Seed merger looks doomed

2011-12-20 00:00

A RECENT statement setting out the Competition Tribunal’s decision to prohibit the proposed merger of Greytown-based Pannar Seed and U.S. giant Pioneer Hi-Bred has highlighted the growing importance of public interest issues in merger applications.

So says competition lawyer at Shepstone & Wylie, Jennifer Finnigan, who told The Witness yesterday that although the full statement of reasons was not yet available, the statement released by the tribunal illustrated its deep-seated suspicion of cartel activity in any concentrated market.

The parties have filed documents with the Competition Appeal Court to appeal the tribunal’s decision of October 2011 to prohibit the deal.

Key issues that came under scrutiny were the further loss of competition in the industry to the potential detriment of maize farmers and consumers of maize products, the barriers to entry for new entrants and seed pricing issues for small-scale farmers.

Finnigan said the Competition Commission argued that the merger increased the risk of tacit collusion as it reduced the number of competitors in the market from three to two (Monsanto and the newly-merged entity).

“The tribunal appears not to have commented on this argument, but it did find that the merger would remove an effective competitor from the market and that this permanent structural change to the market was bad for competition and created a high risk that prices of maize seed to farmers were likely to increase.

“Evidence led by the African Centre for Biosafety, which intervened in the proceedings, indicated that even small price increases would significantly affect small-scale commercial and subsistence farms.

“The tribunal accepted this evidence and found that these farmers are important agricultural contributors.”

Finnigan said that although the parties proposed potential remedies to address certain concerns, the tribunal dismissed them as they did not solve the “structural” problems.

The parties’ argument that the merger would result in the enhancement of the breeding process through more accurate and efficient processes was also dismissed.

Although he confirmed Pannar had received the reasons for the tribunal’s decision, managing director Deon van Rooyen declined to comment.

“What is quite clear is that the parties to any merger which reduces the number of competitors in a concentrated market, particularly a market which affects the poor, are going to have a very hard time getting merger approval,” Finnigan said.

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