By Charl van der Merwe, assisted by Christine Turkington & Gina Lodolo
The South African competition Commission (SACC) has suffered yet another procedural setback- related to the facts pleaded in its referral affidavit – this time, in its ongoing saga with Computicket and Shoprite Checkers, apropos Computicket’s alleged abuse of dominance.
In its initial case against Computicket, which ultimately went to the Competition Appeal Court, SACC succeeded in holding Computicket to account for abuse of dominance in contravention of section 8(d)(i) of the Competition Act (Computicket One). Computicket One was based on the fact that Computicket had entered into exclusive agreements with customers which had the effect of excluding competitors from the market. See exclusive AAT article on Computicket One case here.
The SACC was critical of the conduct of Shoprite Checkers as, in Computicket One, the SACC alleged that the exclusive agreements were entered into between Computicket and Shoprite Checkers shortly after the Computicket was acquired by Shoprite Checkers. Computicket One was based on the agreement entered into for the period 2005 to 2010.
Accordingly and shortly after the conclusion of Computicket One, the SACC referred a second complaint against Computicket for abuse of dominance. The cause of action is substantively similar as that which had been found to be a contravention in Computicket One, however, this time based on the agreements entered into from January 2013 and which are alleged to be ongoing (Computicket Two). In Computicket Two, however, the SACC now seeks to hold Shoprite Checkers jointly and severally liable with Computicket in its capacity as the ultimate parent company of Computicket. Moreover, the SACC appears to seek the imposition of a penalty based on the higher turnover of Shoprite Checkers.
Note that Computicket Two was referred to the Tribunal prior to the enactment of the Competition Amendment Act, which provides for parent companies to be held jointly and severally liable for the conduct of subsidiaries and/or allows for the calculation of an administrative penalty, based on the turnover of the parent company where the parent was aware or ought to have been aware of the conduct of the subsidiary.
The Tribunal, therefore, found the SACC’s referral affidavit to be flawed and lacking of the facts (and points of law) necessary to sustain a cause of action, particularly in so far as it seeks to hold Shoprite Checkers liable. In this regard, the Tribunal expressly held that they view Computicket and Shoprite Checkers as separate economic entities and should thus be treated separately with respect to the allegations made in the Commission’s complaint referral.
The Tribunal went on the emphasize that on the consideration of dominance (which is the statutory first step to an assessment under section 8), “… the Commission conceded that Shoprite Checkers is not active in the market for outsourced ticketing services to inventory providers in which Computicket is active. Unsurprisingly, no market shares attributable to Shoprite Checkers are reflected anywhere in the Commission’s referral. It is simply unclear of what we are to make of the allegations against Shoprite Checkers.”
In order to correct these defects and instead of dismissing SACC’s case, the Tribunal ordered the SACC to file a supplementary affidavit. The Tribunal held that “[g]iven that the Commission’s reliance on the single economic entity doctrine fails and the question of dominance is abundantly opaque, the Commission must rectify its referral to properly reflect and clarify the case against Shoprite Checkers in order for it to meet the case put against it.”
Should the SACC fail to file its supplementary affidavit, within the 30 business days, as order by the Tribunal, Shoprite Checkers and Computicket may approach the Tribunal for an order that the case be dismissed.
John Oxenham, director of Primerio, notes that the Tribunal’s order in allowing the SACC an opportunity to first supplement or amend its referral affidavit is in line with the recent orders of both the Tribunal and Competition Appeal Court to first allow such opportunity for the SACC to remedy its case, instead of ordering an outright dismissal of the case on an interlocutory basis. This is likely to form the precedent for interlocutory applications, even where the facts suggest that the SACC’s case is opportunistic and incapable of being remedied.
According to competition lawyer, Michael-James Currie, the recent orders which have come out of the Tribunal and Competition Appeal Court in interlocutory applications will hopefully have a positive effect on the manner in which cases are referred and prosecuted in South Africa.
The SACC has at times demonstrated a tendency to be overly broad in its complaint referrals, causing respondent firms to engage in costly and time consuming internal investigations to assess the merits of such cases. With the development of the previously underutilized interlocutory processes, respondent firms are now able to, at an early stage of the litigation process, ensure that the SACC sets out its case in a concise manner, substantiated with the requisite factual allegations required to sustain its case, thereby avoiding the unnecessary cost of expansive internal investigations and protracted litigation.
