Diageo Africa B.V v Newshelf 1167 t/a United National Breweries SA (021196) [2015] ZACT 143 (28 May 2015)
- Citation
- [2015] ZACT 143
- Status
- Judgment
- Jurisdiction
- South Africa
- Court
- Competition Tribunal
- Panel
- Yasmin Carrim, Mondo Mazwai, Anton A Roskam
- Case number
- 021196
More details
- Court
- Competition Tribunal
- Panel
- Yasmin Carrim, Mondo Mazwai, Anton A Roskam
- Case number
- 021196
On this page
Professional case brief
Research organized from the available case record
01
Holding and result
The Tribunal found that the proposed transaction, involving Diageo acquiring the remaining 50% of UNB, would not alter the competitive structure of the affected markets, as Diageo already held a significant shareholding. The presence of other competitors, such as SAB and Distillers, and the non-homogenous nature of the products, made coordination unlikely. The Commission's investigation revealed no evidence that the merger would facilitate coordinated effects or enable unilateral price increases. Furthermore, the merging parties confirmed that there would be no adverse impact on employment or other public interest concerns. The Tribunal concurred with the Commission's assessment and concluded that the merger was unlikely to substantially prevent or lessen competition or raise public interest issues.
Court disposition
Merger unconditionally approved.
Orders
- The proposed transaction between Diageo Africa B.V and Newshelf 1167 t/a United National Breweries SA is approved unconditionally.
02
Material facts
Parties
Diageo Africa B.V
Applicant Counsel: Antony NortonNewshelf 1167 t/a United National Breweries SA
Respondent03
Procedural history
Posture
Merger Approval / Decision
04
Questions and positions
Legal issues
- 01
Whether the proposed merger would substantially prevent or lessen competition in any relevant market.
- 02
Whether the merger would facilitate coordinated effects among competitors.
- 03
Whether the transaction raises any public interest concerns, including adverse impact on employment.
Party arguments
- Applicant
- Diageo Africa B.V argued that acquiring the remaining 50% shareholding in UNB would not alter the competitive dynamics of the market, as it already held a significant stake. The applicant submitted that the transaction would enable business growth and would not result in adverse effects on competition or employment.
- Respondent
- Newshelf 1167 t/a United National Breweries SA, through Pestello Investments, contended that the sale was an opportunity to transfer ownership to a purchaser committed to expanding the business. The respondent did not raise concerns regarding competition or public interest, and confirmed no negative impact on employment.
05
Court’s reasoning
Legal principles
- 01
Competition Act, No. 89 of 1998
A merger may only be prohibited if it is likely to substantially prevent or lessen competition in any relevant market.
- 02
Competition Commission findings
The assessment of coordinated effects requires consideration of market structure, product homogeneity, and the ability of firms to align behaviour.
06
Ratio, limits and disposition
Ratio decidendi
The Tribunal found that the proposed transaction, involving Diageo acquiring the remaining 50% of UNB, would not alter the competitive structure of the affected markets, as Diageo already held a significant shareholding. The presence of other competitors, such as SAB and Distillers, and the non-homogenous nature of the products, made coordination unlikely. The Commission's investigation revealed no evidence that the merger would facilitate coordinated effects or enable unilateral price increases. Furthermore, the merging parties confirmed that there would be no adverse impact on employment or other public interest concerns. The Tribunal concurred with the Commission's assessment and concluded that the merger was unlikely to substantially prevent or lessen competition or raise public interest issues.
Obiter and limits
- The Tribunal noted that the market comprises a large number of firms, making coordination difficult to sustain.
- The products involved are non-homogenous, which further reduces the likelihood of coordinated effects post-merger.
- No adverse impact on employment was identified, and no other public interest concerns were raised.
Court disposition
Merger unconditionally approved.
- The proposed transaction between Diageo Africa B.V and Newshelf 1167 t/a United National Breweries SA is approved unconditionally.
