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Lafarge Roofing (Pty) Ltd and Kulu Concrete Products and Others (63/LM/Jul06) [2007] ZACT 41; [2007] 2 CPLR 314 (CT) (18 June 2007)

80 Reportability
Competition Law
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Brief Summary

Competition Law — Merger Approval — Lafarge Roofing (Pty) Ltd acquiring Kulu Group of Companies — Merger raising competition concerns in Western Cape due to monopoly creation — Conditions imposed for divestiture of Kulu's Western Cape plant to mitigate anti-competitive effects — Merger approved subject to conditions.

Comprehensive Summary

Summary of Judgment


Introduction


This matter concerned intermediate merger proceedings before the Competition Tribunal of South Africa in terms of the Competition Act 89 of 1998. The acquiring firm, Lafarge Roofing (Pty) Ltd (“Lafarge”), sought to acquire the businesses collectively described as the Kulu Group of Companies (“Kulu Group”), comprising Kulu Concrete Products Kwazulu Natal (Pty) Ltd, Kulu Concrete Products Cape (Pty) Ltd, and Kulu Concrete Products Gauteng (Pty) Ltd (referred to in the papers as the primary target firms).


The merger was heard on 13 December 2006 and again on 27 February 2007. The Tribunal issued a merger clearance certificate on 12 March 2007, approving the transaction subject to two sets of conditions. These reasons (non-confidential) were issued on 18 June 2007 and explain the basis for the conditional approval.


The general subject-matter of the dispute was the merger’s likely competitive effect in the manufacture and supply of concrete roof tiles, including the proper definition of the relevant product market and relevant geographic markets, the extent of post-merger concentration in certain regions, and the appropriate remedial conditions to address competition concerns, particularly in the Western Cape and the KwaZulu-Natal (Greater Durban) region.


Material Facts


Lafarge and the Kulu Group were both active in the manufacture of concrete roof tiles. Lafarge operated plants in Vereeniging, Brits, Bloemfontein, Durban, Port Elizabeth, and Cape Town. The Kulu Group operated plants in Cape Town, Durban (Queensburgh), Richards Bay, and Germiston. This meant the parties had manufacturing facilities in close proximity in at least three broad regions that became central to the analysis, namely Gauteng (inland), the Western Cape, and KwaZulu-Natal.


The Tribunal treated it as material and largely undisputed that the only relevant product overlap for competition analysis was concrete roof tiles. Although Kulu also manufactured other concrete products (including building blocks, bricks, pavers, and retaining blocks), these were not implicated because there was no overlap with Lafarge in those products for the purposes of this merger assessment.


A key disputed aspect of the factual and economic setting was the scope of the relevant product market. The merging parties contended for a broader market described as the manufacturing or supply of pitched roof coverings, within which concrete tiles allegedly competed with alternatives such as steel roofing, slate, and thatch. The Competition Commission’s market enquiries, cost comparisons, and customer and competitor feedback supported a narrower market limited to concrete roof tiles, on the basis that other pitched-roof materials did not impose sufficient competitive discipline on concrete tile pricing.


The Tribunal also considered as material the geographic organisation of supply and demand. The Commission initially approached geographic market definition on a regional basis that largely tracked provincial boundaries. In KwaZulu-Natal, however, evidence led to refinement. After the first hearing, the Commission filed a supplementary report redefining the KwaZulu-Natal market more narrowly as a Greater Durban area, based on a transport-distance radius (customers typically sourcing from plants within approximately 150 kilometres of Durban). In addition, an economic consultancy report (Genesis) filed by the parties analysed transport costs and pricing patterns and supported a coastal Durban-centred market that extended along the coast more than inland due to topography and transport cost differentials. The Tribunal accepted the refined Durban-centred approach for purposes of analysing competitive effects, while emphasising that distance and transport costs affected the effectiveness of rivalry within the region.


In the Gauteng (inland) region, the post-merger market share was identified by the Commission as approximately 37% for Lafarge (combining Lafarge and Kulu), with concentration measures (HHI) indicating a substantial increase. However, the market contained several other players, including Marley Roofing and Concor, and evidence indicated comparatively lower barriers to entry and some recent entry.


In the Western Cape, the Commission’s capacity-based analysis for 2005 indicated Lafarge had 76% and Kulu 24%, with no other effective producers. The merger would therefore result in a post-merger monopoly. The Commission investigated entry barriers and emphasised customer relationships and contractual arrangements that could impede entry and switching. The Commission recommended divestiture of the Kulu Western Cape plant, and Lafarge agreed to the divestiture proposal as incorporated into the Commission’s recommendation.


In the Greater Durban market, the Commission’s revised capacity-based analysis reflected that Kulu (Durban) and Lafarge (Durban) were the two largest firms, and the combined entity would have a materially increased share (reported as 59%), with the post-merger HHI rising sharply (from 2404 to 4084, a change of 1680). The Tribunal treated it as significant that, within this Durban-centred market, transport costs and proximity meant that not all nominal competitors exerted equal competitive pressure in the Durban “heartland”, and evidence suggested the Durban Kulu plant was Lafarge’s closest and most effective competitor in that core area. It also emerged as material that key input supply conditions in KwaZulu-Natal depended on a single cement supplier, Natal Portland Cement (NPC), which had experienced supply constraints and had imposed quotas on customers, with potential implications for expansion by rivals and effective entry.


