A merger with both horizontal and vertical overlaps
The reasons given by the Competition Tribunal (Tribunal) in the matter between Mogs Proprietary Limited and Booysen Bore Drilling Company Proprietary Limited (Case No: 018044), issued on 13 January 2014, provides a further example of a merger that presented both horizontal and vertical overlaps, but was nevertheless viewed as unproblematic by the competition authorities.
This is according to Lerisha Naidu, senior associate in the Competition practice at Cliffe Dekker Hofmeyr.
"The decision reminds us that the fact that the parties to a transaction operate in the same or similar markets, or engage in a pre-transaction supply relationship does not necessarily mean that the transaction will result in net anti-competitive effects," explains Naidu.
"In respect of the horizontal overlaps, the Tribunal found that, although both parties to the transaction were involved in the market for the provision of exploration and drilling services: (i) the market was fragmented and included a number of other participants; (ii) the combined market share of the parties was not significant (20%); (iii) the market share accretion of the acquiring firm was marginal (5%); (iv) the parties services could be differentiated according to their respective customer's needs; and (v) the existence of customer countervailing power meant that the parties would not likely be able to raise prices," she notes.
"In respect of the pre-existing supply relationship between the parties, the Tribunal found that foreclosure concerns were unlikely (as the parties did not supply to and purchase from any other party pre-transaction). Accordingly, the Tribunal unconditionally approved the large merger," Naidu adds.
