In October 2015, Zimco and Atlantis applied to the Competition Tribunal (Tribunal) for an order, based primarily on changing market conditions, to remove the condition relating to the relocation of the Atlantis plant outside of South Africa and to confirm that certain proposed retrenchments were not merger specific. In January 2016, the Tribunal granted the application.
What qualified as ‘changing market circumstances’?
- The parties could show that the price of commodities had weakened, linked with a decrease in the demand for commodity based products, including copper. Since lead anodes are used in copper products, the parties experienced a decline in demand for their products.
- The largest customer of Atlantis decided to suspend operations at some of its mines, with grave consequences for Atlantis whose viability largely depended on this customer.
- In order to sustain the economic viability of Atlantis, the plant needed to be relocated from Brakpan to Krugersdorp. The anticipated knock on effect was job losses for 13 employees who would not be able to relocate. The parties’ view was that these retrenchments are not merger specific and are purely operational in nature.
- The parties are desirous of moving certain production capacity to locations outside of South Africa, closer to its export markets, to counter the high transport costs and weakening currency in South Africa.
After conducting a thorough investigation, the Commission was satisfied that the amendment was justified in the circumstances. While a ‘change in market circumstances’ must be determined on a case by case basis, taking into account the unique characteristics of the market developments in question, this decision bodes well for merger parties seeking to, ex post facto, break the shackles of economically unworkable merger conditions.