Senmin International (Pty) Ltd and Another v Competition Commission (14/AM/Feb12) [2013] ZACT 5; [2013] 1 CPLR 146 (CT) (7 February 2013)

Senmin International (Pty) Ltd and Another v Competition Commission (14/AM/Feb12) [2013] ZACT 5; [2013] 1 CPLR 146 (CT) (7 February 2013)

The Tribunal found that the proposed vertical merger would likely substantially prevent or lessen competition in the market for the distribution of technical grade CMC for mining, as the merged entity would have both the ability and incentive to foreclose downstream rivals, particularly GMA. The evidence showed that imports of technical grade CMC do not constitute a real alternative due to quality, price, and logistical constraints, and that the market is highly concentrated both upstream and downstream. Mining customers require secure, continuous supply and are highly sensitive to product quality (recovery performance), making switching to untested imports impractical. The Tribunal...

Citation
[2013] ZACT 5
Parties
Applicant: Senmin International (Pty) Ltd; Applicant: Cellulose Derivatives (Pty) Ltd; Respondent: The Competition Commission
Court
Competition Tribunal
Jurisdiction
South Africa
Judgment Date
7 February 2013
Case Number
14/AM/Feb12
Procedural Posture
Intermediate Merger Application / Reasons for Conditional Approval After Hearing and Submissions
Outcome
Merger conditionally approved subject to behavioural remedies.
Judges
Takalani Madima, Andreas Wessels, Merle Holden
Legal Topics
Vertical Merger, Input Foreclosure, Market Definition, Remedies and Conditions, Dominance, Product Substitutability
Competition Law Commercial and Corporate Vertical Merger Input Foreclosure Market Definition Remedies and Conditions Dominance Product Substitutability

Case Brief

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Parties

Senmin International (Pty) Ltd

Applicant

Cellulose Derivatives (Pty) Ltd

Applicant

The Competition Commission

Respondent

Procedural Posture

Intermediate Merger Application / Reasons for Conditional Approval After Hearing and Submissions

Legal Issues

  1. 1 Whether the proposed vertical merger would substantially prevent or lessen competition in the relevant market.
  2. 2 Whether the merged entity would have the ability and incentive to foreclose downstream rivals, specifically GMA, in the distribution of technical grade CMC.
  3. 3 Whether imports of technical grade CMC constitute a real competitive constraint post-merger.

Ratio Decidendi

The Tribunal found that the proposed vertical merger would likely substantially prevent or lessen competition in the market for the distribution of technical grade CMC for mining, as the merged entity would have both the ability and incentive to foreclose downstream rivals, particularly GMA. The evidence showed that imports of technical grade CMC do not constitute a real alternative due to quality, price, and logistical constraints, and that the market is highly concentrated both upstream and downstream. Mining customers require secure, continuous supply and are highly sensitive to product quality (recovery performance), making switching to untested imports impractical. The Tribunal...

Court Disposition

Merger conditionally approved subject to behavioural remedies.

Orders

  • The merger is approved subject to the conditions set out in Annexure A, including guaranteed annual minimum supply of technical grade CMC to GMA at equivalent quality and specifications, a pricing formula for maximum supply price, non-discriminatory supply terms to other players under certain circumstances, and...
  • The merged entity must comply with regular reporting and monitoring requirements as specified in the conditions.