Competition Commission prohibits two separate mergers

The Competition Commission has prohibited a proposed merger between Dutch packaging manufacturer Greif International and local steel drum manufacturer Rheem South Africa, as it would garner anticompetitive activities.

The commission felt that, as Greif and Rheem were the only manufacturers of steel drums in KwaZulu-Natal and Gauteng, the merged entity could unilaterally increase prices.

The proposed merger had been considered in 2004 and the commission has again assessed the market for the manufacture and supply of large steel drums and found the transaction would effectively be a merger to monopoly, regardless of the geographic market considered.

Meanwhile, the commission has also prohibited the proposed merger whereby Nippon Yusen Kabushiki Kaisha (NYK), Mitsui OSK Lines (MOL) and Kawasaki Kisen Kaisha (KL) intend to merge their container liner shipping businesses to form a joint venture (JV) in that market.

The primary acquiring firm is the JV for the container liner shipping of NYK, MOL and KL, a company to be incorporated in accordance with the laws of Japan. NYK operates its shipping business through an agent called Mitchell Cotts Maritime.

Locally, MOL operates through its wholly owned subsidiaries MOL South Africa and MOL ACE South Africa, while KL operates through K Line Shipping South Africa.

The primary target firm is the container liner shipping businesses of NYK, MOL and KL, which are separately conducted and controlled.

“We considered the impact of the proposed transaction on the market for the provision of container liner shipping services, as well as the impact of the proposed transaction on the adjacent market of the car carriers shipping market where the JV partners compete.

“We found that the structure of the container liner shipping market is conducive to coordination based on previous collusive conduct in the container liner market in other parts of the world. The merger increases the likelihood of coordination as it creates further structural linkages in the container liner market,” the commission said in a statement.

It further suggested that the proposed transaction creates a platform for coordination in the car carrier market, which has a history of collusion involving the merging parties.

The parties have been prosecuted in some jurisdictions, while investigations are under way in others.

“It is our view that the merging parties may require a formal mechanism for the further collusive conduct in the car carriers market. The JV provides such a mechanism and the proposed transaction is likely to increase the scope for coordination in the container liner shipping market, while creating a platform for coordination in the car carrier market,” it stated.

It also noted that there were no efficiencies that outweighed the anticompetitive effects of this transaction and that there were also no remedies sufficient to address these effects.