Legal Issues


The central legal questions were whether the proposed transaction was likely to result in a substantial prevention or lessening of competition in any relevant market, and if so, whether that outcome could be appropriately addressed through merger conditions rather than prohibition. These questions required the Tribunal to determine, as a matter of applying competition law to economic facts, the relevant product market and the relevant geographic markets, and then to evaluate competitive effects under the framework mandated by section 12A(2) of the Competition Act 89 of 1998.


The dispute involved a combination of economic fact assessment (substitutability, transport-cost effects, input supply constraints, concentration measures) and evaluative judgment in applying statutory factors, particularly regarding the competitive significance of removing an effective rival, the weight to be placed on concentration indicators (including HHI), and the adequacy of entry and expansion as constraints. It also required a remedial assessment as to whether a structural remedy (divestiture) and a behavioural remedy (a time-limited condition aimed at reducing entry barriers arising from input supply constraints) were necessary and sufficient to address identified risks.


Court’s Reasoning


On the relevant product market, the Tribunal accepted the Commission’s narrower market definition of concrete roof tiles rather than the merging parties’ broader pitched-roof coverings market. The Tribunal’s acceptance followed the Commission’s comparative analysis of the costs of concrete and steel roofing solutions, including both product and installation costs, which suggested steel roofing solutions were materially more expensive than concrete solutions by approximately 20–30% on the evidence before it. The Tribunal also relied on market feedback that concrete tiles were perceived to differ from steel products in durability and performance attributes, and on the Commission’s analysis of pricing movements, which indicated that the price dynamics of the two products were primarily driven by their respective key inputs (cement for concrete tiles and steel for steel products) rather than mutual competitive responsiveness. In addition, customer and competitor interviews supported the view that concrete tiles constituted a distinct market.


On the geographic dimension, the Tribunal considered the Commission’s general approach of using provincial boundaries as a surrogate for regional markets, while emphasising that antitrust markets must be grounded in economic considerations such as transport costs, customer sourcing patterns, and the practical range within which suppliers can compete effectively. The Tribunal concluded that, although provincial boundaries could serve as a practical proxy in some contexts, KwaZulu-Natal required a narrower market definition. The Tribunal’s concern with the Commission’s initial KwaZulu-Natal definition led to further investigation, culminating in a Durban-centred coastal market definition (described as a Greater Durban market) based largely on evidence regarding transport constraints and the realistic competitive radius for supply.


In the Gauteng region, despite a substantial increase in concentration on the HHI measure, the Tribunal accepted that the merger was unlikely to lessen competition materially because the market included several other significant competitors and barriers to entry were assessed as relatively low. This assessment rested on the availability of inputs, a large and geographically concentrated customer base, and evidence of recent entry and expansion possibilities. The Tribunal treated these features as sufficient to maintain competitive discipline on the merged firm.


In the Western Cape, the Tribunal accepted that the merger would create a monopoly because Lafarge and Kulu were effectively the only capacity in that market. It accepted the Commission’s conclusion that barriers to entry were high, including due to customer relationships and contracts binding customers to suppliers, which reduced the likelihood that entry would constrain the merged firm. The Tribunal regarded divestiture as the only appropriate remedy because it would restore a competitive structure resembling the pre-merger position, provided the purchaser would be a viable competitor. Since the merging parties accepted the Commission’s divestiture proposal, the Tribunal did not revisit that issue in extensive detail beyond procedural “fine-tuning”.


In the Greater Durban market, the Tribunal’s analysis was more interventionist than the Commission’s initial approach, largely due to the narrower geographic market and the consequent rise in concentration and competitive risk. The Tribunal applied concentration indicators (including HHI and the number of firms) to characterise the post-merger market as exceptionally concentrated, moving from a five-firm to a four-firm structure in which the leading firm acquired a major rival. The Tribunal did not treat concentration measures as determinative by themselves; rather, it considered whether the merger removed an effective competitor and whether entry or expansion could realistically counteract post-merger market power.


On the “effective competitor” assessment, the Tribunal reasoned that transport costs and proximity mattered for competitive intensity in Durban’s core supply area. It regarded Kulu’s Durban plant as Lafarge’s most effective competitor because it was geographically closest, had significant capacity, priced lower than Lafarge and Marley on the data presented, produced a full range of tile products, and offered product interchangeability with Lafarge tiles (which could facilitate switching for some customers). The Tribunal thus treated the acquisition as removing Lafarge’s most effective competitive constraint in that region.


On barriers to entry and expansion, the Tribunal accepted that capital costs alone did not capture the primary barrier in the Greater Durban market, namely access to the key input cement. It regarded NPC as the only effective supplier of cement to tile manufacturers in the region and accepted evidence that NPC had experienced shortages and had imposed quotas. The Tribunal reasoned that if quotas were re-imposed, rivals’ ability to expand output in response to any post-merger price increase could be materially constrained, particularly because quota allocations were based on historic supply and NPC had previously not supplied new customers during constrained periods. The Tribunal treated the uncertainty about whether NPC’s planned capacity expansions would adequately resolve shortages as a material risk affecting contestability and the likelihood of competitive entry or expansion.


