South Africa: Heineken seeks protection from consequences of AB InBev/SABMiller merger

Heineken on June 22 criticised as vague and irrational the conditions of the mooted merger between major brewers Anheuser-Busch (AB) InBev and SABMiller, IOL reported.

The Competition Tribunal is currently holding hearings on the merger of the two major brewers. This comes after the Competition Commission last month approved the merger with conditions.

The conditions included AB InBev’s commitment not to retrench workers as a result of the merger, an undertaking to continue SABMiller subsidiary SAB’s policy of maximising local production of beer and cider and the creation of a R1 billion fund for the development of South African agricultural outputs for barley, hops and maize, as well as the promotion of entry and growth of emerging and black South African farmers.

But it was the conditions relating to the provision of access to cold room and fridge space that seemed to bother Heineken most. “The conditions are vague and ambiguous,” Heineken’s lawyer, Anthony Norton, said.

He said the merged entity – made up of the largest and second-largest brewing companies in the world – could abuse its dominance in the South African market.

Heineken’s stance is different from the previous concerns about a range of so-called public interest factors. Norton said that contrary to the perception the merger’s competition concerns were done and dusted, the tribunal should consider new information on competition aspects of the merger.

He raised Heineken’s fears that the merged entity could resort to unsavoury tactics to elbow out competitors, especially given what he said was SAB’s overwhelming dominance of beer manufacturing and distribution. The entry of AB InBev’s 200 brands would further enhance that dominance. He raised the possibility of the merged entity incentivising “space” owners, such as taverns, so that they give preference to products belonging to the merged entity.

“What is going to happen (post merger) is that new brands are going to be actively marketed in South Africa. One must ask the question: what is going to happen to competitors when these brands are actively marketed?”

He said the South African market had been characterised by “unsavoury and dirty tricks” by SABMiller. “That is the structural reality in which you need to evaluate this merger.”

He said the dirty tricks included removing competitors’ promotion material and incentivising business owners to hike prices of competitor products. He said SABMiller had as much as 90 percent of the local market share.

“Frankly, why is there one beer producer raising these concerns? There is nobody else to raise concerns about the transaction. That is the reality. The tribunal should take account of the market place realities. The conditions (of the merger)… do not preclude them from making arrangements with (outlet) owners, saying they must set aside 90 percent of space for the merged entity’s products.

“The merged entities said outlet owners would make their own decisions about the allocation of space. We are not naive. We know how shelf placement works. He who pays the most gets the most space,” Norton said.

He said the tribunal should set clear conditions on the allocation of shelf space. “We cannot afford to be in a position whereby conditions are so vague that no one can interpret them.“

24 June, 2016