2 The importance of remedies
to address concerns in merger
cases
To date we have seen relatively
few mergers prohibited by the
Competition authorities in SA. E.g.
between 1 April 2007 to 31 March
2008, 94.8% of the 480 mergers
were approved without conditions,
whereas 2.3% of mergers
were conditionally approved.2
Only 0.6% of mergers during this
period were prohibited. This is because
mergers often result in efficiency
gains where the benefits of
merging outweigh the costs. The
way to deal with any anti-competitive
effects is usually to address
these through appropriate remedies,
in order to still reap the positive
results of a merger. According
to Davies and Lyons (2007)3 , remedies
are useful in that they are
intended to iron out anti-competitive
effects of an approved merger.
This means that the merging
firms can realise anticipated efficiency
gains while remedies dissolve
anti-competitive concerns.4
Mergers take the form of vertical
integration which is between
upstream and downstream firms
and horizontal mergers which
are between firms that co-exist in
the same stage of the production
line. Typically vertical mergers
raise less anti-competitive concerns,
whereas horizontal mergers
more commonly raise more anticompetitive
concerns. Anti-competitive
effects arising from vertical
mergers are often dealt with
by imposing behavioural remedies,
whereas horizontal mergers
often utilise structural remedies.
The competitive criteria considered
when analysing the effects
of a merger include whether the
merger would mean the removal
of an effective competitor, demonstrate
anti-competitive effects,
facilitate easier co-ordination and
collusion amongst parties in the
industry, whether it would set up
high entry barriers and result in
large market concentration, and
whether it would cause the foreclosure
of firms and employment 2
RESEARCH NOTE 23 - JULY 2011
concerns. Structural or behavioural
remedies, or a synthesis of
the two are utilised to effectively
remove the above-mentioned outcomes.
Structural remedies, which
are typically the more effective
type of remedy, are used to iron
out anti-competitive effects. This is
in line with Competition Authorities
primary objectives of maintaining
healthy competition in the
economy and protecting consumer’s
interests. Periphery concerns
such as the impact of mergers
on local production, firm foreclosure,
loss of employment and
other socio-economic outcomes
are typically remedied using a
behavioural approach. We show
that this was also the approach of
the Competition Authorities in the
recent Walmart-Massmart case.