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South Africa Competition Commission halts packaging acquisition

By Jenny Eagle+

23-Jan-2017
Last updated on 24-Jan-2017 at 11:41 GMT2017-01-24T11:41:15Z

Corruseal makes packaging for all types of F&B. Picture: Corruseal.
Corruseal makes packaging for all types of F&B. Picture: Corruseal.

The Competition Commission of South Africa has stopped Corruseal Group acquiring Boxlee and Pride Pak Packaging.

Corruseal manufactures and supplies F&B packaging products among others, including containerboard paper, corrugated board and corrugated packaging such as shelf-ready packaging, outer cartons and shippers to pizza boxes.

'Significant concerns'

Boxlee and Pride Pak manufacture and supply corrugated boxes/packaging including single face board, regular slotted containers, dye cut self-erecting containers and trays.

The Commission has prohibited the two mergers claiming the proposed transactions are likely to substantially prevent or lessen competition as a result of strengthened coordination in the affected markets.

Hardin Ratshisusu, deputy commissioner, Competition Commission of South Africa, said it was concerned about the foreclosure of market participants that are not vertically integrated and/or engaged in coordinated conduct in the industry and in the affected markets.

There are significant concerns that the proposed mergers would make the market more conducive to coordination on prices by firms in the corrugated board and packaging markets,” he said.

Further concentration in these markets would significantly lessen competition to the detriment of consumers.

Market transparency

The Commission added it found the industry and the affected markets are characterized by high levels of concentration along the value chain, market transparency, multi-market contact, high and increasing barriers to entry, amongst other considerations.

It concluded the proposed transactions are likely to strengthen coordination as post-merger it would be easy to reach terms of coordination and monitor deviations from coordinated conduct.

In a statement it said: ‘Corruseal, Boxlee and Pride Pak are in a horizontal and vertical relationship. The Commission found the proposed transactions are not likely to result in unilateral effects.

‘With respect to the vertical relationship, the Commission found the acquisition of Boxlee and Pride Pak by Corruseal is not likely to raise classic input and customer foreclosure concerns.

‘The merger assessment primarily focused on coordinated effects likely to arise in the market for the manufacture and supply of corrugated board and in the market for the manufacture and supply of corrugated packaging (“the affected markets”).

‘The Commission particularly conducted this assessment in light of ongoing collusion investigations in the industry and in the affected markets.

‘Also, likely coordination was considered in light of increased vertical integration in the industry and the symmetrical positions that such vertical integration creates thus making it easier to reach the terms of coordination.’

Boxlee Packaging has been in the corrugated market since 1990 and is one of the largest privately-owned sheet board plants in South Africa.

Pride Pak is an independent converter of corrugated products, located in Crown Mines, Johannesburg, South Africa.

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