Lexshell 668 Investments (Pty) Ltd and Wakefield Investments (Pty) Ltd (82/LM/Oct06) [2007] ZACT 51; [2007] 2 CPLR 335 (CT) (1 August 2007)

Lexshell 668 Investments (Pty) Ltd and Wakefield Investments (Pty) Ltd (82/LM/Oct06) [2007] ZACT 51; [2007] 2 CPLR 335 (CT) (1 August 2007)

The Tribunal found that the merger between Lexshell and Wakefield would not result in a substantial lessening or prevention of competition in either the metallurgical or thermal coal markets. The merged entity's significant share in the residual domestic thermal coal market (36.3%) does not confer market power sufficient to harm competition, as price increases and the trend toward export parity are driven by structural changes in the coal industry, including increased export prices, full utilisation of export terminal capacity, and commodification of coal. Evidence showed that price escalations and supply constraints predated the merger, and that Wakefield was already increasing prices...

Citation
[2007] ZACT 51
Parties
Applicant: Lexshell 668 Investments (Pty) Ltd; Respondent: Wakefield Investments (Pty) Ltd
Court
Competition Tribunal
Jurisdiction
South Africa
Judgment Date
1 August 2007
Case Number
82/LM/Oct06
Procedural Posture
Merger Application / Reasons for Decision
Outcome
Merger approved without conditions.
Judges
N Manoim, M Holden, M Madlanga
Legal Topics
Horizontal Merger, Market Definition, Export Parity Pricing, Richards Bay Coal Terminal, Public Interest, Market Concentration
Competition Law Commercial and Corporate Horizontal Merger Market Definition Export Parity Pricing Richards Bay Coal Terminal Public Interest Market Concentration

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Parties

Lexshell 668 Investments (Pty) Ltd

Applicant

Wakefield Investments (Pty) Ltd

Respondent

Procedural Posture

Merger Application / Reasons for Decision

Legal Issues

  1. 1 Whether the merger will result in a substantial lessening or prevention of competition in the relevant coal markets.
  2. 2 Whether post-merger pricing power arises from the transaction or from structural changes in the coal industry.
  3. 3 Whether public interest concerns are raised by the merger.

Ratio Decidendi

The Tribunal found that the merger between Lexshell and Wakefield would not result in a substantial lessening or prevention of competition in either the metallurgical or thermal coal markets. The merged entity's significant share in the residual domestic thermal coal market (36.3%) does not confer market power sufficient to harm competition, as price increases and the trend toward export parity are driven by structural changes in the coal industry, including increased export prices, full utilisation of export terminal capacity, and commodification of coal. Evidence showed that price escalations and supply constraints predated the merger, and that Wakefield was already increasing prices...

Court Disposition

Merger approved without conditions.

Orders

  • The merger between Lexshell 668 Investments (Pty) Ltd and Wakefield Investments (Pty) Ltd is approved unconditionally.
  • No public interest conditions are imposed.