[The editors at AfricanAntitrust wish to thank Jemma Muller and Gina Lodolo for compiling this article]
On 3 April 2020, Minister Ebrahim Patel made amendments to section 27(2) of the Competition Act 89 of 1998 (“the Act”) with regards to the regulations pertaining to the functions of the Competition Tribunal (“the Tribunal”).
The amendment was enacted to regulate complaint referrals for alleged contravention of section 8(1)(a) of the Act which deals with the charging of excessive prices by a dominant firm. The amendment is crucial in light of the current state of affairs, where the charging of excessive prices has become more frequent during the Covid-19 outbreak. Accordingly, the amendment is only applicable for the duration of the period of the declaration of a Natural State of Disaster with regards to COVID-19.
An applicant who wishes to bring a complaint based on an alleged contravention of section 8(1)(a) of the Act, read with the Consumer and Customer Protection Regulations, must file a Notice of Motion and founding affidavit to the Tribunal.
Urgent complaint referral procedure
Who must file the complaint referral?
A complaint referral may be filed by the Commission or a complainant, as soon as possible after the commission has issued a notice of non-referral to that complainant.
Notice of motion requirements
An applicant must allege a contravention of section 8(1)(a), indicate the order sought against the respondent(s) and state the name and and address (electronic or otherwise) of each respondent in respect to whom the order is sought. Applicant’s may also state the date and time on which the applicant wishes the matter to be heard by the Tribunal.
The founding affidavit must set out the grounds of urgency and the material points of law and evidence that support the complaint. In addition, the applicant may include confirmatory affidavits from any factual or expert witnesses.
The applicant must serve a copy of the Notice of Motion and founding affidavit on each of the respondent(s) named in the Notice of Motion and file a copy of the application with the Tribunal.
The important time periods:
A respondent must serve a copy of their Answering Affidavit on the complainant within 72 hours of service of the complaint referral. Thereafter the person who filed the Complaint referral may serve a copy for their Reply within 24 hours after being served with a copy of the Answering Affidavit.
The Tribunal will then determine the date and time for the hearing of the complaint referral (Tribunal Rules 6,16,17,18,18,47,54 and 55 apply to an application under this Rule unless they pertain to Rules which stipulate time-frames).
These documents may be filed electronically.
The Tribunal may direct that the urgent complaint proceedings in terms of the Rules may be conducted wholly as video or audio proceedings.
If no answering affidavit is filed within the period set out in the Notice of Motion or such extended period as may be determined by the Tribunal, the urgent complaint referral may be heard on an unopposed basis.
The Tribunal will determine if there was contravention of section 8(1)(a) of the Act based on the evidence contained in the affidavits unless there is a substantial dispute of fact which cannot be resolved by affidavits. In this case the Tribunal may determine an expedited procedure (which may include oral evidence on an expedited basis by way of video or audio proceedings). The Tribunal may also call for further evidence if it is required (subject to section 55 of the Act).
The Tribunal may impose a pricing order if the respondent has been found to contravene section 8(1)(a) of the Act. The respondent may apply to appeal or review the decision on an urgent basis to the Competition Appeal Court (the pricing order will remain in force unless it is set aside by the court on appeal or review).
The Commission may at any time (before, during and after and investigation) conclude a consent agreement for a complaint under section 8(1)(a) of the Act and it will be the full and final settlement of the matter (including settlement of civil proceedings). This consent order may be confirmed by the Tribunal without hearing any evidence.
The amended complaint referral procedures equip complainants with the means in which to assist the competition authorities in penalizing those who have used the prevailing circumstances to exploit consumers, and is thus a commendable and efficient tool invoked by the Minister.
The COMESA Competition Commission (CCC) has, along with several other competition-law enforcers on the African continent, issued new guidance on timing and other implications relating to the COVID-19 pandemic. The text of the official announcement is below:
NOTICE OF INTERIM MEASURES IN MERGER REVIEW OF THE COMESA COMPETITION COMMISSION DUE TO THE COVID-19 PANDEMIC
The COMESA Competition Commission (the Commission) is aware that these are unprecedented, uncertain and challenging times for undertakings and other stakeholders. In view of this, the Commission wishes to notify the general public and all interested parties that as a result of the global Covid-19 pandemic it has issued the following interim processes for merger reviews under the COMESA Competition Regulations (the Regulations) and the COMESA Competition Rules (the “Rules”).
- Receipt of Merger Notifications
Parties to a Merger are encouraged to submit all notifications and filing of mergers and acquisitions electronically including certified copies of filings. This therefore means that the parties shall not be expected to submit the hard copies within the specified 7 days under the COMESA Merger Assessment Guidelines. The hard copies may still be submitted by the parties at a later date when it is possible under the circumstances.
