The Competition and Tariff Commission (CTC) imposed a fine of US$9.1 million on Innscor Africa Limited (Innscor) for implementing the merger of one of its subsidiaries without the Commission’s approval.
Business Weekly reports that Innscor was also ordered to divest from the merger “forthwith”.
In its Newsletter for the first quarter of 2022, the CTC revealed that Innscor implemented the merger of one of its subsidiary – Ashram Investments, and Progroup Holdings’ subsidiary Amiata Investments without the Commission’s approval. This was in violation of the notification provisions of the Act.
1). It is alleged that in December 2019, CTC received a post-merger notification of the transaction involving subsidiaries of Progroup Holdings (Amiata Investments) and Innscor Africa Limited (Ashram Investments).
2). The transaction was implemented in June 2016 when Progroup Holdings underwent a Scheme of Reconstruction which resulted in Ashram Investments injecting USD$2.38 million into Progroup’s subsidiaries – Probrands and Probottlers.
3). Post the Restructure, in January 2018, Probrands disposed of its dairy assets to a newly incorporated company – Prodairy, which is a dairy and dairy products processor.
4). since incorporation, Prodairy’s shareholders are Innscor and Rowcost Investments holding 50.1 per cent and 49.9 per cent respectively.
i). The CTC analysis revealed that the merger created a single firm with anti-competitive effects as well as substantial market power with long-lasting consequences on consumers.
ii). CTC recommended that the Commission prohibits the Ashram/Amiata merger and orders Ashram to divest from Amiata forthwith.
iv). It was recommended that the CTC “imposes a penalty of USD$9,143,597.86 or its equivalence in ZWD at the time of settlement on IAL for consummating the merger without the Commission’s approval”.
The merger was analysed in light of the theories of harm associated with horizontal mergers namely unilateral effects.