Having concluded that the probabilities favoured a finding of a substantial prevention or lessening of competition in the Greater Durban market absent intervention, the Tribunal then considered remedies. It adopted a dual approach: a structural remedy in the Western Cape (divestiture) to address the monopoly outcome, and a time-limited behavioural remedy in KwaZulu-Natal aimed at reducing entry and expansion barriers linked to cement supply constraints. The Tribunal acknowledged the general concern that behavioural conditions may be difficult to enforce, but considered enforceability more realistic here because NPC had previously administered quotas and because competitors would be well-placed to monitor compliance once informed of the condition.


The Tribunal further recorded that the merger raised no public interest concerns, and that public interest factors therefore did not influence the outcome or the selection of remedies.


Outcome and Relief


The Tribunal approved the merger and issued a merger clearance certificate on 12 March 2007, subject to two sets of conditions.


The first set of conditions required the divestiture of the Kulu Western Cape plant, addressing the merger-to-monopoly outcome in the Western Cape concrete roof tile market, with associated procedural provisions governing implementation of the divestiture as recorded in the Tribunal’s annexure to the order.


The second set of conditions addressed the Tribunal’s finding that, in the Greater Durban (KwaZulu-Natal) concrete roof tile market, the merger created a substantial risk of a prevention or lessening of competition, particularly given high concentration, removal of an effective competitor, and the potential for cement supply constraints to impede entry or expansion. The condition was imposed for a limited period of three years and was directed at ensuring that the cement supply constraint would not operate as an entry barrier in the manner identified in the Tribunal’s reasons.


No costs order is recorded in the provided text of the reasons.


Cases Cited


No judicial decisions were cited in the provided reasons.


Legislation Cited


Competition Act 89 of 1998, section 12A(2)


Rules of Court Cited


No rules of court were cited in the provided reasons.


Held


The Tribunal held that the relevant product market was the market for concrete roof tiles, and that steel and other pitched-roof materials did not impose sufficient competitive constraint to be included in the same market on the evidence before it.


The Tribunal held that the merger did not materially threaten competition in Gauteng due to the presence of multiple competitors and relatively low barriers to entry, but that it would create a monopoly in the Western Cape, justifying a divestiture remedy.


The Tribunal further held that, in the Greater Durban region, the merger would probably lead to a substantial prevention or lessening of competition, given extreme post-merger concentration, the removal of Lafarge’s most effective competitor (Kulu Durban), and the potential for cement supply constraints and quota systems to impede competitive entry or expansion. The merger was therefore approved only with a time-limited condition aimed at mitigating this barrier, in addition to the structural divestiture condition in the Western Cape.


LEGAL PRINCIPLES


The Tribunal applied the principle that relevant market definition must be grounded in evidence of demand-side substitution and competitive constraints. A claimed broader market will not be accepted where price, performance characteristics, and customer and competitor evidence indicate that alternative products do not exercise sufficient competitive discipline.


In assessing geographic markets, the Tribunal applied the principle that transport costs and proximity may be decisive in regional industries, both for delineating the market and for evaluating the effectiveness of competition within the market. Even where firms are capable of supplying across a defined area, competitive intensity may be greatest between firms in close proximity, and merger analysis must consider whether the transaction removes a particularly effective competitive constraint.


The Tribunal applied the principle that high concentration indicators (including HHI measures) are relevant to merger assessment, but their significance depends on whether other factors—especially entry and expansion—can realistically constrain the merged firm.


The Tribunal treated input supply constraints affecting rivals’ ability to expand output as a material component of barriers to entry and expansion, and considered that contestability requires not only theoretical entry but also practical capacity for rivals to increase supply in response to post-merger price increases.


The Tribunal applied the remedial principle that where a merger would create a monopoly, a structural remedy such as divestiture may be required to restore the pre-merger competitive structure, and that in appropriate circumstances a time-limited behavioural condition may be imposed to mitigate a specific, identified barrier to competitive entry or expansion, particularly where monitoring is feasible due to industry practices and competitor oversight.

COMPETITION TRIBUNAL OF SOUTH AFRICA
Case No: 63/LM/Jul06
In the matter between:
Lafarge Roofing (Pty) Ltd Acquiring Firm
And
Kulu Concrete Products
Kulu Roof Tiles Cape (Pty) Ltd
Kulu Roof Tiles (Pty) Ltd
(“Collectively known as 
Kulu Group of Companies”) (Pty) Ltd Primary Target Firms
______________________________________________________________
Panel :   N.Manoim (Presiding Member) Y Carrim (Tribunal 
    Member), and M Mokuena (Tribunal Member) 
Heard on : 13 December 2006 and 27 February 2007
Order Issued  : 12 March 2007
Reasons Issued : 18 June 2007
REASONS[NON­CONFIDENTIAL]
Approval 
[1]. The Competition Tribunal issued a merger clearance certificate on 12 March  
2007   approving   this   merger   subject   to   two   sets   of   conditions.   The   first   set   of  
conditions   relates   to   the   eventuality   of   supply   constraints   in   Kwa   Zulu   Natal,   the  
second,   to   the   divestiture   of   a   plant   in   the   Western   Cape.   The   reasons   for   our  
decision follow.
1

