HARARE
–
Innscor
Africa
Limited
has
been
ordered
to
divest
from
Profeeds
after
the
Supreme
Court
ruled
that
the
merger
of
Profeeds
and
National
Foods
created
a
near
monopoly
in
the
stockfeed
industry.
Supreme
Court
judges
said
“the
coming
together
of
two
companies
which
previously
were
competitors,
under
Innscor,
created
a
dominant
unit
which
can
reasonably
become
a
monopoly.”
Innscor,
which
owns
the
country’s
number
one
stock
feed
manufacturer,
National
Foods,
used
its
subsidiary
Ashram
Investments
to
acquire
59
percent
of
its
main
competitor
Profeeds
in
2013.
In
2014,
the
Competition
Tariff
Commission
(CTC)
examined
the
transaction
and
prohibited
the
merger
after
ruling
that
it
was
contrary
to
the
public
interest.
Undeterred,
Innscor,
through
Ashram,
decided
to
form
another
merger
with
Profeeds
in
2015,
this
time
with
a
minority
49
percent
stake.
Whereas
the
law
requires
companies
to
inform
the
CTC
of
a
merger
above
US$1.2
million
within
30
days,
the
companies
did
not
do
so
until
2019,
two
years
after
Innscor’s
new
lawyers
advised
the
company
to
inform
the
CTC.
The
CTC
took
a
dim
view
of
Innscor’s
decision
to
delay
in
informing
it
of
the
merger.
It
again
prohibited
the
second
transaction
and
imposed
a
ZWL$40
million
fine
on
the
company.
Innscor
challenged
the
CTC’s
decision
at
the
Administrative
Court
and
won,
prompting
the
commission
to
approach
the
Supreme
Court
on
appeal.
Justice
Tendai
Uchena
of
the
Supreme
Court,
with
Justices
Nicholas
Mathonsi
and
Felistus
Chatukuta
agreeing,
said
in
their
judgement
delivered
on
October
3
that
the
Administrative
Court
erred
in
finding
in
Innscor’s
favour.
The
judges
ruled:
“The
court
aquo
failed
to
consider
the
potential
harmful
effects
of
the
merger.
It
therefore
did
not
make
its
decision
in
terms
of
all
the
applicable
factors
in
assessing
a
merger…
“Monopolistic
tendencies
must
be
carefully
assessed
because
they
may
initially
appear
favourable,
but
in
the
long
run
they
may
–
when
the
monopolists
get
to
a
point
where
the
market
has
no
other
option
but
to
buy
their
goods
–
turn
around
and
control
even
the
economy
of
a
country
by
producing
highly
priced
goods
or
substandard
goods
sold
at
high
prices.
They
may
also
destroy
small
business
in
the
future.”
The
judges
said
the
Administrative
Court
ought
to
have
carefully
considered
the
fact
that
Innscor
retained
a
controlling
interest
in
both
National
Foods
and
Profeeds,
companies
which
specialise
in
manufacturing
and
selling
stock
feeds.
“Innscor
also
has
a
controlling
interest
in
Irvines
Zimbabwe,
a
major
customer
of
both
Profeeds
and
National
Foods.
An
analysis
of
Innscor’s
conduct
shows
that
it
desires
to
wholly
control
the
stock
feeds
market
which
is
not
permissible,”
the
Supreme
Court
said.
The
merger
“concentrated
industrial
power
in
the
two
biggest
companies
in
the
stock
feed
industry,”
they
added.
The
fine
imposed
on
Innscor
was
reasonable,
the
judges
said,
given
the
company’s
apparent
affinity
for
anti-competition
activities.
The
Profeeds
merger
was
the
third
time
Innscor
had
contravened
competition
laws,
the
court
said.
Following
the
merger,
Profeeds
and
National
Foods
now
controlled
57
percent
of
the
stock
feed
market,
with
the
next
competitor
enjoying
just
11
percent
market
share.
Profeeds
had
also
seen
its
shops
grow
from
19
to
40.
“It
took
Innscor
more
than
three
years
and
nine
months
to
notify
the
CTC
of
the
merger
which
it
had
already
consummated.
This…
demonstrates
the
nature,
duration,
gravity
and
extent
of
the
contravention
of
the
law…
It
is
also
on
record
that
Innscor
has
contravened
competition
laws
before.
This
conviction
increases
to
three
Innscor’s
contraventions
of
competition
laws.
It
shows
its
persistence
in
disregarding
competition
laws…
It
is
this
court’s
view
that
the
monetary
penalty
(of
ZWL$40
million)
was
justifiable,”
the
Supreme
Court
ruled.