The Competition Commission has approved the Anheuser-Busch Inbev acquisition of SABMiller on condition that the Competition Tribunal addresses several concerns.
“We are confident that these comprehensive conditions address the competition and public interest concerns emanating from the merger”, said Tembinkosi Bonakele, Competition Commissioner.
“These conditions address issues that were raised by various stakeholders since the announcement of the acquisition of SABMiller by AB InBev, including the South African government, which ultimately reached an agreement with the merging parties on its concerns, trade unions, market participants as well as the Commission’s own investigation,” Bonakele adds.
Concerns arising from the merger and proposed conditions
- The Distell Shareholding – The Commission is of the view that this relationship creates a platform for the exchange of commercially sensitive information between AB InBev and Distell
In order to address the above concerns, AB InBev will divest (i.e. sell off) the Distell shareholding within 3 (three) years after closing date of the transaction.
- Coca-Cola and Pepsi bottling arrangements – The Commission is concerned that these bottling arrangements for the two global leading soft drinks manufacturers could be a platform for coordination.
In order to address this concern, AB InBev has undertaken to ensure that its employees who are involved in bottling operations for Coca-Cola will not also be involved in its bottling operations for Pepsi
- Supply of tin metal crowns – The Commission is concerned that the merger will increase the likelihood of the merged entity foreclosing its competitors by refusing them access to tin metal crowns.
To remedy this concern, AB InBev has undertaken that it will supply tin metal crowns to third parties for a period of 5 (five) years after closing date of the transaction and that it will not enter into any exclusive agreements nor induce Coleus not to deal with or supply third parties.
- Access to cold room and fridge space – The Commission is concerned that the transaction will have a negative impact on the ability of small beer producers, such as craft brewers, to compete effectively.
In order to address this concern, AB InBev has undertaken to ensure that retail outlets and taverns which are solely supplied by it with beverage coolers or refrigerators are free to provide at least 10% of the capacity of 1 (one) such beverage cooler or refrigerator in such retail outlets or taverns.
It will not preclude or induce any retailer from offering non-merged entity owned cold storage and non-merged entity owned refrigerator space to competing third parties.
AB InBev will also implement a compliance programme to ensure that all of its employees who are responsible for the beverage refrigerator and cooler space policies in South Africa, adhere to the provisions of the Competition Act.
- Creation of a fund – AB InBev has committed to make available over a 5 year period an aggregate amount of R1 billion for investments in South Africa.
- Employment – These concerns relate to job security and post-merger restructuring which may result in the loss of employment.
In this regard, AB InBev has undertaken that it will not retrench any employee in South Africa as a result of the merger. This condition will endure in perpetuity.
AB InBev has undertaken that it will offer employment to those employees of DGB who may be retrenched in the event that AB InBev terminates the DGB distribution agreement.
- Small beer producers – The Commission identified concerns relating to security of supply of raw materials to small beer producers.
The Commission has recommended a condition that AB InBev continues to supply input products, such as hops and malt that are currently supplied by SAB to small beer producers.
- Local production – AB InBev has undertaken that it will continue SAB’s policy and practice of maximizing local production of beer and cider. In this regard, it will ensure that South Africa maintains at least the same ratio of local production.
- Suppliers of input products – In order to address any potential impact that the merger may have on the South African suppliers of input products such as glass bottles, cans, ends, crowns, etc… required for beer production.
The merged entity has committed to source its inputs from local suppliers and comply with the terms and conditions of SABMiller’s existing supply agreements
- BBBEE – The Commission also found that there may be a potential dilution of ownership by historically disadvantaged South Africans at the maturity of the empowerment Zenzele Scheme in 2020.
In an endeavour to address this potential dilution effect, the merging parties have agreed to submit to Government and the Commission by no later than 2 (two) years after closing the merger and outline its black economic empowerment plans setting out how the merged entity intends to maintain black participation in the company, including equity.
- Owner drivers – AB InBev has undertaken to comply with the terms and conditions of the current agreements that exist between SAB and owner-drivers.