Parties to the merger
[2]. In this merger, Lafarge Roofing Pty Ltd (“Lafarge”) seeks to acquire the Kulu  
Group of companies (“Kulu Group”). Both firms are manufacturers of concrete roof  
tiles. Lafarge is at the time of this decision a wholly owned subsidiary of Lafarge  
Cement.1  The   Kulu   Group   of   companies   comprises   the   following   firms:   Kulu  
Concrete Products (Pty) Ltd Kwazulu Natal, Kulu Concrete Products Cape (Pty) Ltd  
and Kulu Concrete Products (Pty) Ltd Gauteng.  2   Although not owned by a holding  
structure we are advised that the firms have a common controlling shareholder, Tony  
Redford. For operational purposes the three firms can be considered as being run as  
a group. The other owners of the Kulu Group are Mike Stirling and Rolf Moschinksy.  
Together with Redford they comprise the present management.  3
[3]. Lafarge has plants in Vereeniging, Brits, Bloemfontein, Durban, Port Elizabeth  
and   Cape   Town.   Kulu   has   plants   in   Cape   Town,   Durban,   Richards   Bay   and  
Germiston. 
[4]. From this it is clear that the parties to the merger have plants located in close  
proximity in three provinces. We examine later whether these constitute firms located  
in the same geographic markets.
[5]. The product overlap between the firms is in the manufacture of concrete tiles.  
Although Kulu also makes standard size concrete building blocks, concrete common  
blocks, maxi concrete bricks, pavers and retaining blocks,   these products are not of  
concern in this merger, as there is no overlap here with any equivalent product made  
by Lafarge.
Contending market definitions 
[6]. The  merging parties  defined  the  market  as  the  manufacturing  or  supply of  
pitched roof coverings.  4  The merging parties were non­committal on the geographic  
extent   of   this   market,   contending   that   the   merger   raised   no   issues   however   the  
geographic market was defined.  5
[7]. The Commission defined the market more narrowly as the market for concrete

[7]. The Commission defined the market more narrowly as the market for concrete  
1  We were advised in the course of this hearing that Lafarge Cement is diluting its interest in its  
roofing   business   on   a   world   wide   basis   and   that   it   will   only   retain   a   25%   interest   in   the   roofing  
business, which includes the South African operation. This dilution, if it takes place, has no bearing on  
the analysis applied in this decision.
2  See Competitiveness report, page 454 paragraph 1.1
3 The precise shareholdings of the respective Kulu firms are set out on page 460 of the record.
4 See Competitiveness report, page 470 paragraph 5.21.
5 See Competitiveness report, page 471 paragraph 5.24.
2

roof tiles. The Commission defined the geographic markets as being co­extensive  
with   provincial   boundaries.   For   this   reason   the   merger   created   concerns   for   the  
Commission.
Relevant product market
[8]. The   merging   parties   contend   that   concrete   roof   tiles   are   just   one   of   the  
substitutes   that   compete   in   a   market   for   pitched   –   as   opposed   to   flat   –   roof  
coverings.   Other   products   consumers   can   turn   to   according   to   them   for   roof  
coverings are steel, slate and thatch. On this basis they argue that the merged firm  
would only have a market share of 9% and hence the merger should not give rise to  
any further concerns.
[9]. The   Commission   has   done   a   very   thorough   analysis   of   this   aspect   of   the  
merger   and   comes   to   the   conclusion   from   its   market   enquiries   that   other   roofing  
products are insufficient constraints on the pricing of concrete tiles and hence cannot  
be considered in the same relevant market.
[10]. The key question here is the extent to which steel roofing products, compete  
with those of concrete tiles. Although other roofing materials are in use, such as slate  
and thatch, neither the Commission nor the merging parties view them as serious  
competitors.6
[11]. We   therefore   only   focus   on   whether   the   steel   products   impose   any  
competitive discipline on the pricing of the concrete product. 7
[12]. This comparison is difficult to make for two reasons; the products come in a  
wide   range   from   those   aimed   at   the   affordable   segment   to   the   luxury   segment;  
secondly, as the merging parties have argued, customers have to consider not just  
the cost of a particular type of roof covering, but the cost of its installation. Labour  
and   other   associated   structural   costs   vary   depending   on   the   type   of   covering  
selected. The Commission has resolved these difficulties, firstly, by comparing the

selected. The Commission has resolved these difficulties, firstly, by comparing the  
costs of a standard roof product with a standard steel product, and then going on to  
consider the respective installation costs, in order to be able to compare the costs of  
the respective total roofing solutions.
6 According to the merging parties in what they have defined as the pitched roofing market, slate has  
a 1% market share whilst thatch is given no specific share but thrown into an “other” box comprising  
less than 3% of the market. See pages 475­476 of the record.
7 Steel roofing comprises several products; steel sheets, painted or unpainted, tiles and
3

