Momentum Group Limited and African Life Health (Pty) Ltd (87/LM/Sep05) [2006] ZACT 1; [2006] 1 CPLR 171 (CT) (3 January 2006)

Momentum Group Limited and African Life Health (Pty) Ltd (87/LM/Sep05) [2006] ZACT 1; [2006] 1 CPLR 171 (CT) (3 January 2006)

The Tribunal found that while Momentum and Discovery currently compete vigorously, the governance structure and cross-directorships present a risk of future co-ordination and collusion, especially as both firms seek to expand into lucrative market segments. The Commission's approach to market share calculation was rejected, as all beneficiaries, including those in Discovery's own scheme, are contestable. The Tribunal held that the elimination of cross-directorships at both operating and holding company levels is necessary to preserve rivalry and prevent anti-competitive conduct. The merger was approved subject to a condition requiring the resignation of directors serving on both boards...

Citation
[2006] ZACT 1
Parties
Applicant: Momentum Group Limited; Respondent: African Life Health (Pty) Ltd
Court
Competition Tribunal
Jurisdiction
South Africa
Judgment Date
3 January 2006
Case Number
87/LM/Sep05
Procedural Posture
Large Merger Review / Merger Clearance With Conditions
Outcome
Merger approved subject to conditions.
Judges
N. Manoim, Y. Carrim, D. Lewis
Legal Topics
Merger Control, Cross Directorships, Market Power, Corporate Governance, Medical Scheme Administration
Competition Law Commercial and Corporate Merger Control Cross Directorships Market Power Corporate Governance Medical Scheme Administration

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Parties

Momentum Group Limited

Applicant

African Life Health (Pty) Ltd

Respondent

Procedural Posture

Large Merger Review / Merger Clearance With Conditions

Legal Issues

  1. 1 Whether the merger between Momentum Group Limited and African Life Health (Pty) Ltd will substantially lessen competition in the market for medical scheme administration.
  2. 2 Whether the presence of cross-directorships between Momentum and Discovery Holdings creates a risk of collusion or co-ordination post-merger.
  3. 3 Whether the aggregation of market shares between Momentum and Discovery should be considered for competition analysis.

Ratio Decidendi

The Tribunal found that while Momentum and Discovery currently compete vigorously, the governance structure and cross-directorships present a risk of future co-ordination and collusion, especially as both firms seek to expand into lucrative market segments. The Commission's approach to market share calculation was rejected, as all beneficiaries, including those in Discovery's own scheme, are contestable. The Tribunal held that the elimination of cross-directorships at both operating and holding company levels is necessary to preserve rivalry and prevent anti-competitive conduct. The merger was approved subject to a condition requiring the resignation of directors serving on both boards...

Court Disposition

Merger approved subject to conditions.

Orders

  • The merger is approved subject to the condition that all existing directors serving on both the boards of Momentum Group Limited and Discovery Holdings Limited must resign from one of the boards.
  • No future cross-directorships are permitted between the boards of Momentum Group Limited and Discovery Holdings Limited.