Source and reliance status
Competition Tribunal
This page organises the available record for research. Confirm quotations, current status, and subsequent treatment against the official source before relying on the case.
Judgment reading view
Judgment text
The complete available source text.
Competition Tribunal
Judgment
COMPETITION
TRIBUNAL OF SOUTH AFRICA
Case No: 021196
In the matter between:
Diageo Africa B.V
Primary Acquiring Firm
And
Newshelf 1167 t/a United National Breweries SA Primary Target Firms
Panel
: Yasmin Carrim (Presiding Member)
: Mondo Mazwai (Tribunal Member)
: Anton A Roskam (Tribunal Member)
Heard on : 13 May 2015
Order Issued on : 13 May 2015
Reasons Issued on : 28 May 2015
Non Confidential Reasons for Decision
Approval
[1] On 13 May 2015, the Competition Tribunal ("Tribunal") unconditionally approved the merger between Diageo Africa B.V ("Diageo") and Newshelf 1167 Va United National Breweries SA ("UNB").
[2] The reasons for approving the proposed transaction follow.
Parties to transaction
Primary acquiring firm
[3] The primary acquiring firm Diageo is a firm incorporated and registered in Netherlands. It is listed on the New York Stock Exchange and the London Stock Exchange. It is not controlled by a single shareholder but its largest shareholder is BlackRock Investment Management (UK) Limited and Capital Research and Management Company.
[4] UNB is incorporated in South Africa and is jointly controlled by Diageo and Pestello Investments. UNB solely controls the following South African private companies, Reldann Investments No. 12 Proprietary Limited ("Reldann") and
Primary target firm
[5] The primary target firms in this group, the UNB Group is made up of UNB, Reldann and
[6] The UNB group manufactures traditional African sorghum beer (Umqombothi) and Mageu in South Africa. These products are distributed from four breweries and various distribution depots situated around South Africa with the exception of the Western Cape.
Proposed transaction and rationale
[7] The proposed transaction involves Diageo, who already holds 50% of UNB acquiring the remaining 50% from Pestello Investments.
[8] The target firms submitted that its intention to sell is due to the fact that this will be an opportunity to sell to a purchaser who intends to grow the business.
Impact on competition
[9] According to the Competition Commission's ("the Commission") findings the proposed transaction is unlikely to alter the existing competitive structure in the affected markets given Diageo's pre-existing shareholding of 50%.
[10] The Commission further found that the merging entity will be unable to unilaterally increase prices post-merger and it has limited incentives to so considering the presence of other competitors such as SAB and Distillers that operate in the affected market.
[11] The Commission also investigated the possibility of coordinated effects. The Commission was of the view that coordination in this case may be difficult to sustain in a market which comprises of a large number of firms as it may be challenging for firms to align their individual behaviour and agree on common terms. Further, the products involved are non- homogenous and the merger, from joint to sole control, does not assist in facilitating coordination as it does not alter the market. Based on these findings the Commission found that typical conditions to facilitate coordination are not present in this case.
[12] We concur with the Commission's competition assessment, i.e. that the proposed transaction is unlikely to substantially prevent or lessen competition in any relevant market. We further agree that it is unlikely that the transaction would result in coordination.
Public interest
[13] The merging parties confirmed that the proposed transaction will not result in an adverse impact on employment.[1] The proposed transaction further raises no other public interest concerns.
Conclusion
[14] In light of the above, we conclude that the proposed transaction is unlikely to substantially prevent or lessen competition in any relevant market. In addition, no public interest issues arise from the proposed transactions. Accordingly, we approve the proposed transaction unconditionally.
Yasmin Carrim
28 May 2015
DATE
Mondo Mazwai and Anton A Roskam concurring
Tribunal Researcher: Aneesa Raval For the merging parties: Antony Norton of Nortons Inc For the Commission: Daniela Bove and Grashum Mutizwa
[1] Inter alia merger record page 7.
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