[13]. It   emerges   from   this   that   the   standard   steel   product   is   generally   more  
expensive   than   its   concrete   counterpart   and   that   when   comparing   total   roofing  
solutions,   the   steel   roofing   solution   is   about   20­30%   more   expensive   than   its  
concrete   counterpart.   8  The   Commission   argues   that   this   difference   in   price   is  
significant enough to suggest the products are not regarded as substitutes. 
[14]. Further complicating the picture is that even comparing the respective total  
costs   of   roofing   solutions   may   not   be   a   sufficient   basis   to   consider   their  
substitutability. According to the Commission’s feedback from the market, concrete  
tiles last longer than steel products, have less of a propensity to leak and have other  
attributes, which conceivably contribute to customers, perceptions of their superiority  
over steel. If  this perception of  value is translated into the total  roof  price then it  
would further increase the price differential.
[15]. The Commission has also studied the respective price movements of steel  
and concrete tiles to test whether they move in response to price changes in the  
other.9
[16]. The  Commission  concluded  that  the  movements  in  the  pricing  of  the  steel  
product are largely dependant on the price of steel that a roofing manufacturer can  
obtain from sole supplier, Mittal SA. Similarly, the price of concrete tiles is largely  
dependant on the pricing of cement, with most manufacturers of tiles dependant on a  
single supplier.  10 The Commission concluded that the movements in their respective  
prices   were   explained   by   changes   in   the   costs   of   their   key   inputs,   and   not   as   a  
response to a change in prices of the other product.
 [17]. All   this   evidence   points   to   the   products   not  being   substitutes.   This  view   is

strengthened   by   the   views   of   customers   and   competitors,   all   of   whom,   when  
interviewed by the Commission, suggested that they considered concrete tiles to be  
in a separate market from steel roofing products.
[18]. No doubt there will be times when a rise in concrete prices not accompanied  
by a rise in steel prices, might bring prices closer together, but this is an insufficiently  
evidenced   phenomenon   to   give   us   comfort   that   the   one   product   is   a   constant  
discipline on the pricing of the other.
[19]. Although the  merging parties never formally abandoned  their adherence to  
their  market   definition,   their   subsequent   posture  in   the  case   when  they  accepted  
both   conditions   proposed,   which   were   predicated   on   the   Commission’s   market  
definition, suggests they did not press it with any great conviction.
8 See Commission report page 16
9 See Commission report page17 .
10 Concrete costs account for approximately 50% of the costs of a concrete tile. We do not have  
information on the proportion of steel costs to the cost of a steel tile, but can presume that it is similar.
4

[20]. We   have   therefore   no   reason   for   not   accepting   the   Commission’s  
recommendation of the relevant product market, as being the market for concrete  
roof tiles.
Geographic market
[21]. The   merging   parties,   as   we   indicated   earlier,   did   not   define   a   relevant  
geographic market, because their approach to the product market did not suggest  
any concentration would arise, post merger. The Commission’s approach has been  
to suggest that the markets are regional and co­extensive with provincial boundaries.  
On this basis the Commission contends for three regional markets where production  
facilities for the merging firms overlap:
1) Gauteng
2) Western Cape
3) Kwa ­ Zulu Natal
[22]. To   be   fair   to   the   Commission,   it   has   not   suggested   some   serendipitous  
coincidence   between   the   boundaries   of   the   antitrust   market   ­   one   driven   by  
economic considerations and the province ­ one driven by political considerations;  
rather, its case is that these serve for the most part as a useful surrogate for an  
antitrust market, as firms have organized themselves on some regional basis when it  
comes to the choice of factory positioning and the supply of customers. For the most  
part this approach has worked, but we have differed with the Commission’s loose  
application of this approach in the Kwa Zulu­Natal region, where we have found a  
narrower definition of the geographic market was required, and having made that  
determination, the merger raised more problems in this market than the Commission  
considered  there  to  be,  because  of  its  more  expansive  market  definition.  We  will  
consider the competition implications for each region.
Gauteng   
Table 1 :  Market Shares Based on Sales Volumes in the Concrete Tile Market in  
the Inland Region for 2005  11
Market Players Market   share  
(%)
Lafarge Roofing 24
11 See Commission report page 30.
5

Kulu [11]
Marley Roofing [32]
Concor [6]
Ama Tiles [4]
West Rand Tiles [4]
Techon Tile [3]
[23]. The   Commission   interchangeably   refers   to   this   as   the   Gauteng   or   inland  
market. It notes that post merger; Lafarge will have 37% of the market. The pre­
merger HHI is 1622, and the post merger HHI is 2326, resulting in a change of 704.  
This suggests a highly concentrated market. 12
[24]. The Commission, however,  considered that  barriers to entry  in this market  
were   insufficient   to   deter   new   entry   or   expansion   by   existing   players.   This  
assessment is reasonable. Apart from the merged firm there are three other large  
firms that compete in this market, namely, Marley Roofing, Concor and Brickor. The  
market also has three other smaller players. Thus, unlike the other regional markets  
we will consider, the Gauteng market whist highly concentrated has enough other  
players to exercise a competitive discipline on the merged firm, notwithstanding that  
it   will   leapfrog   over   Marley   to   become   the   biggest   player   in   this   market.   The  
Commission’s research also confirms that entry barriers into this market are lower  
than on other regions. This is because inputs are more accessible, the customer  
base is larger and geographically more confined. This view seems to be fortified by  
the fact that there has been evidence of recent entry. 13
[25]. None of those interviewed by the Commission appear to contradict this view  
in respect of this region.
In   our   view   the   Commission   correctly   found   that   despite   the   large   post   merger  
increase in concentration, the merger is unlikely to lessen competition in this market  
because barriers to entry are low.
Western Cape 
12  The HHI is the Hirschman­Herfindahl Index, which measures concentration in a market. The 1992  
U.S.Horizontal Merger Guidelines states that: “Where post merger HHI exceeds 1800, it would be

