LML4802
Portfolio Semester 2 2023 (Oct/Nov)
,LML4802
October November
Portfolio
Semester 2 2023
DUE: 13 November 2023
QUESTION 1
1.1 Discovery Ltd intends to acquire Netcare Ltd before the implementation of the
National Health Insurance as proposed by the National Health Act 61 of 2003.
Conduct focused research on the companies guided by various provisions for merger
control.
Thereafter, identify and classify the type of the merger, apply the relevant factors
considered for evaluation of the merger and make a recommendation in relation to the
merger as the competition commission. You need not discuss the procedure and
notification provisions of merger regulation. (10)
1.2 Uni Pharma (Uni) is a large pharmaceutical retailer that sources its products from
Mega Pharma Manufacturers (Mega), one of the largest pharmaceutical
manufacturers in South Africa with an 80% market share. When South Africa
experienced its first case of a COVID 19 pandemic infection, Uni, Mega and other
pharmaceutical manufacturers and retailers witnessed a vast increase in demand for
facial masks, sanitizers and disinfectants (these products).
As a result, South Africa experienced a shortage of these products. Mega had to
increase its production to meet the demand from pharmacies. At the same time, Uni
had to procure more stock to meet the demand from consumers. To ensure the
continued supply of these products to consumers, Uni increased the prices of these
products by 300%.
In addition, Uni, with a market share of 40%, approached other pharmaceutical
retailers, and an agreement was reached that they would all charge the same price for
these products. Many consumers were disgruntled by the increase, as they could not
afford these products when they were so needed.
, 1.2.1 You are the principal investigator appointed by the Competition Commission to
investigate Uni’s conduct. Write a report wherein you outline in detail the possible
provisions of the Competition Act 89 of 1998 which have been contravened by Uni,
whether any existing grounds of justification and any sanctions that may be imposed
by the Competition Commission. (15)
1.2.2 Upon investigation, it transpires that Mega has a supply agreement with Uni, in
which it instructed Uni to increase its prices by 300%. The agreement provided that if
Uni failed to increase its prices accordingly, Mega would stop supplying any of its
products to Uni.
As a result, Uni complied with Mega’s request. Write a report wherein you discuss
whether Uni and Mega’s supply agreement contravenes the CONFIDENTIAL Page 7
of 8 LML4802 Oct/Nov 2023 provisions of the Competition Act 89 of 1998 and any
defence that may be available to either of the parties in terms of this Act. (10)
[35]
, ANSWER;
Question 1
1.1
Merger Control Process:
Identify Relevant Legislation:
Research the applicable merger control regulations in the jurisdiction where Discovery
Ltd and Netcare Ltd operate. In South Africa, it may involve the Competition Act and
related guidelines.
Type of Merger:
Determine the type of merger: horizontal, vertical, or conglomerate. This classification
helps in understanding potential competition concerns.
Factors for Evaluation:
Assess various factors considered in merger evaluation, such as market share,
concentration, potential anti-competitive effects, and entry barriers.
Competition Commission's Role:
Understand the role of the competition commission in evaluating and approving
mergers.
Example Approach:
Research on Discovery Ltd and Netcare Ltd:
Company Profiles:
Gather detailed information on Discovery Ltd and Netcare Ltd, including their market
presence, services, and market share.
Market Analysis:
Analyze the market structure in which both companies operate. Identify key
competitors and market dynamics.
Type of Merger:
Classify the merger type based on whether it is horizontal, vertical, or conglomerate.
Factors for Evaluation:
Evaluate factors such as market share, potential for market dominance, impact on
competition, and entry barriers.
Competition Commission Guidelines:
Refer to the relevant guidelines or precedents set by the competition commission for
similar mergers.
