Akzo rejects CCC notification request, claims no ‘failure-to-file’ in paint deal

Paint giant goes on offensive against COMESA request for retroactive merger filing

By AAT Editors

As AAT first reported here on Sept. 26, the COMESA Competition Commission has launched its first failure-to-file investigation into an M&A transaction (here, likely, a licensing deal), specifically involving Dutch commercial paint giant AkzoNobel and paint brand “Sadolin“.

Today’s news, reported in local Ugandan media, is that AkzoNobel’s Director for Decorative Paints in Sub-Saharan Africa, Johann Smidt, made strong comments at the “relaunch” of Sadolin Uganda, claiming that Akzo’s reassignment of the Sadolin brand name & distribution network to Crown Paints East Africa falls outside the CCC’s purview.”  This sentiment was echoed by Crown’s CEO, Rakesh Rao, saying that “[w]e do not have a merger going on; we are a fully independent plant, so COMESA does not come into the picture at all.

Competition lawyers caution that, on occasion, a business person’s notion of what constitutes a “notifiable transaction” can be at odds with the legal definition thereof, says Andreas Stargard,  an antitrust attorney with Primerio Ltd.

“Whilst they may not be a classic ‘merger’ or ‘acquisition’ in the eyes of the business people, certain types of exclusive licensing agreements or even patent or other IP [intellectual property] assignments may very well fall within the purview of competition regulators, including the COMESA Comp Com.,” said Stargard.

The facts surrounding the transaction itself are by all accounts, fairly confounding.  As best as one can interpret the media reports, the former AkzoNobel license agreement was one with an entity called “Sadolin East Africa” (SEA).  However, upon the purchase of SEA by Japanese company Kansai Plascon (AKA “Plascon Uganda” in the region), Akzo cancelled the agreement and has now entered into a new replacement license with Crown Paints (AKA Regal Paints).  It is the cancellation and reassignment that, according to two letters sent by the CCC on September 19th and 25th, requesting that the companies make retroactive merger-notification filings to bring them into belated compliance with the COMESA merger regime.

For now, we know that Akzo remains defiant (presumably basing its critical position on advice of legal counsel), with its local director stating that “whatever we have done to date has been within the laws of this country and this region”.

While some of Akzo’s statements were presumably vetted by antitrust counsel, others are at odds with a “good” antitrust story and appear to be less-carefully made proclamations: Akzo has said that “we believe that we are going to improve competition because we have a new player who is introducing a new product and an existing player, who is Sadolin and we will continue to be here,” yet its director also noted “that the war of words between Sadolin and Plascon had eaten into their market share and that this had influenced their quick agreement with Crown paints”.

As attorney Stargard observes, “it is usually not considered to be an effective antitrust defence to claim that a competitor has ‘eaten into your market share’, and that your actions that are now under investigation were motivated by said competition…”

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