presumed that mergers producing an increase in the HHI of more than 100 points are likely to create  
or enhance market power or facilitate its exercise.”
13 See Commission report page 31.
6

Table 2:   Market Shares for Concrete Roof Tiles in the Western Cape Based on  
actual production capacity for 2005.  14
Actual Production Capacity for 2005  
in million m ²
Market Shares (%)
Lafarge Roofing 1.48 76
Kulu 0.46 24
Others 0 0
Total 1.94 100
[26]. As the Commission observes the merger will lead to a monopoly for Lafarge  
in this market. The Commission did not stop there, and very cautiously went on to  
examine entry barriers in the Western Cape. Finding them to be high on account of  
the   relationships   that   exist   between   the   tile   manufacturers   and   their   customers,  
where   customers   are   bound   to   a   supplier   by   contract,   the   Commission  
recommended divestiture  of  the  Kulu  Western Cape  plant.   Lafarge  agreed  to  the  
proposal   and   the   terms   of   the   divestiture   formed   part   of   the   Commission’s  
recommendations. It is therefore not necessary for us to consider this aspect in any  
further detail. In our view divestiture is the only appropriate remedy in this market,  
given the post merger monopoly the merger would have created.
Kwa Zulu­ Natal
[27]. In its initial report the Commission defined the market as the whole Kwa Zulu­  
Natal province and identified the players in that market in the following table:
Table   3:   Market   Shares   for   concrete   roof   tiles   in   the   KZN   region   based   on  
current production capacity per million tiles per annum
Market Players Current   production  
capacity (mn p.a)
Market Shares (%)
Lafarge Roofing 9.6  24
Kulu (Durban) 7.2 18
Kulu (Richards Bay) 4.8 12
Saiba 2 5
14 See page 40 of the Commission’s recommendation.
7

Stanger Tiles 6 18
Kulu Crete 1.9 5
Marley Roofing 7.2 18
Kinaka Tiles 2 5
Total 40.7 100
[28]. From   that   table   it   emerges   that   the   merged   firm   would   have   a   high   post  
merger market share (54%), but the Commission concluded that this did not raise  
concerns as it considered that barriers to entry in this market were not that high, as  
the market remained contestable, in contrast with that of the Western Cape. 15
[29]. When   the   matter   was   first   heard   on   the   13   December   2006   we   raised  
questions about the adequacy of this market definition with the two witnesses who  
testified, Mr. Klaus Schubert from Marley Roofing and Mr Johan Van Jaarsveld from  
Lafarge. From this testimony we felt that the market was likely to be narrower than  
the   provincial   boundary   and   that   this   required   further   investigation   by   the  
Commission to see whether the market was perhaps a coastal market adjacent to  
the greater Durban area.
[30]. The Commission filed a further report on the 15 th of February 2007 in which it  
redefined   the   market   as   a   Greater   Durban   market.   The   Commission   in   this  
supplementary report, states that customers are likely to source supply from plants  
up to 150 kilometers away from the manufacturer. Since both Kulu and Lafarge have  
a plant in the Durban area, the Commission defined the geographic market as being  
one within 150 kilometers of Durban. 16
[31].  It recalculated market shares and these are inserted in the table below:
Table 4:   Market Shares for concrete roof tiles in the Greater Durban Region  
based on maximum production capacity (thousand tiles per day)  17
Market Players Maximum   production  
capacity (mn p.day)
Market Shares (%)
Lafarge Roofing 45 000 8  24
Kulu (Durban) 66 000 9 35
15 See Competition Commission report page 36.
16 See the Supplementary Report of the Competition Commission dated 15 February 2007, page 14.
17 See Supplementary report page 15.
8

