Reversal of two merger decisions raise questions
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.