- Says the merger would result in substantial lessening of competition and strengthened dominance of the merged entity
The Competition and Consumer Authority (CAA) has prohibited AkzoNobel’s (Dulux Botswana) proposed acquisition of Kansai Paint’s African (Plascon Botswana).
Chronicling how the Authority arrived at its decision, the Chief Executive Officer of CCA, Tebelelo Pule, indicated that AkzoNobel (the acquiring enterprise) is a public limited liability company established under the Laws of the Netherlands.
She said the company is listed on the Euronext Amsterdam stock exchange. AkzoNobel conducts its business in Botswana through Dulux Botswana Proprietary Limited (Dulux Botswana), a private company established under the Laws of Botswana. Dulux Botswana has a manufacturing facility, warehouses, and sales operations. Dulux Botswana manufactures decorative coating products but does not manufacture or supply any industrial coating products in Botswana.
Furthermore, Pule said, Dulux Botswana’s manufacturing facility does not produce the full range of AkzoNobel decorative coating products, and certain products that have low sales volumes in Botswana are imported as finished products from AkzoNobel’s operations in South Africa. “KPAL (the target enterprise), is incorporated in accordance with the Laws of the Republic of South Africa. KPAL is controlled by Kansai Paint,” Pule said.
Pule noted that Kansai Paint is a public company incorporated under the Laws of Japan and listed on the Tokyo Stock Exchange. “KPAL conducts its business in Botswana through Kansai Plascon Botswana Proprietary Limited (Plascon Botswana). Plascon Botswana is a private company incorporated under the Laws of Botswana,” said Pule. She added that Plascon Botswana does not conduct any local manufacturing operations but undertakes sales and warehousing operations.
According to Pule, all of the KPAL decorative coating products sold in Botswana are manufactured in South Africa and exported as finished products to KPAL’s depots in Botswana. “Similarly, all of KPAL’s industrial coating products (namely automotive refinishes, general industrial coatings, and protective coatings) that are sold in Botswana are manufactured outside of Botswana and exported to KPAL’s local depots,” she said.
Regarding the relevant market, Pule said the Authority established a horizontal product and geographical overlap in the activities of the merging parties since they both trade in decorative paints throughout Botswana. She indicated that the merging parties serve the same set of customers comprising individuals, retailers and contractors. As such, she said, the relevant market is specifically defined as the market for wholesale supply and retail distribution of decorative paints in Botswana.
Regarding competitive analysis and public interest concerns, Pule said the Authority has established that the proposed transaction would result in substantial lessening of competition and strengthened dominance of the merged entity. She noted that the merging parties are close competitors in terms of price, quality and product range and the merger will remove competitive rivalry between two notable brands, thus reducing consumer choice.
“There will be a removal of a vigorous competitor, being Plascon Botswana, as it is the only other significant player in the relevant market,” said Pule. As such, Pule said, the merger will enhance Dulux Botswana’s dominant position in the market. She added that the merged entity is highly likely to act unilaterally with less competition restraint from remaining competitors as they are significantly smaller than the merging parties.
“Plascon Botswana and Dulux Botswana possess strong brand recognition and customer loyalty built over many years,” Pule pointed out. This, she said, has provided and will continue to provide insulation from competitive pressure as they are able to maintain relatively higher market shares despite their product pricing being relatively higher than of their competitors. “As such, it takes considerable time for new entrants to offer effective competition to the merging parties; and KPAL’s survival in the relevant market is not dependent on the proposed merger,” said Pule.
“In terms of public interest considerations, the findings of the assessment revealed that there is potential for loss of jobs arising from duplication of roles,” said Pule. Rejecting the proposed merger, Pule stated: “Pursuant to the provision of Section 53 (1) (b) of the Act, the Authority has resolved to decline the proposed acquisition of Kansai Paint Co. Ltd subsidiary, namely Kansai Plascon Africa Ltd by AkzoNobel N.V”