Marley Roofing 36 000 19
Stanbrik Roof Tiles 20 000 11
Kulu Crete 20 000 11
Combined 111 000 59
Total 187 000 100
In this market the post merger HHI is 4084 and pre­merger HHI is 2404 and thus a  
change of 1680. This is leaving out Kulu Richards Bay, which on the Commission’s  
version is not in this market, because located 185 kilometers from Durban, it falls  
outside of the  Commission’s market boundary of 150 kilometers. On the merging  
parties’ version, Richards’ Bay would fall into the market because they have a more  
expanded notion of the extent of the market. 18   If this is correct the merging parties  
would enjoy even more concentration as including Richards Bay only adds the Kulu  
plant   and   no   other   competitor.   (We   are   unable   to   do   this   calculation   as   the  
Commission has changed from doing market shares based on annual production in  
its   first   report,   to   market   shares   based   on   daily   production   in   the   supplementary  
report. As the Commission’s figures were not disputed by the merging parties, and  
are more favourable to them than would be if we included Kulu Richards Bay for the  
purpose of calculating HHI’s, we accept that we should work with the Commission’s  
table and thus exclude the Richards Bay plant.)
[32]. When we resumed our hearing on the 27   February 2007, the parties filed a  
report   prepared   by   Genesis,   an   economic   consultancy   firm.   The   Genesis   report  
analyzed the transport costs of both firms and compared pricing of certain merchant  
customers and came to a conclusion on the boundaries of the geographic market in  
the   KZN   area.   This   market,   which   has   Durban   at   its   centre,   is   a   coastal   market  
extending to the North and South, but not extending very far to the inland regions of  
the province. It is thus a market narrower than the one originally contended for by the  
Commission.19
18 From Port Shepstone to Richards Bay. See the submission by the merging parties in January

18 From Port Shepstone to Richards Bay. See the submission by the merging parties in January  
2007, supplementary file page 25, an annexure containing a report by Genesis.
19 The reason for the market extending further along the coast than it does to the interior was is due  
to the topography of the area. Transport costs are higher inland, due to the mountainous nature of the  
interior terrain. See transcript for instance page 90, testimony of Mr. Van Jaarsveld
9

[33]. In its report Genesis has produced a useful diagram, which we set out below,  
where the geographic market is outlined in the red sphere as well as the locations of  
the respective firms that the merging parties and the Commission contend are the  
competitors in this market. 20
[34]. Although   the   Commission   has   delineated   this   Greater   Durban   geographic  
market in a different way to the merging parties, nothing turns on this as they are  
both in agreement as to which firms compete in this market. The merging parties  
concede this in their evidence. 
“CHAIRPERSON:   And   then   if   I   can   take   you   to   page   15   of   the  
Commission’s   report,   if   you   have   that   in   front   of   you,   it’s   the  
Commission’s current report. 
MR MYBURGH : Their latest report?
20 See Genesis report exhibit ­­­ page­ 10
10

CHAIRPERSON:   Yes,   yes,   page   15   and   the   table   of   the   who   the  
players are. 
MR MYBURGH : Okay.
CHAIRPERSON: Are those the players you see in that market, or do  
you see other people they haven’t included? Are you in agreement with  
them then about that? I know you’ve given a different boundary, but  
they say look these are the people in some derivative of this market.
MR MYBURGH : Yes that is our view.
CHAIRPERSON: Okay, so you don’t have a dispute with them about  
that?
MR MYBURGH : No.” 21
[35]. Whilst we accept that it would be difficult to determine the geographic market  
with any greater precision, the likelihood is that the one contended for remains too  
broad. Because of the extent of this market, and the centrality of transport costs to a  
manufacturer’s   ability   to   be   competitive,   firms   tend   to   be   less   competitive   as   the  
distance of the customer from its factory gate increases. This means that even if we  
consider firms to be located in the same geographic market, a firm faces the most  
vigorous competition from a rival to which it is most closely located, and conversely,  
is less threatened in its most proximate markets, by a rival more distant from them.  
Stanbrik Roof Tiles (“Stanbrik”) is identified as a competitor in the greater Durban  
market.   Yet,   when   asked   by   the   Commission   about   sales   in   the   Durban   area   it  
answered: 
COMMISSION   QUESTION:   What   percentage   of   your   production   is   sold   in   the  
greater Durban area?
STANBRIK ANSWER:  0% production is sold in the greater Durban area.  22
[36]. The same answer is given to the next question, which is what percentage of  
the market Stanbrik has in the greater Durban area.  23 
 [37]. Whilst   the   Commission   did   not   define   the   Greater   Durban   market   in   its  
question, and thus it is not clear whether Stanbrik understood it in the same way as

question, and thus it is not clear whether Stanbrik understood it in the same way as  
the   Commission   did,   it   is   at   least   clear   that   Stanbrik   sees   transport   as   a   more  
21 See transcript dated 27 February 2007 page 48
22 See record pages 201 and 202 of the supplementary file dated 15 February 2007.
23 See record page 202 of the supplementary file dated 15 February 2007. Stanbrik at the same time  
states it can sell up to 150 kilometers from its plant before it becomes impractical. It also indicates that  
transport cost increase every 50 km by 50 cents per tile.
11

