 2 Will the merged entity be able to exercise market power monopsonistically or monopolistically in the wet blue market?
  3. 3 Is there a risk of input or customer foreclosure resulting from vertical integration?

Ratio Decidendi

The Tribunal found that although the merged entity would have a significant share of the South African wet blue market, the relevant markets for wet blues and automotive leather are international in scope. The procurement practices of multinational OEMs, which are driven by price and quality, ensure that domestic suppliers cannot exercise market power unilaterally. The merger does not enable input or customer foreclosure, as the merged entity remains dependent on external suppliers and customers. Seton's passive equity stake in Kolosus does not confer control or raise horizontal competition concerns. Regarding public interest, the Tribunal acknowledged the risk of retrenchments but...

Court Disposition

Merger conditionally approved subject to employment condition.

Orders

  • The merger between Daun et Cie AG and Kolosus Holdings Limited is approved subject to the condition that retrenchments resulting from the merger are limited to 150 employees for a period of one year from 29 July 2003.
  • The parties are required to comply with statutory procedures and negotiated provisions governing retrenchment.