Tuesday, October 26, 2021

Here is what the Competition Authority post mergers survey shows

The Competition Authority has produced it first ever post-merger impact assessment since the establishment of the authority six years back.

The competition agency says it has carried a survey in a bid to establish the market effects of the decisions it took over the past few years.

The Authority has been assessing mergers and acquisitions; and making determinations pertaining to mergers and acquisitions since November 2011.

Briefing the media in the capital Gaborone this week, Competition Authority Director Mergers and Monopolies Magdeline Gabaraane said that the post-merger assessments provide an opportunity to check whether the conditions or remedies imposed were sound, given the information available at the time and if the assumptions on which the conditions were made were sensible.

Some of the major cases assessed during the 2015/16 and 2016/17 Post-merger Impact assessments include the acquisition of Trojan and Shield by G4S which the Authority said it raised competition concerns and was therefore rejected. The merger was expected to result in reduced competition due to the removal of a small but significant competitor and enhanced market power for the acquiring enterprise.

In November 2011, the Authority received a notification, for the proposed acquisitions by G4S (Botswana) of Trojan Security Services (Pty) Ltd and Shield Security.

“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,” said Gabaraane.

She further stated that 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. She said in realising the potential effect of the transaction, the Authority intervened and prohibited G4S from acquiring the said assets.

Gabaraane gave an example of a related industry transaction, where in December 2014, the Authority approved for Security Services Botswana (Pty) Ltd  to acquire hotline Security’s client service contracts with the required associated equipment. She added that the acquisition availed a citizen owned enterprise an opportunity to compete in the cash-in-transit and alarm & response markets, which were previously dominated by a foreign owned enterprise, G4S.

Gabaraane spoke of another transaction of the acquisition of 100 percent interest in the operations of the Liquid Petroleum Gases business of PUMA Energy Botswana by Easigas Botswana (Pty) Ltd.

She said the Authority approved the acquisition of 100 percent interest in the operations of the LPG business of Puma Energy Botswana by Easigas Botswana on the condition that the merged entity does not engage in any conduct or activity that is tantamount to abusing its dominant market position since it is classified as a dominant firm as per Section 4(a) of the Competition Regulations.

“As at the time of the transaction, there were no stand-alone employees dedicated to the running of the LPG division of Puma Energy Botswana but by end of January 2017, Easigas Botswana reported a staff complement of 20 Batswana working full time directly under Easigas Botswana,” she said.

Also in the assessment is a transaction of the acquisition of 100percent issued share capital in Shell Botswana by Vivo Energy, where in June 2012, the Authority considered the proposed acquisition of 100 percent issued share capital in Shell Botswana by Vivo Energy Holdings B.V. Gabaraane stated that the transaction was unconditionally approved as the merger was not likely to give rise to substantive competition concerns in the distribution of fuel and lubricants markets in Botswana.

Another transaction that Gabaraane spoke about was the acquisition of 100 percent controlling interest in Pinks Family Outfitters by Leapingeagles Investments (Pty) Ltd [Woolworths Group]. She said the Authority considered the proposed acquisition of 100 percent controlling interest in Pinks Family Outfitters by Leaping eagles Investments (Pty) Ltd which is Woolworths Group.

“This merger did not raise any competition concerns but rather raised some public interest concerns. The Authority was concerned that Woolworths Group (non-citizen owned entity) was acquiring total control of all the 22 Woolworths franchise stores in Botswana, thus taking away the involvement of local citizens in the ownership of Woolworths stores,” she said.

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