Overlaps between merging parties do not automatically mean that the merger is anti-competitive – Tribunal decision

14 Jan 2014 2 min read Article

The reasons  given by the Competition Tribunal (Tribunal) in the matter between Mogs Proprietary Limited and Booysen Bore Drilling Company Proprietary Limited (Case No: 018044), issued on 13 January 2014, provides a further example of a merger that presented both horizontal and vertical overlaps, but was nevertheless viewed as unproblematic by the competition authorities.  This is according to Lerisha Naidu, Senior Associate in the Competition practice at Cliffe Dekker Hofmeyr.

“The decision reminds us that the fact that the parties to a transaction operate in the same or similar markets, or engage in a pre-transaction supply relationship does not necessarily mean that the transaction will result in net anti-competitive effects,” explains Naidu. 

“In respect of the horizontal overlaps, the Tribunal found that, although both parties to the transaction were involved in the market for the provision of exploration and drilling services: (i) the market was fragmented and included a number of other participants; (ii) the combined market share of the parties was not significant (20%); (iii) the market share accretion of the acquiring firm was marginal (5%); (iv) the parties services could be differentiated according to their respective customer's needs; and (v) the existence of customer countervailing power meant that the parties would not likely be able to raise prices,” she notes. 

“In respect of the pre-existing supply relationship between the parties, the Tribunal found that foreclosure concerns were unlikely (as the parties did not supply to and purchase from any other party pre-transaction).  Accordingly, the Tribunal unconditionally approved the large merger,” Naidu adds.

The information and material published on this website is provided for general purposes only and does not constitute legal advice. We make every effort to ensure that the content is updated regularly and to offer the most current and accurate information. Please consult one of our lawyers on any specific legal problem or matter. We accept no responsibility for any loss or damage, whether direct or consequential, which may arise from reliance on the information contained in these pages. Please refer to our full terms and conditions. Copyright © 2024 Cliffe Dekker Hofmeyr. All rights reserved. For permission to reproduce an article or publication, please contact us cliffedekkerhofmeyr@cdhlegal.com.