NAMIBIA: NAMIBIAN COMPETITION COMMISSION PROHIBITS CEMENT MERGER

On 3 August 2020, the Namibian Competition Commission (Commission) reported that it had prohibited a proposed merger in Namibia’s cement industry, citing concerns around the likelihood of post-merger co-ordinated behaviour; strengthening of a dominant position; and no ‘concrete’ benefits outweighing the perceived anticompetitive effects.

In terms of the proposed merger, West China Ltd (West China), a Chinese manufacturer and distributor of cement, sought to acquire the entire issued shares in Schwenk Namibia (Pty) Ltd, which in turn operates Ohorongo Cement (Pty) Ltd (Ohorongo), a local cement producer. West China also operates in the local market as a cement distributor.

During the course of its investigation, the Commission received concerns that the merger would result in foreign national employees being favoured over Namibian locals; the risk that the procurement of goods and/or services may be deflected away from Namibian locals in favour of foreign firms; transfer pricing manipulation could occur; and concerns that West China had relationship links to a competitor in the cement market, Whale Rock Cement, trading in Namibia as Cheetah Cement.

Following receipt of these concerns, the Commission considered it appropriate to hold a public conference inviting stakeholders to submit oral and written comments on the merger. The public conference was held on 9 July 2020 and, on 30 July 2020, the Commission decided to prohibit the merger.

The Commission’s investigation revealed that due to existing links between West China and Cheetah Cement, the merger would increase the likelihood of coordinated behaviour, and would create or enhance market conditions rendering the Namibian cement sector susceptible to collusive conduct.

The Commission was particularly concerned about the sharing of competitively sensitive information.

The Commission’s investigation also revealed that Ohorongo is a dominant player and given existing relationships between West China and Cheetah Cement, the implementation of the merger would strengthen the merged entity’s dominant position.

Additionally, barriers to entry into the market were considered high, and in the Commission’s view, it was not likely that small undertakings owned or controlled by historically disadvantaged persons would be able to gain access to, or be competitive within, the relevant market.

Moreover, the Commission was of the view that the merger did not present any redeeming benefits capable of outweighing the perceived detrimental effects on competition.

Ultimately, the Commission found that the merger would substantially prevent or lessen competition in the Namibian cement market and the only means of addressing these concerns was an outright prohibition.