daniel chigunweTapiwanashe Mangwiro
Senior Business Reporter
THE Supreme Court has granted the Competition and Tariff Commission (CTC) its appeal against a High Court judgment endorsing the merger between Innscor Africa Limited subsidiaries Profeeds and Ashram Investments.
The High Court had approved the merger, following an appeal lodged by Ashram Investments, determining that the transaction was in the public interest, as it created new jobs and expanded the merged businesses.
In a judgment delivered on October 3, 2024, Supreme Court judge Justice Tendai Uchena, overturned the lower court’s decision, citing the potential long-term risks of monopolistic tendencies.
Innscor Africa, wholly owns Ashram Investments, which separately acquired 49 percent stakes in Profeeds, a stock feed manufacturer and Produtrade, a property holding company leasing facilities to Profeeds.
The transactions were consummated in 2015 but only notified to CTC in 2019, nearly four years later, after the companies’ new legal counsel advised the parties of their obligations under the Competition Act.
CTC had, however, initially prohibited an earlier transaction in which Ashram sought to acquire an even bigger stake in Profeeds, which would have seen it take a controlling interest in Profeeds, citing risks of market concentration.
The regulator argued that the combined influence of Profeeds and National Foods, an Innscor associate, would lead to a dominant position in the stock feed market by the Zimbabwe Stock Exchange-listed conglomerate.
Additionally, the CTC imposed a $40,5 million (Zimbabwe dollars) penalty on Innscor for failing to notify the regulator about the merger within the prescribed period.
The respondents, led by Ashram Investments, appealed to the High Court against the regulator’s determination, with the latter approving the transaction citing that the deal was in the public interest.
The High Court noted that Profeeds had expanded from 19 to 40 retail outlets post the merger, creating jobs and increasing economic activity in the country.
It also reduced the penalty to a mere caution and discharge, reasoning that the merger had benefited the economy and that Innscor’s subsidiaries should not bear collective punishment.
However, the Supreme Court found significant flaws in the High Court’s reasoning.
Justice Uchena underscored the need to consider long-term effects.
“Monopolistic tendencies must be carefully assessed because they may initially appear favourable, but in the long run, they may control even the economy of a country by producing highly priced goods or substandard goods sold at high prices,” he said.
The Supreme Court criticised the High Court for focusing narrowly on short-term economic benefits while neglecting the merger’s potential to create a monopoly.
The judgment highlighted that Innscor’s ownership of Profeeds and National Foods concentrated industrial power in two of the largest stock feed producers, raising the risk of anti-competitive practices.
Justice Uchena further noted that Innscor had a history of non-compliance with competition law, referencing its previous failure to notify mergers in 2013 and 2018.
The Court emphasised that this pattern of behaviour demonstrated a disregard for regulatory oversight, which should have been a critical factor in assessing the merger’s public interest implications.
The Supreme Court reinstated the CTC’s prohibition of the merger and upheld the $40,5 million (ZWL) penalty.
Justice Uchena stressed the importance of adhering to statutory obligations, noting that the CTC’s mandate is to protect public welfare by regulating mergers that could harm market competition.
“Competition policy is formulated to encourage, improve, and protect the competition process for the benefit of consumers through monitoring and regulating business conduct that is actually or potentially anti-competitive,” Justice Uchena said.
The higher court clarified that penalties under the Competition Act must be determined based on all seven statutory factors, including the nature and gravity of the contravention, the level of profit derived, and prior violations.
As a result, the Court found that the High Court had erred by considering only three factors, leading to an inadequate penalty.
This ruling aligns Zimbabwe with global trends in competition enforcement. The Supreme Court referenced international precedents, including the 1911 Standard Oil case in the United States and a 2022 decision by the COMESA Competition Commission, which blocked a merger in the paint industry to prevent undue market power.
