Re­ver­sal of two merger de­ci­sions raise ques­tions

Business Day - Business Law and Tax Review - - BUSINESS LAW & TAX REVIEW - CHRIS CHAR­TER & KAY­LEY DE OLIVEIRA

THE re­cent re­ver­sal of two merger de­ci­sions pre­vi­ously ap­proved may leave merg­ing par­ties ques­tion­ing the va­lid­ity of merger de­ci­sions made by the Com­pe­ti­tion Com­mis­sion in the past, as well as the per­ma­nence of de­ci­sions made by the com­mis­sion in the fu­ture.

The ac­qui­si­tion of Pri­me­[email protected] by Paarl Me­dia was pro­hib­ited by the com­mis­sion in De­cem­ber 2011 af­ter a re­view ef­fec­tively over­turned the un­con­di­tional ap­proval of the merger which the com­mis­sion gave early in 2011.

The par­ties are now faced with hav­ing to re­verse a merger process which has been im­ple­mented for al­most a year.

On its web­site, Paarl Me­dia sees the re­ver­sal of the merger as “com­mer­cial an­ar­chy”, which bodes ill for eco­nomic growth and jobs in fu­ture. The Group Com­mer­cial and Le­gal Ex­ec­u­tive of Pri­me­dia is also quoted as say­ing that Pri­me­dia will close Pri- me­[email protected] if it is handed back, re­sult­ing in po­ten­tial job losses of be­tween 1 200 and 1 400 jobs. The prac­ti­cal im­pos­si­bil­ity of re­vers­ing the merger is also noted by Paarl Me­dia: “the com­mis­sion’s decision is in­ca­pable of be­ing im­ple­mented — you can­not un­scram­ble an omelette.”

In March 2007, the merger be­tween MTO Forestry (MTO), Boskor Sawmill and Boskor Rip­plant was un­con­di­tion­ally ap­proved by the com­mis­sion. In Au­gust 2009, fol­low­ing an ap­peal by a cus­tomer of MTO, the Com­pe­ti­tion Ap­peal Court re­mit­ted the case to the com­mis­sion for re­newed con­sid­er­a­tion of the merger. In Jan­uary 2011, al­most four years af­ter the ini­tial decision, the com­mis­sion ap­proved the merger but sub­ject to a num­ber of con­di­tions.

The merg­ing par­ties have ap­plied to the tri­bunal for a re­con­sid­er­a­tion of the decision. In the in­terim, in an at­tempt to avoid “un­scram­bling the omelette”, the merg­ing par­ties made an ap­pli­ca­tion to the tri­bunal for a tem­po­rary sus­pen­sion of the op­er­a­tion of the con­di­tions im­posed by the com­mis­sion pend­ing the out- come of the tri­bunal’s re­con­sid­er­a­tion pro­ceed­ings.

The tri­bunal dis­missed the ap­pli­ca­tion for tem­po­rary sus­pen­sion of the con­di­tions, rather than cre­ate a mech­a­nism for merg­ing par­ties to tem­po­rar­ily reap the ben­e­fits of a merger with­out the en­cum­brances of the merger con­di­tions im­posed.

In its decision, the tri­bunal cau­tions that “it may very well be im­pos­si­ble to re­store the harm done to com­pe­ti­tion in the af­fected mar­kets and con­sumers in the pe­riod of sus­pen­sion, if sus­pen­sion was a pos­si­bil­ity.”

The cases call into ques­tion the cer­tainty of merger ap­proval based on the risk that the in­ves­ti­ga­tion may be picked-apart at some later stage.

A so­lu­tion may be to limit the time within which a re­view ap­pli­ca­tion can be brought (cur­rently, the Pro­mo­tion of Ad­min­is­tra­tive Jus­tice Act caters for a max­i­mum 180 days to bring a re­view of an ad­min­is­tra­tive decision) so that at the very least, there is less of a dan­ger that the merger would have been im­ple­mented for many months be­fore it is sought to be over­turned.

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