Tuesday, October 26, 2021

Competition Authority stopped planned Security Shield sale to G4S

The Competition Authority has revealed that it frustrated an attempt by two security companies to “circumvent” a ruling it made in a merger case.

In 2012 the Authority considered a merger between G4S and Trojan Security Services as well as another between G4S and Shield Security. Upon fears that the proposed merger would reduce competition due to the removal of a small but significant competitor and enhanced market power for the acquiring enterprise (G4S), the Authority rejected the application.

“Following the rejection of the acquisition, the Authority became aware of a transaction between the parties which would have the effect of circumventing the decision of the Authority,” the Authority says in a post-merger impact assessment report that it put out last Thursday. “The parties claimed that Shield was in dire financial strain and as such would shut down its business; and dispose its assets, allowing G4S to acquire those assets in the open market. In realising the potential effect of the transaction, the Authority intervened and prohibited G4S from acquiring the said assets.”

The language it used then was much more pointed. At the time it refuted claims that Shield was not doing well, stating that “Shield Security is not a failing firm. On the contrary it is a profitable firm.”

As a result of the Authority’s intervention, Shield resolved that its assets, trading licence, trading name and clients list would be transferred to a 100 percent citizen-owned entity, Sancos MD Investment Enterprises, which is owned by a minority shareholder in Shield. The Authority directed that the assets and employees should not be affected by such transfer. It further directed that beginning June 2012, G4S would be restrained from soliciting any current clients of Shield for 24 months. The restraint would only lapse when “Sancos t/a Shield closes down business or sells its business, subject to the closing down not being due to the fact that G4S directly or indirectly solicited clients as provided in the submitted client list during the 24-month restraint period; and/or there is a change in management control and/or majority shareholder control in Sancos at any time whatsoever.”

Five years later, the Authority determines the impact of its decision to be growth in the number of Shield’s employees and contracts. The example the report gives is of an increase of 45.6 percent in the number of contracts and 64.1 percent in employment between 2012 and 2015.

The Authority’s mandate is restricted to ensuring that the playing field is level and if it had to go farther and assess the quality of employment created, the picture painted here would be wholly different. Without exception, security companies pay their employees minimal ways that make no significant impact in their living standards.

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