Home Grown Remedy
Tribunal approves the second global agrochemical merger in less than a year
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Development fund remedy for media firms
Media companies found to have colluded in fixing payment terms for advertising contribute to a fund for the advertising sector
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Consumer welfare at the heart of merger findings
The Tribunal granted two previously prohibited mergers with the Netcare Group subject to tariff regulation and in one case divestiture
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Statistics
Tribunals performance from April 2018 to June 2018
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Tribunal approves the second global agrochemical merger in less than a year
In the merger involving Bayer Aktiengesellschaft (Bayer) and Monsanto Company (Montsanto), South Africa was one of many jurisdictions that had to consider the merger and the Competition Tribunal had to address concerns specific to the South African market.
Bayer and Monsanto, recognised as leaders in crop protections and seed and traits, were given approval to merge by the Competition Tribunal on 16 July 2018 as part of a global transaction. This merger is part of the global transaction between Bayer and Monsanto, which has been notified in other jurisdictions such as the USA, Russia, China and Brazil.
In South Africa Bayer is active in the selling of fungicides, insecticides, herbicides and seed treatment products while Monsanto supplies seeds, biotechnology traits and herbicides. However both firms are involved in research and development for biotechnology traits and the development of genetically modified (GM) seeds and agro-chemicals.
While conditions imposed in other countries have relevance to South Africa, the Competition Tribunal was concerned that the merger would result in a monopoly in the South African GM cotton seed market and imposed conditions to address this potential loss of competition. The merger, if approved, would remove the opportunity for Bayer to independently enter into South Africa and compete against Monsanto, particularly in the development and production of traits for seeds and the accompanying herbicides used in a number of agricultural markets.
The Tribunal therefore imposed conditions that require the merged entity to divest and sell the entire global Liberty Link trait technology and the associated Liberty branded agro-chemicals business of Bayer, as well as Bayer’s SA Cotton Seed Business.
Although the Liberty and Liberty Link technologies are not used in South Africa, the divestiture of the technologies was required in order to cure the removal of potential competition. The condition also requires that the purchaser of the technologies shall be obligated to commercialize the technologies locally for use, to the benefit of farmers. Should the purchaser fail to commercialize the technology, they then become obliged to license such to a South African third party to commercialize.
The Tribunal approved an earlier large merger between DowDuPont and Dow Chemical and DuPont which saw the creation of a new company, DowDuPont, incorporated for the purpose of the transaction and controlled by both Dow and DuPont. This merger was similar to the Bayer transaction in that it was global in nature and required notification in several jurisdictions.
At the time of the transaction, both Dow Chemical and Du Pont were involved in the distribution of seeds, agro-chemicals and material science products in South Africa. Although there were conditions imposed in other jurisdictions that resolved some competition concerns locally, the Tribunal was concerned that they were insufficient to address the South African issues, in particular the possible exit of a potential significant competitor in the maize market.
In response to this concern the merging parties tendered a detailed set of licensing remedies aimed at ensuring access to specified plant materials after the merger. The licensing remedies included granting the right to third parties to conduct breeding and testing on each and any products on the Dow Genetics Materials List, at no charge, and removing restrictions on using the licensed materials for commercialisation.
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Development fund remedy for media firms
Media companies found to have colluded in fixing payment terms for advertising contribute to a fund for the advertising sector
The Competition Commission initiated a complaint in 2011 against media houses for offering different discounts to media agencies who were accredited to the Media Credit Co-ordinators, an industry management company.
The Commission alleged that accredited agencies were offered a discount of 16.5% for all payments made within a 45 day period from the date of the statement where as non-accredited advertising agencies were only offered a discount of 15%. Some media houses also applied a fix cancellation fee in respect of all adverts that the advertising agencies withdrew 24 hours before publication.
So far eight firms have concluded settlement agreements with the Commission for the conduct described above. These are DSTV Media Sales (Pty) Ltd, Independent Media (Pty) Ltd; Caxton and CTP Publishers and Printers Limited, Provantage (Pty) Ltd, Media24 Limited, MTV Networks Africa, Mediamark (Pty) Ltd and United Stations (Pty) Ltd. Together these firms have paid approximately R47 million in administrative penalties.
Each of the firms have been ordered by the Tribunal to pay administrative penalties, provide additional 25% advertising space or airtime to qualifying small agencies at each firms discretion.
These firms also agreed to contribute money into the Economic Development Fund (EDF) over a period of three years to enable the provision of bursaries to students who wish to study media or advertising qualifications at tertiary institutions. The fund will also be used by individuals who require assistance to acquire post—qualification experience to participate in the advertising industry.
The EDF is to be managed and administered by the Media Development and Diversity Agency (MDDA) and will report to the Commission. A memorandum of agreement between the Commission and MDDA has been concluded to this effect.
The Commission is presently in settlement negotiations with other media firms named in the complaint.
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The Tribunal granted two previously prohibited mergers with the Netcare Group subject to tariff regulation and, in one case, divestiture
On 19 March 2018 the Tribunal approved, with conditions, a large merger between the Netcare Hospital Group (Netcare) and mental health care provider Akeso Group (Akeso) going against an earlier recommendation by the Competition Commission that the merger be prohibited. The conditions included a requirement that Netcare divest of its Rand Hospital and Bell Street Hospitals.
Netcare operates a private hospital network and Akeso has a group of in-patient clinics that provide individual, integrated and family orientated treatment for a range of mental health, psychological and addictive conditions. The Commission initially recommended a prohibition because it was concerned that post-merger Netcare would increase Akeso’s existing lower tariffs for mental healthcare to Netcare’s higher general healthcare tariffs. It was concerned the merged entity would acquire market power in a local market in Gauteng, giving it the unfettered ability to control market conditions.
To resolve the concerns raised by the Commission, the merging parties, during the hearing, submitted conditions addressing its 2018 prices for Akeso and future price increases at Akeso’s current facilities. It also undertook to divest its Rand and Bell Street Hospitals.
A small merger between Netcare Hospitals and Benoni-based Lakeview Hospital was approved subject to conditions relating to the regulation of tariffs put forward by the merging parties. The conditions broadly require:
- For the purposes of fee for service reimbursement for services rendered at Lakeview hospital Netcare shall insure that the tariff used in relation to any Medical Scheme will be at a discount of 5% to the Netcare 57/58 tariff * in respect of that Medical Scheme or in respect of that option. (* 57/58 tariff – the schedule of tariffs that Netcare has negotiated with each of the Medical Schemes for fee-for-services reimbursement for the relevant calendar year in respect of its general acute hospitals).
- For the purposes of alternative reimbursement models (ARM) services (negotiated in terms of 57/58 facilities in respect of Medical Schemes for options) the tariff will be at a discount of 5% to the Netcare 57/58 tariff.
The pricing conditions in both mergers will apply for a period of seven years.
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Statistics
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Sector and penalty breakdown in terms of cases Q1 2018
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