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South African Journal of Economic and Management Sciences

On-line version ISSN 2222-3436
Print version ISSN 1015-8812

S. Afr. j. econ. manag. sci. vol.11 n.3 Pretoria Oct. 2008




Vertical mergers - The European guidelines on non-horizontal mergers and their relevance for South Africa1



Grant Saggers2

CRA International




There has been a long and heated debate in the world of antitrust about the likely effects of vertical integration on competition and welfare. The publication of the European Commission's Guidelines on the assessment of Non-horizontal mergers in November 2007 has again brought this debate into the spotlight. Competition authorities find themselves faced with the complex task of balancing the potential pro-competitive efficiencies of these mergers against the concerns that, in some circumstances, vertically-integrated firms could use their presence at multiple levels of the production chain to strategically soften competition. This paper outlines the current thinking on vertical mergers as presented in the Guidelines and examines, through an evaluation of a past Competition Tribunal decision, how the South African competition authorities have handled the complexities presented by vertical transactions.

JEL: G34, L41



“Full text available only in PDF format”




1 BISHOP, S.; LOFARO, A.; ROSATI, F. & YOUNG, J. (2005) "The efficiency-enhancing effects of non-horizontal mergers", a report by RBB Economics for the European Commission, Office for Official Publications of the European Communities, Luxembourg,         [ Links ] [online] Available at (Accessed November 2007).

2 BORK, R.H. (1978) The Antitrust Paradox: A Policy at War with Itself, Basic Books Inc.: New York, New York.         [ Links ]

3 CHEN, Y. & RIORDAN, M.H. (2003) "Vertical integration, exclusive dealing, and ex post cartelization", Discussion Paper #:0203 -13, Department of Economics, Columbia University: New York, New York.         [ Links ]

4 CHURCH, J. (2004) "The impact of vertical and conglomerate mergers on competition", Church Economic Consultants Ltd. and Department of Economics University of Calgary, Final report for the Directorate General for Competition, European Commission: Brussels,         [ Links ] [online] Available at (Accessed April 2007).

5 JOSKOW, P.L. (2003) "Vertical integration" in C. Ménard & M. Shirley, (eds.) Handbook of New Institutional Economics (forthcoming), Kluwer Academic Publishers: Norwell, Massachusetts.         [ Links ]

6 KAMPEL, K. (2004) "The role of South African Competition Law in supporting SMEs", CRC International Conference Pro-poor Regulation and Competition: Issues, Policies and Practices: Cape Town, South Africa,         [ Links ] [online] Available at (Accessed April 2007).

7 MOTTA, M. (2004) Competition Policy Theory and Practice, Cambridge University Press.         [ Links ]

8 NOCKE, V. & WHITE, L. (2005) "Do vertical mergers facilitate upstream collusion?", Working Paper 05-013, Penn Institute for Economic Research Department, University of Pennsylvania: Philadelphia, Pennsylvania.         [ Links ]

9 PITOFSKY, R. (1997) "Vertical restraints and vertical aspects of mergers - a U.S. perspective" in a speech at the 24th Annual Conference on International Antitrust Law and Policy, New York, USA, October 1997,         [ Links ] [online] Available at (Accessed April 2007).

10 REY, P. & TIROLE, J. (2007) "A primer on foreclosure", in Handbook of Industrial Organization, Vol. III, M. Armstrong & R. Porter (eds.): Amsterdam, North-Holland.         [ Links ]

11 RIORDAN, M.H. & SALOP, S.C. (1995) "Evaluating vertical mergers: A post-Chicago approach", Antitrust Law Journal, 63 (2): 513-568.         [ Links ]

12 RIORDAN, M.H. (2005) "Competitive effects of vertical integration", Discussion Paper No 0506-11, Department of Economics, Columbia University: New York, New York.         [ Links ]

13 WILLIAMSON, O. (1971) "The vertical integration of production: Market failure considerations", The American Economic Review, 61: 112-123.         [ Links ]

14 EUROPEAN COMMISSION (2007) Guidelines on the assessment of non-horizontal mergers under the Council Regulation on the control of concentrations between undertakings,         [ Links ] [online] Available at: (Accessed November 2007).

15 SOUTH AFRICAN GOVERNMENT (1998) Republic of South Africa Competition Act 89 of 1998. Government Gazette, 400(19412): Cape Town, Republic of South Africa.         [ Links ]

16 UNITED STATES DEPARTMENT OF JUSTICE (1984) Merger Guidelines,         [ Links ] [online] Available at (Accessed April 2007).

Case references

17 Mondi/Kohler, Competition Tribunal, Republic of South Africa, 'Reasons for Tribunal Decision (Non-Confidential version), in the large merger between Mondi Limited and Kohler Cores and Tubes a division of Kohler Packaging Limited', Case No: 06/LM/Jan02, May 2002.         [ Links ]

18 Competition Appeal Court, 'Judgment in the Appeal of Mondi Limited and Kohler Core and Tubes', Case No. 20/CAC/Jun02, February 2003.         [ Links ]

19 Schumann Sasol/Price's Daelite, Competition Tribunal, Republic of South Africa, "Reasons for Tribunal Decision (Non-Confidential version), in the large merger between Schumann Sasol (South Africa) (Pty) Limited and Price's Daelite (Pty) Limited", Case No: 23/LM/May01, July 2001.         [ Links ]



1 This paper was originally written for the First Annual Competition Commission, Tribunal and Institute Conference on Competition Law, Economics and Policy in SA at University of the Witwatersrand in June 2007. At that time the European Commission had published only a draft version of the Guidelines on non-horizontal concentrations for public discussion. The paper has since been updated to reflect the finalised Guidelines published in November 2007.
2 The author is sincerely grateful to Robert Stillman, Ragvir Sabharwal, Rameet Sangha, and Simon Roberts for their comments and advice. The author thanks also two anonymous referees for their recommendations.

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