Nestle SA v Infant Nutrition Business of Pfizer Inc (65/LM/Jun12) [2013] ZACT 16; [2013] 1 CPLR 257 (CT) (18 March 2013)

Nestle SA v Infant Nutrition Business of Pfizer Inc (65/LM/Jun12) [2013] ZACT 16; [2013] 1 CPLR 257 (CT) (18 March 2013)

The Tribunal found that the proposed merger would result in a highly concentrated market, with Nestlé's post-merger share exceeding 70%. The risks of reduced competition were significant, and the transaction was essentially a three-to-two merger. The Tribunal accepted that a permanent divestiture would create practical difficulties, including split ownership of trade marks, reputational risks, and free-riding. The revised transitional re-branding remedy, involving a ten-year exclusive licence to the purchaser and a subsequent ten-year black-out period, was found to address these concerns. The remedy provides the purchaser with access to intellectual property, process technology, pipeline...

Citation
[2013] ZACT 16
Parties
Applicant: Nestlé S.A.; Respondent: Infant Nutrition Business of Pfizer Inc.
Court
Competition Tribunal
Jurisdiction
South Africa
Judgment Date
18 March 2013
Case Number
65/LM/Jun12
Procedural Posture
Merger Control / Conditional Approval After Hearing and Submission of Remedies
Outcome
Conditional approval of the merger subject to the implementation of the transitional re-branding remedy and assessment of the purchaser under the Competition Act.
Judges
Andreas Wessels, Lawrence Reyburn, Mondo Mazwai
Legal Topics
Merger Control, Remedies in Merger, Market Concentration, Intellectual Property Licensing, Divestiture, Public Interest
Competition Law Commercial and Corporate Merger Control Remedies in Merger Market Concentration Intellectual Property Licensing Divestiture Public Interest

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Parties

Nestlé S.A.

Applicant

Infant Nutrition Business of Pfizer Inc.

Respondent

Procedural Posture

Merger Control / Conditional Approval After Hearing and Submission of Remedies

Legal Issues

  1. 1 Does the proposed merger between Nestlé and Pfizer's infant nutrition business raise substantial competition concerns in the South African infant formula market?
  2. 2 Is a transitional re-branding remedy sufficient to address the identified competition concerns?
  3. 3 Should a permanent divestiture or a transitional re-branding remedy be imposed to maintain market competitiveness?

Ratio Decidendi

The Tribunal found that the proposed merger would result in a highly concentrated market, with Nestlé's post-merger share exceeding 70%. The risks of reduced competition were significant, and the transaction was essentially a three-to-two merger. The Tribunal accepted that a permanent divestiture would create practical difficulties, including split ownership of trade marks, reputational risks, and free-riding. The revised transitional re-branding remedy, involving a ten-year exclusive licence to the purchaser and a subsequent ten-year black-out period, was found to address these concerns. The remedy provides the purchaser with access to intellectual property, process technology, pipeline...

Court Disposition

Conditional approval of the merger subject to the implementation of the transitional re-branding remedy and assessment of the purchaser under the Competition Act.

Orders

  • The merger between Nestlé S.A. and the infant nutrition business of Pfizer Inc. is approved subject to the final set of tendered conditions as set out in Annexures X and Y.
  • Nestlé must divest the physical assets and grant an exclusive ten-year licence to the purchaser for the Pfizer trade marks and product formulations, followed by a ten-year black-out period.