Merger control - does it matter for South Africa? A review of the IMERYS South Africa (PTY) LTD and andalusite resouces (PTY) LTD merger
Date
2022
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Abstract
In April 2015, the Competition Commission of South Africa (“Commission”) prohibited the merger wherein Imerys South Africa (Pty) Ltd (“Imerys SA”) intended to acquire Andalusite Resources (Pty) Ltd (“AR”) (“the Imerys SA and AR merger”). Mergers happen quite often and sometimes in industries that are strategic for the development of a country. It is therefore important that the decisions taken by the competition authorities are the correct ones, and to understand the impact that these merger decisions have on the industries affected. Using the Critical Loss Analysis (“CLA”) technique, this research paper has evaluated whether the decision by the South African competition authorities to prohibit the Imerys SA and AR merger was correct. Using the CLA, this research tests whether the economic arguments relied upon by the authorities are internally consistent. The paper finds that the authorities were correct in prohibiting the merger between the two firms. This research finds that that the entire premise which the merging parties were basing their arguments on for the approval of the merger was not true. The merging parties were arguing that they would be capacity constrained in the next two to five years following the merger, which meant that even absent the merger, prices of andalusite would increase. This paper finds that Imerys SA and AR are still not capacity constrained and that the decision to prohibit the merger was correct. If the merger had not been prohibited prices of andalusite would have increased by at least five times more than the pre-merger price levels. This shows that merger control proved to be a good tool for promoting competition and protecting consumer welfare in this case. Therefore, merger control of the kind that South Africa has does matter for the South African economy since it ensures that authorities are able to assess and prevent mergers that lead to build up of market power and ensures that consumers (and small and medium sized firms) are able to get competitive prices
Description
A dissertation submitted in fulfilment of the requirements for the degree of Master of Commerce to the Faculty of Commerce, Law and Management, University of the Witwatersrand, Johannesburg, 2022
Keywords
Imerys SA, Critical Loss Analysis, AR merger