- Notification of a Merger following a Decision to Merge by the Parties
Pursuant to Article 24 (1) of the Regulations, parties to a merger should notify the Commission within 30 days of the decision to merge. The Commission takes cognizant that due to restrictions of movements and lockdowns in most countries as a result of the CoVID-19 Pandemic, some parties may not be able to gather all the information to enable them complete the notification within the 30 days period provided under Article 24(1) of the Regulations. The Commission is cognizant that section 5 of the Guidelines provides for the notification process and gives guidance to what amounts to a complete notification. During this temporal period, the Commission shall consider the initial engagement with the parties as the beginning of the notification process which shall be considered complete once all the information is submitted. It follows therefore that as long as the parties have engaged the Commission on the notification process, they shall not be penalized for failure to submit complete information within 30 days of the parties’ decision to merge.
- Consultations and Meetings
The Commission has suspended onsite investigations and face-to-face meetings with regard to merger investigations. However, consultations and meetings shall continue to be held through teleconferencing facilities until the situation normalises.
- Investigation Period of 120 Days
The Commission observes that under the current situation, it may not be able to complete its assessment of mergers and acquisitions that has been notified and yet to be notified in accordance with the 120 days stipulated under Article 25 (1) of the Regulations. This is due to travel bans and lockdowns in most Member States. These conditions shall affect the Commission’s engagements with various relevant stakeholders who are essential in the consultative process adopted by the Commission pursuant to Article 26 of the Regulations. Therefore, the merging parties should take note that the 120 days investigation period may be extended in some cases pursuant to Article 25 (2) of the Regulations as it may not be practicable to complete the assessment within 120 days under the circumstances.
If you wish to seek further details and/or clarifications on any aspect of this Notice, you may get in touch with Mr. Willard Mwemba, Manager, Mergers and Acquisitions, on +265 (0) 1 772 466 or via email at email@example.com and/or firstname.lastname@example.org.
Further, note that the Commission may update and revise this notice from time to time.
George K Lipimile
Director & Chief Executive Officer
By Charl van der Merwe
Global markets are in turmoil and governments around the globe are under increased strain to prevent the spread of the Covid-19 virus whilst maintaining necessary services. A key concern in South Africa and elsewhere has been the availability of key supplies and the capacity of the health care and other infrastructure system to meet the unprecedented demand.
In order to alleviate these concerns, South African Minster of Trade and Industry and Competition (DTIC) has moved to publish Regulations in terms of Section 78 of the South African Competition Act 89 of 1998 (Competition Act):
- exempting industry players in certain sectors from prosecution for conduct in contravention of Sections 4 and 5 (Act) (Block Exemptions); and
- prohibiting excessive pricing (and ensuring sufficient supply) by firms selling key supplies (Pricing Regulations);
Traditionally, exemptions in terms of the Competition Act were granted through application to the Competition Commission, based on the specific grounds as defined in section 10 of the Competition Act. In terms of the Competition Amendment Act, application for a block exemption can also be made directly to the Minister.
Related to the exemption process in terms of the Competition Act, is the powers of the Minister to publish directions under the recent Regulations issued in terms of section 27 (2) of the Disaster Management Act (GN 318 of 18 March 2020). In this regard, Regulation 10(6) provides that the Minister may issue directions to:
- protect consumers from excessive, unfair, unreasonable or unjust pricing of goods and services during the national state of disaster; and
- maintain security and availability of the supply of goods and services during the national state of disaster.
Block Exemptions have been published by the Minster in terms of section 10(10) of the Competition Act which provides that the Minister may, after consultation with the Competition Commission (SACC), issue regulations in terms of section 78, exempting a category of agreements or practices from the application of sections 4 and 5 of the Competition Act.
As at the date of writing, Block Exemptions have been granted to the Healthcare Sector, the Banking Sector and Retail Property Sector.
Health Care Sector
The exemption include a range of industry players, including healthcare facilities, pharmacies, medical suppliers, medical specialist, pathologists and laboratories, and healthcare funders.
Exemptions are fairly novel in South African competition law, although the National Hospital Network (NHN) has for many years now operated under an Exemption in terms of which it is permitted to engage in collective bargaining, global fee negotiations and centralized procurement (The NHN is a non-profit co-operative venture that is controlled by its members, a group of independent private hospitals who run medical establishments such as day clinics, sub-acute facilities and psychiatric facilities). The Exemption was renewed by the SACC for a further 5 year period in November 2018.
