Competition Authorities examine transactions that increase likelihood of information exchange
On 23 January, 2013, the Competition Tribunal issued its reasons in the larger merger involving Absa Bank Limited (Absa) and the Private Label Store Card Portfolio of Edcon (Proprietary) Limited ("Edcon") under case number 70/LM/Jun12, in which the tribunal approved the transaction subject to conditions designed to minimise the potential for co-ordinated effects post-merger.
Pre-merger, certain business activities supplied by the merging parties, namely those relating to the provision of unsecured credit, were found to overlap horizontally. This was because Absa is party to a joint venture with Woolworths (Proprietary) Limited ("Woolworths") called Woolworths Financial Services (Proprietary) Limited ("WFS"), which offered certain types of unsecured credit products and that, post transaction, Absa would acquire the right, title and interest to the accounts and receivables relating to the Edcon portfolio (which offers substitutable products and services to WFS).
A platform for collusion
The commission regarded Absa's post-transaction interest in both WFS and the Edcon portfolio as a platform for collusion, which could facilitate the exchange of competitively sensitive information (such as pricing, marketing policies and commercial strategies) between Edcon and Woolworths through Absa, and could substantially prevent or lessen competition. The tribunal agreed with the commission's findings and imposed a set of behavioural conditions, pertaining to the implementation of ring fencing measures designed to prevent anti-competitive information exchange and monitoring conditions.
In the decision of Business Venture Investments No. 1624 (Proprietary) Limited and another and Waco African (Proprietary) Limited and another under case number 54/LM/May12, similar conditions were imposed by the tribunal to prevent the dissemination of competitively sensitive information within the acquiring group as regards its interests in competing scaffolding businesses, post-merger.
These decisions and the imposition of such conditions reflect the increasing tendency by the competition authorities to look closely at transactions in which the potential for the dissemination of competitively sensitive information between firms is heightened. In this light, it is important for acquiring firms that seek to acquire interests in competing entities to implement measures and proactively to adopt policies and procedures that ensure that the likelihood of information exchange post-transaction is obviated.