The Supreme Court has ordered Innscor Africa Limited to divest from Profeeds after ruling that the merger of Profeeds and National Foods (owned by Innscor) created a near monopoly in the stockfeed industry, reported ZimLive.
The Supreme Court judges found that the merger of the two previously competing companies under Innscor’s ownership resulted in the creation of a dominant unit that could reasonably become a monopoly. This was deemed contrary to the public interest.
Innscor, through its subsidiary Ashram Investments, had acquired a 59% stake in Profeeds in 2013, which the Competition Tariff Commission (CTC) initially prohibited.
Innscor then formed another merger with Profeeds in 2015, this time with a 49% stake, but failed to inform the CTC within the required 30-day period.
Although the law mandates that companies notify the CTC of any merger exceeding US$1.2 million within 30 days, the companies delayed this notification until 2019, two years after Innscor’s new legal team advised them to do so.
The CTC again prohibited the second transaction and imposed a ZWL$40 million fine on Innscor.
Innscor challenged the CTC’s decision at the Administrative Court and won, but the CTC then appealed to the Supreme Court.
Justice Tendai Uchena of the Supreme Court, along with Justices Nicholas Mathonsi and Felistus Chatukuta concurring, stated in their October 3 judgment that the Administrative Court made an error in ruling in favour of Innscor. Ruled the judges:
The court aquo failed to consider the potential harmful effects of the merger. It therefore did not make its decision in terms of all the applicable factors in assessing a merger…
Monopolistic tendencies must be carefully assessed because they may initially appear favourable, but in the long run they may – when the monopolists get to a point where the market has no other option but to buy their goods – turn around and control even the economy of a country by producing highly priced goods or substandard goods sold at high prices. They may also destroy small business in the future.
The Supreme Court judges said the Administrative Court ought to have carefully considered the fact that Innscor retained a controlling interest in both National Foods and Proceeds, which specialise in stock feeds. The Supreme Court said:
Innscor also has a controlling interest in Irvines Zimbabwe, a major customer of both Profeeds and National Foods.
An analysis of Innscor’s conduct shows that it desires to wholly control the stock feeds market which is not permissible.
The judges added that the merger “concentrated industrial power in the two biggest companies in the stock feed industry” and that the fine imposed on Innscor was reasonable given the company’s apparent affinity for anti-competition activities.
The court said the Profeeds merger was the third time Innscor had contravened competition laws.
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