Boart Longyear (a division of Anglo Operations Limited) and Huddy (Pty) Ltd / Huddy Rock Tools (Pty) Ltd (41/LM/Aug03) [2004] ZACT 2; [2004] 1 CPLR 81 (CT) (20 January 2004)

Boart Longyear (a division of Anglo Operations Limited) and Huddy (Pty) Ltd / Huddy Rock Tools (Pty) Ltd (41/LM/Aug03) [2004] ZACT 2; [2004] 1 CPLR 81 (CT) (20 January 2004)

The Tribunal found that the merger does not substantially lessen competition in the international markets for industrial diamond products, diamond core drilling products (except pneumatic drills), and percussion drilling products. However, the merger would create a monopoly in the national market for pneumatic drills, as Boart and Huddy are the only local manufacturers. The market is stagnant, making new entry unlikely, and the lucrative segment is in parts supply, dominated by pirated parts. The Tribunal rejected a pure divestiture remedy due to the lack of a viable purchaser and concerns about the Kempe business's sustainability. Instead, it imposed a combined behavioural and structural...

Citation
[2004] ZACT 2
Parties
Applicant: Boart Longyear (a division of Anglo Operations Limited); Respondent: Huddy (Pty) Ltd; Respondent: Huddy Rock Tools (Pty) Ltd
Court
Competition Tribunal
Jurisdiction
South Africa
Judgment Date
20 January 2004
Case Number
41/LM/Aug03
Procedural Posture
Large Merger / Conditional Approval After Hearing
Outcome
Merger conditionally approved subject to behavioural and structural remedies.
Judges
D Lewis, N Manoim, M Holden
Legal Topics
Horizontal Merger, Market Definition, Remedies, Divestiture, Public Interest, Employment Effects
Competition Law Commercial and Corporate Horizontal Merger Market Definition Remedies Divestiture Public Interest Employment Effects

Case Brief

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Parties

Boart Longyear (a division of Anglo Operations Limited)

Applicant

Huddy (Pty) Ltd

Respondent

Huddy Rock Tools (Pty) Ltd

Respondent

Procedural Posture

Large Merger / Conditional Approval After Hearing

Legal Issues

  1. 1 Does the proposed merger substantially prevent or lessen competition in any relevant market?
  2. 2 Is the market for pneumatic drills a national market and does the merger create a monopoly therein?
  3. 3 What remedy is appropriate to address any anti-competitive effects in the pneumatic drill market?

Ratio Decidendi

The Tribunal found that the merger does not substantially lessen competition in the international markets for industrial diamond products, diamond core drilling products (except pneumatic drills), and percussion drilling products. However, the merger would create a monopoly in the national market for pneumatic drills, as Boart and Huddy are the only local manufacturers. The market is stagnant, making new entry unlikely, and the lucrative segment is in parts supply, dominated by pirated parts. The Tribunal rejected a pure divestiture remedy due to the lack of a viable purchaser and concerns about the Kempe business's sustainability. Instead, it imposed a combined behavioural and structural...

Court Disposition

Merger conditionally approved subject to behavioural and structural remedies.

Orders

  • The merger is approved subject to the condition that price increases for the Kempe pneumatic drill are capped to the consumer price index for three years.
  • The merged entity must appoint two independent agents to market and distribute the Kempe pneumatic drill, with manufacturing remaining the responsibility of the merged entity.