12 February 2014 by Cliffe Dekker Hofmeyr

Commission's recommendations in Afgri / AgriGroupe transaction

In the merger between Afgri and the AgriGroupe, the Competition Commission's investigation revealed that the proposed transaction would not likely substantially prevent or lessen competition in the market for agricultural commodities, storage, trading and other related services.  This is according to Lerisha Naidu, Senior Associate in the Competition Practice at Cliffe Dekker Hofmeyr who explains that, notwithstanding the unlikely impact on competition that would flow from the merger, the Commission was nevertheless mandated to conduct an analysis, following concerns from various stakeholders, into certain public interest concerns.

Naidu explains the Commission’s mandate, “South African merger regulation is, in the context of comparative anti-trust approaches to the assessment of mergers, quite unique.  In the consideration of mergers, the competition authorities are mandated to consider a transaction in a dual sense – by firstly assessing its likely impact on competition in the relevant markets and secondly, though no less importantly, analysing the transaction-specific effects on the public interest.  Viewed in this context, a merger brought before the competition authorities may conceivably raise no competition concerns, but may nevertheless be susceptible to prohibition (or conditional approval) on public interest grounds.”

“In the merger between Afgri and the AgriGroupe in particular, government raised concerns that, post-merger, the AgriGroupe would increase the storage costs for grain in certain regions, which is an indispensable cost in the realisation of food security in South Africa.  Moreover, the apprehension was raised that the merged entity would export grain to other counties and increase prices in South Africa.  Employment concerns were also raised as well as the impact that the proposed transaction would have on farmers, specifically black farmers,” she notes.

Naidu explains that the Commission's investigation revealed that none of the public interest concerns raised were supported by evidence.  The Commission found that diverting grain to other countries would not be economically feasible; the merged entity was unlikely to exclude access to silos (particularly in view of excess capacity in the silos); and the transaction was more likely to result in job opportunities in the long term.

“The Commission also noted that other concerns were raised, which fell beyond the purview of the Commission's statutorily entrenched public interest mandate – as a result, the Commission refrained from expressing a view on matters it considered itself not empowered to investigate.

“This reminds us that not all concerns that do not speak to transaction-specific impacts on competition can be shoe-horned into a public interest analysis that the Commission is mandated to investigate.  The Commission is empowered to consider certain merger-specific public interest factors and any stakeholder concerns that fall outside of the ambit of the Commission's investigatory powers must be pursued in other appropriate fora and with other relevant institutions,” she adds.

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