Competition watchdog halts fire protection firms merger | Fin24
 
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Competition watchdog halts fire protection firms merger

Jul 02 2017 17:35

Cape Town – South Africa’ competition watchdog has prohibited the proposed intermediate merger whereby Jasco Electronics intends to acquire Cross Fire due to concerns of price-fixing and potential collusion.

Jasco Electronics is a smart technology company which provides information and communication technology services across a number of sectors.

Jasco Fire, a subsidiary of Jasco Electronics, operates in the fire protection industry and manufactures pipes used in fire protection systems. Jasco designs, supplies and installs the full fire protection system based on the particular needs of a customer.

Cross Fire in turn designs, supplies, fabricates and installs a range of fire protection systems.  It does not manufacture pipes used in fire protection systems but sources the supply of pipes and installation services from third parties.

In a statement issued on Sunday, the Competition Commission said the merger will likely lead to a consolidation of the market in Gauteng and the Western Cape.

READ: Two fire companies admit cartel conduct 

“The merger will result in a reduction of the number of firms in markets that are already highly concentrated. This will make it easier to perpetuate existing cartel conduct of price-fixing, market allocation and collusive tendering,” it said.

The Commission has referred several companies in the industry to the Competition Tribunal for price-fixing, division of markets and collusive tendering. Two implicated companies in the cartel have already entered into settlement agreements with the Commission.

“The Commission is concerned that the merger will result in the removal of a potential disruptor in the market, Jasco Fire, which has not been implicated in cartel conduct. Cross Fire is one of the firms implicated in the cartel and the Commission believes that Jasco Fire will be incorporated into the cartel and the consolidation of the market will enhance or strengthen coordinated effects after the merger.”

READ: This is what changes to the Competition Act could look like 

For these reasons, the Commission said the merger is likely to substantially prevent or lessen competition in the provision of active fire protection systems.

“The remedies proffered by the merging parties are not sufficient to address the harm identified. For this reason, the Commission prohibits the proposed transaction.” 

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