The Namibian Competition Commission imposed a N$5 million fine on four entities in the cement industry for merging without notifying the Commission, and implementing the merger without approval.
The entities fined are Fan Qingmei, Wang Zhongke, Hong Xiang Holdings LTD and Whale Rock Cement Pty (Ltd).
The Commission noted that it is concerned about mergers that are likely to result in a substantial decline in competition, and in firms acquiring market power, which could be used against consumers through charging higher prices, and changing service levels and product quality, among others.
“All merger transactions meeting merger thresholds are required to be notified for assessment of possible market effects and clearance by the Commission.
This has the benefit of protecting consumers from potential abuses that can result from market dominance.
“Specifically, the merger assessments aim at ensuring that merging firms will not have the ability to raise prices, reduce quantity and/or quality, and reduce the range of customer service post-merger,” the NaCC noted.
The Commission and the relevant companies agreed to a settlement after an investigation determined the parties contravened the Competition Act 2 (2003).
All efforts to obtain comments before going to press from the affected companies proved futile.
As part of the settlement, the parties agreed to a settlement agreement with the Commission, wherein they will pay a pecuniary penalty of N$5 million, and implement a compliance programme on Namibia’s competition law.
To that end, the settlement agreement was made a court order in the High Court on 29 July 2024.
“The Commission’s investigation found that the parties contravened Section 44, read with Sections 51 and 53 of the Competition Act. During the investigation of a merger between West China Cement Limited and Schwenk Namibia (Proprietary) Limited, which was prohibited in 2020, as it was likely to prevent or lessen competition in the market for the production and supply of cement in Namibia, the Commission detected that Zhongke acquired Hong Xiang Holdings shares from Qingmei. The Commission’s findings indicated that the acquisition would have resulted in an effective monopoly in the production and supply of cement in Namibia that would likely have resulted in anticompetitive effects,” the NaCC stated.
The NaCC explained that Hong Xiang Holdings is the majority shareholder with a 70% shareholding in Whale Rock Cement, and accordingly controls Whale Rock Cement.
“Given that Hong Xiang Holdings controls Whale Rock Cement, Zhongke’s acquisition of Hong Xiang Holdings from Qingmei constituted a change of control in Whale Rock Cement and a merger as defined in terms of Sections 42(1) and (2) of Chapter 4 of the Competition Act. The merger falls within the prescribed notification thresholds, and the parties failed to notify the Commission as required in terms of Section 44 of the Act,” the NaCC stated.
The Commission also encouraged stakeholders to ensure they remain in compliance with the Competition Act, specifically Chapter 4.
“Where stakeholders are not sure whether the transactions that they wish to pursue are notifiable or not, the Commission encourages such stakeholders to approach the Commission, and seek an advisory opinion before proceeding,” the NaCC advised.
The Commission’s statement continued that while cement is a very useful building material in construction, the national cement market is highly concentrated.
“The construction sector is estimated to be contributing about 2% to GDP and about 10% of the labour force. Competition between firms enhances productivity and product choice. Competitive markets incentivise innovation, thereby enhancing economic development and consumer welfare. Merger regulation establishes a system of preventive control against increases in market power. The rationale is to prevent market structures that are conducive to anti-competitive conduct from developing. This is because markets that are characterised by few participants with high barriers to entry, where customers have no bargaining power, and with little or no innovation create an environment where incumbents possess market power, which can potentially be abused through the anti-competitive conduct,” the NaCC explained.
Photo: Cement
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