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Victory for beer rivals in SAB merger ruling

Jul 01 2016 08:54
Matthew le Cordeur

Cape Town – The intervention from South African competitors into Anheuser-Busch InBev’s [JSE:ANB] R1.5trn takeover of SABMiller [JSE:SAB] to ensure a condition was placed down on cooler access was a key change in the Competition Tribunal’s conditions announced on Thursday.

That’s according to Chris Charter, director of competition law at Cliffe Dekker Hofmeyr.
 
“One key change is to the cooler access condition,” he said. “Thanks to intervention from competitors, this has been extended to all outlets - previously retail outlets and taverns - where coolers are solely supplied by the merged entity and beyond small beer producers.”

This will “include - albeit to a lesser extent - ciders of all competitors,” he said, “even large cider producers.”  

“The merged entity is also expressly precluded from seeking exclusivity in any outlet, save for during sponsored events.”

The approval with conditions set the stopwatch to the final countdown with China and the US very close to approving the mega-brew deal.

READ: AB InBev faces two more hurdles before SAB can say cheers
READ: AB InBev wins Competition Tribunal approval for SABMiller takeover

The official conditions the Tribunal gave were that the “merged entity shall ensure that outlets which are solely supplied by it with beverage coolers or refrigerators are free for a period of five years to provide at least 10% capacity of one such beverage cooler or refrigerator in such outlets to South African owned and produced cider brands of competing third parties.”

It further states that the merged company’s employees should all know the competition provisions, putting the onus on the company to ensure compliance.

“The merged entity shall ensure that outlets which are solely supplied by it with beverage coolers or refrigerators are free to provide at least 10% capacity of one such beverage cooler or refrigerator in such outlets, to the beer products of small beer producers,” the Tribunal said.

Charter said not all the conditions are truly merger specific. “Whether one sees these conditions as the zenith or the nadir of the authorities' policy on public interest and the regulation of ‘mega-mergers’, they are certainly a new watershed in merger control policy – notably the willingness to drive broader competition policy agendas through contested mergers,” he said.  

“I do not believe that less high-profile transactions will garner a similar approach, but certainly those looking to put together very large transactions with multinational dimensions ought to steel themselves for a challenging time.

“Although it is somewhat unusual for the Tribunal to adjust agreed conditions, the Tribunal is required to exercise its inquisitorial powers to interrogate whether conditions are rational and reasonable adequately address concerns.  

“So it does from time to time make adjustments or send the parties back to make changes. In this case, however, I think the intervention by third parties likely led to the adjustments, to accommodate their concerns. I suspect that the Tribunal would not have revised the conditions that unilaterally but rather brokered an agreed outcome.  
 
“The conditions are wide-ranging and cover a multitude of issues so will be a challenge to both the parties to ensure compliance and the Commission to monitor.  

“Many of the conditions protect stakeholders so there will be an element of monitoring by complaint if the parties do not get it right.  

“One thing worth noting is the express reference to the ‘spirit of the conditions’, which will make it difficult for the parties to find loopholes in the event of inadvertent lacunae.  

“Such lacunae are likely given the way in which the conditions would have been negotiated, added to and amended in fits and starts to accommodate various stakeholders,”  he said.

ab inbev  |  sabmiller  |  competition tribunal  |  takeover
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