The Block Exemption will similarly allow industry players to coordinate on procurement of supplies, transferring equipment and coordinating the use of staff. In effect, the Block Exemption extends and broadens the scope of the exemption enjoyed by the NHN to include state and private healthcare.
While this move is certainly a welcome one to ensure that South Africa is able to effectively deal with the spread of Covid-19, its effect on competition in this market will be most interesting. The health care sector, and particularly large private sector players (Private Health Care), has long been in the cross-hairs of the SACC, with many enforcement actions, heavily contested merger control proceedings and most recently, the market inquiry into the private healthcare sector conducted and concluded by the SACC. Concentration and Coordination has been key to the debate.
Allied to this and according to industry expert, Avias Ngwenya of Nortons Inc, these measures are effectively a forced trail run of the South African Government’s recently proposed and highly criticized National Health Insurance (NHI) which, he believes will test the ability of private healthcare to provide healthcare services to the state.
While the Exemptions will apply only for so long as the state of disaster remains in effect, the effects of these measures on the industry is likely to endure for some time and will reform the debate around the future of health care in South Africa.
The Block Exemption published in favour of the Banking Sector is aimed at exempting category of agreements or practices between Banks, Banking Association of South Africa and/or Payments Association of South Africa from the application of sections 4 and 5 of the Act and promoting cooperation between these industry participants to mitigate damages and to ensure the effective continuance of banking infrastructure. In this regard, industry participants are to coordinate and agree on, inter alia:
- operation of payment systems and the continued availability of notes at ATMs, branches and businesses;
- debtor and credit management to cater for payment holidays and debt relief (including limitations on asset recovery and the extension of further credit terms).
Retail Property Sector
The Block Exemption in respect of the Retail Property Sector applies only to retail landlords and designated retail tenants (required to shut down in terms of the national shut down currently in place) and aims to provide a framework for cooperation between industry participants in respect of payment holidays and rental discounts and limitations on the eviction of tenants. The Block Exemptions also seek to cater for cooperation on limitations to the restrictions placed on tenants to protect their viability during the nation disaster, likely to allow tenants to alter of expand their product or service offerings to fall within the category of businesses or services exempt from the restrictions currently enforced by Government, thereby ensuring alternative income and increased capacity on key products and services.
The Block Exemptions in respect of the Banking and Retail Sectors provide welcome relief to small businesses who have been hard hit by the restrictions put in place both locally and internationally. This is a key object and concern of the government and, in particular the DTIC who have placed small and medium business at the centre of competition policy in an effort to ensure greater participation by historically disadvantaged individuals in South Africa. This has been evident through the amendments to the Competition Act and recent conditions which have been imposed on large international mergers. The DTIC is, therefore, intent to ensure that these efforts are not effectively nullified by the emergency measures put in place to prevent the spread of the Covid-19.
Block Exemptions have not been widely utilised in South Africa. To the extent that the measures introduced by the Block Exemptions are effectively implemented, however, the use and application of the process of exemptions under the Competition Act may become a more prominent feature of the South African competition law process. The nature of emergencies are such that they expedite the implementation of historical process which were otherwise untouched or contested as the counterfactual has changed.
It is already evident that more and more industries affected by the Covid-19 will apply for or be granted block exemptions to ensure that they are able to effectively avert the negative effects associated with disruptions caused to the business and economy. Examples of these include the Grocery Retail and/or Fast Moving Consumable Goods Sectors, Security Sector and more.
The Pricing Regulations, most interestingly was published by the Minster in terms of the Combination of the Competition Act, the Consumer Protection Act 61 of 2008(2008) and the Disaster Management Act (2002) and apply only to the ‘key supplies identified in the Pricing Regulations and will remain in effect only for so long as Covid-19 remains a ‘national disaster’.
Section 8(3)(f) of the Competition Act provides that in determining whether a price is an excessive price (for purposes of section 8(1)), it must be determined whether that price is higher than a competitive price and whether such difference is unreasonable, determined by taking into account any regulation published by the Minister in terms of Section 78.
Now, in terms of the Pricing Regulations a price will be considered an excessive price for purposes of Section 8(1) of the Competition Act where, during this period of national disaster, a price increase:
- does not correspond to or is not equivalent to the increase in the costs of providing that goods or service; or
- increases the net margin or mark-up on that good or service above the average margin or mark-up for that good or service in the three month period prior to 1 March 2020.
Notably, Section 8 applies only to dominant firms.
In addition to the above, the Pricing Regulations contain a similar assessment for the consideration of what is termed unconscionable, unfair, unreasonable and unjust price increases in the Consumer Protection Act. While it is likely that what constitutes an excessive price under the Competition Act will also constitute an unreasonable price increase for purposes of the Consumer Protection Act, the opposite may not be true. The Consumer Protection Act is enforced by a different authority in South Africa and case precedent has been quite limited, compared to the competition authorities.
The Pricing Regulations also cover quantities and the restrictions on sale to maintain equitable distribution and curb stockpiling. No mention is made of the Competition Act or Consumer Protection Act in these paragraphs, although they should also be considered in the broader context of competition policy and what the Pricing Regulations seek to achieve. Although South African competition policy is not ordinarily concerned with discrimination at the final consumer level, in terms of the Pricing Regulations, retailers are effectively required to ration the quantity sold, as the normal economic mechanism, whereby suppliers sell to those parts of the demand curve with a sufficient willingness to pay, is suspended.
The penalty provisions of the Pricing Regulations require prosecution in terms of the underling legislation, being the Competition Act and Consumer Protection Act respectively as these sanctions exceed the powers given to the Minister in the Disaster Management Act. The Pricing Regulations state that subject to the further specific provisions of the respective pieces of legislation, a failure to comply with the Pricing Regulations may attract a fine of up to R1 000 000 and/or a 10% of a firms turnover and imprisonment for a period not exceeding 12 months (depending on the applicable legislation). In terms of the Competition Act, only cartel conduct under section 4(1)(b) attracts criminal liability.
The Minister has recently announced that 11 firms are currently under investigation for allegedly contravening the provisions of the Competition Act and/or Consumer Protection Act in a manner prohibited by the Pricing Regulations.
While these rather drastic measures are necessary and the Minster and SACC should be commended for their swift action, the effects of these measures are set to leave a lasting impression on competition law and the precedent arising out of the investigations and subsequent referrals in terms of these Pricing Regulations.
The Disaster Management Act provides that the declaration of a national state of disaster can terminate after the expiry of 3 months or upon notice in the Government Gazette by the Minister before the expiry of 3 months. The Minister can nonetheless extend such a period for one month at a time. Accordingly, the Disaster Management Act offers little certainty on how and when the measures implemented will come to an end.
Temporary measures tend to have a nasty habit of outlasting emergencies.
In one of the few megamergers of the 2019/2020 season, the South African Competition Tribunal approved, subject to a wide range of public interest related conditions, PepsiCo’s acquisition of South Africa’s largest FMCG producers, Pioneer Foods.
In predictable fashion, this was not the type of transaction which would escape the attention of Minister Patel (who oversees the portfolio of the competition agencies). Despite not being a transaction which raises any competition concerns (i.e. there being no substantive overlap in product portfolios) and no material public interest concerns, the merger was an acquisition by a major international producer, PepsiCo and Minister Patel has openly expressed his intention to involve himself in acquisitions by foreign firms in an effort to extract a “socio-economic” tax from the merging parties. This was first seen in the Massmart/Walmart deal in 2012 but more recently in the AB-InBev/SAB and SAB/Coca-Cola mergers.
Competition lawyer, Michael-James Currie points out that a noteworthy difference between the legislative environment in terms of which the PepsiCo/Pioneer merger was assessed are the amendments to South Africa’s Competition Act. Under the new merger regime, public interest standards have been elevated, as a test, so as to be on par with the traditional competition analysis. Furthermore, the public interest grounds which the competition authorities are mandated to take into account have been expanded and now specifically include ownership levels among historically disadvantaged persons (commonly referred to as BBBEE policies in South Africa – Broad-Based Black Economic Empowerment).
The Competition Tribunal’s reasons are noteworthy. In a transaction of this magnitude, the Tribunal did not provide any reasons or findings as to the assessment of the merger. There was no analysis as to the relevant markets nor an assessment of the negative effects that the merger may have on the public interest factors.
The Tribunal’s reasons jump straight to the conditions ostensibly on the basis that the merging parties, the Competition Commission and Minister Patel had “agreed” to the conditions and, therefore, there was no reason to assess the transaction and the Tribunal could go ahead and rubber stamp the terms of the agreement.
Based on the majority of the conditions imposed, it is safe to assume that the transaction raised no material competition or public interest concerns. Notwithstanding that the transaction raised no adverse effects, the conditions imposed on the merger include:
- The creation of a BBBEE Workers Trust which will receive at least R1.6 billion (USD 10.6 million) in equity and the appointment of a non-executive director to the PepsiCo board together with voting rights of 12.9% in lieu of the equity for a period of 5 years;
- A moratorium on merger related retrenchments for a period of 5 years;
- An undertaking to maintain the aggregate levels of employment for 5 years; and
- An undertaking to create 500 direct new employment opportunities and 2500 indirect employment opportunities over the next five years.
- An undertaking to invest a cumulative amount of R5.5 billion (USD180 million) in production capacity over the next five years.
- Promote procurement from local suppliers and producers;
- Maintain all sales and distribution agreements currently in place for a period of two years;
- Contribute at least R600 million (USD60 million) to the creation of a development fund to be used for education, small medium enterprise development and agriculture programs.
Despite the substantial conditions imposed on the merger, Minister Patel surely finds himself in a catch twenty two. On the one hands, Minister Patel is a socialist at heart and has very much focused his efforts on utilising the Competition Act and authorities to promote industrial policy action and advance socio-economic objectives. Now, both as Minister of Trade and Industry and in light of President Cyril Ramaphosa’s drive to attract foreign direct investment, Minister Patel needs to tread a far more intricate line than ay previously the case (under President Jacob Zuma’s reign).
On the one hand, large foreign mergers present Minister Patel with a golden opportunity to extract non-merger specific public interest commitments – which merging parties often acquiesce to in order to preclude protracted litigation. On the other, Minister Patel needs to ensure that South Africa’s message to the rest of the world is that we would welcome foreign investment with open arms.
John Oxenham says that while it is perhaps regrettable that the Competition Tribunal did not grapple fully with the extent to which these types of conditions would have been objectively justifiable in terms of the new merger control regime or whether they amount to an overreach. While the Tribunal typically does not dedicate substantial resources to evaluating mergers when there is no dispute between the parties – and understandably so – the Tribunal should be mindful of rubber-stamping approvals of this nature. The message that this decision sends to foreign firms seeking to invest in South Africa is certainly not a warm and inviting message. The lack of analysis and objective justification for the conditions sends a strong message to merging parties that the most important aspect for purposes of obtaining merger approval is to engage and reach settlement terms with Minister Patel.
When the executive becomes the gatekeeper to merger control approvals (or competition law enforcement more generally), this very rapidly blurs the distinction of the separation of powers.
As reported by AAT here last month, the PepsiCo / Pioneer Foods mega deal has caused the parties to agree to a number of conditions imposed by the South African Competition Commission, despite there being no material overlap between the parties which give rise to any legitimate competition concerns.
Now, COMESA has joined the field, with its Competition Commission likewise reviewing the transaction’s effect on the common market under its jurisdiction, pursuant to Notice 39/2019. The Competition and Tariff Commission of Zimbabwe will likely provide its confidential input as to the transaction to the CCC. According to local news outlets, the proposed U.S. $1.7 billion takeover by American conglomerate giant Pepsi has sent Zimbabwean and other local and regional competitors “into panic mode.”
In the specific context of the Zimbabwean non-alcoholic beverage market, local beverage producer Varun Beverages sells Pepsi’s brands and already enjoys significant tax benefits from its “special economic zone” status. The local competitors’ concern is that, if Varun also obtains the full rights to distribute all of Pioneer’s FMCG products, it will put smaller rivals at a disadvantage.
Taken together with other regional taxation incentives (in Zambia, Varun had temporarily been granted a deferment of value-added tax and excise duty for five years, which was however reversed upon a finding of likely illegality), the impact may indeed affect the competitiveness of Varun’s rivals. However, it remains to be seen whether the Pepsi/Pioneer deal itself has any material adverse competitive effects overall, as this is the transaction under review after all, comments legal practitioner Andreas Stargard. “Besides, merger reviews pursuant to established antitrust law concern themselves not with the welfare of competitors, but with the maintenance of overall competition in the total relevant market. Just because some rival is hurt does not make the deal anti-competitive per se,” says Stargard. Moreover, there are major competitors still to reckon with, such as Delta brands, which has historically dominated the Zimbabwean market, and only recently lost market share to Varun, which has budgeted US$150 million in investments over the next five years. “These investments and the increased rivalry between a potentially strengthened Varun and the existing market leader Delta may actually be considered pro-competitive indicators by the competition regulators, such as the CCC and the Zim authorities,” concludes Stargard.