significant barrier to entry than do the merging parties, and whatever its conception  
of the greater Durban area there is an area close to Durban, the heartland of the  
merging  firms, in which it  makes no sales.  Indeed  the version on transport costs  
differs   amongst   the   merging   parties.   Whilst   Lafarge   appears   to   levy   a   uniform  
transport cost across the region that Genesis defines as the Greater Durban market,  
Kulu differentiates its costs across this region with the differential reaching as much  
as 50% more. In one zone, this same differential is reflected within a zone. 24  On this  
point, Mr. Haywood, the operations director of Kulu, was perfectly frank. Asked to  
explain   the   discrepancy   he   testified   that   the   firm   would   want   to   maximize   its  
revenues and if it did not face opposition in an area its charges would reflect this and  
when it was it would in his words “ bring ourselves in line”   He explained that the  
significant   differential   between   prices   in   Port   Shepstone   and   Umzimkulu   were  
attributable   to   the   existence   of   competition   in   one   and   its   absence   in   the   other  
despite the fact that they were grouped in the same transport zone for the purposes  
of their distance from the Kulu plant. 25
[38]. The evidence of Mr. Van Jaarsveld of Lafarge was that transport costs to a  
contractor  (third parties are  mostly used we were told)  may not be passed on  at  
exactly that rate to the customer. 26 
He went on to say:
Mr. Van Jaarsveld: What I am trying to say is that in Amanzimtoti we may pay  
the contractor R550, 00 and we charge the customer R 720, 00 in this case.  
In the Pietermaritzburg case because it’s uphill, we may be paying R 720, 00  
that’s in the zoned areas. 
Ms Carrim: You may keep the margin then..
Mr. Van Jaarsveld: Correct.
[39]. The   relative   distances   of   the   competitors   from   Durban   according   to   the  
Commission are:
Marley – 45 kms
Stanbrik – 120 kms

Commission are:
Marley – 45 kms
Stanbrik – 120 kms
Kulu Crete – 150 kms 27
24 See supplementary file page 28. See also evidence of Mr. Haywood the operations director of Kulu  
transcript page 55­6
25 See transcript page 56 lines 4­ 23 
26 See transcript page 89­90.
27 See supplementary report page 14.
12

[40]. Thus whilst firms may be regarded as competitors in a particular geographic  
market, it would be artificial, after having come to that conclusion, to have no regard  
to whether they are equally effective competitors of the merged firm over the whole  
of   that   region.   One   of   the   requirements   that   we   consider   in   merger   analysis   is  
whether the merger will lead to the removal of an effective competitor. Because in  
this market, transport costs are fundamental in determining a firm’s competitiveness  
in a particular area, the closer the proximity of firms the greater their rivalry. In this  
respect because the Durban plant of Kulu is closest to the Lafarge plant it will be its  
most   effective   competitor,   judged   from   location.   According   to   the   Genesis   report,  
68% of Lafarge’s sales take place in a segment of the market closest to Durban,  
where   Kulu   and   Marley   are   the   best   placed   geographically   to   compete   for   those  
sales.   28  Thus   although   these   firms   have   sales   throughout   this   Greater   Durban  
region, the bulk of sales are made much closer to the location of their factories.
[41]. We see a similar pattern examining customers buying patterns. One merchant  
BBS, which has a branch in Richards Bay, and thus is situated at the outer extremity  
of the Greater Durban market, informs the Commission that it sources nearly half its  
tiles from Kulu Richards Bay and a similar amount from Marley in Tongaat, whilst it  
sources only 2% of its tiles from Lafarge in Durban. 29
Analysis
[42]. Whilst we accept the definition of the geographic market in this region, as it is  
now contended for by the merging parties in the Genesis report, we remain of the  
view that not all the competitors in this market, and as we have seen there are now  
less   of   them   than   in   the   original   KZN   market   contended   for   initially   by   the

Commission, are as effective competitors to the merged firm over all areas of this  
market, albeit that they are capable of supplying the entire area.  30
[43]. We   now   go   on   to   consider   whether   the   merger   will   lead   to   a   substantial  
lessening or prevention of competition in this market, by considering some of the  
factors that the Act directs us to take into account in terms of section 12A(2).
Levels of concentration
28 See Genesis report Exhibit “A”   page 10
29 See record page 981.
30 In the initial Commission report, Saiba and Kinaka were included in the relevant market in KZN, but  
are not included in the Greater Durban market because of their distance from Durban; recall that the  
Commission now defines the greater Durban market as one composed of firms within 150 kms from  
Durban.
13

[44]. The conventional measurement of concentration used in merger analysis is  
the   Herfindahl­Hirschman   Index   (HHI).   The   United   States   antitrust   agencies’  
Horizontal Merger Guidelines, suggest that a market with an HHI of 1800 is highly  
concentrated and that a change in the HHI from the pre to post merger status of  
more   than   100   is   an   issue   of   concern.   31  With   that   as   the   comparator,   the  
concentration levels in this market post merger are stratospheric. The pre­merger  
HHI is 2404, thus we commence with an already highly concentrated market, whilst  
the   post   merger   HHI   is   4084   ­   a   change   in   concentration   of   1680.   Expressed  
differently,  we  are going  from  a five  firm  market  to  a  four  firm market  where  the  
number one firm is buying number 2. Post merger, the two top firms will have almost  
80% of the market. Another measure of analysis sometimes used is by summing the  
market shares of the four largest firms in the market or the CR4. Typically a CR4 of  
more than 75%   is considered a highly concentrated market. Here, post merger, we  
exceed this figure with summing the market shares of just the two largest firms. 
Removal of most effective competitor
[45]. We have noted that the merger leads to a market in which there are only four  
competitors. Apart from  the merged firm,  only  Marley of the  remaining three is a  
large and enduring concern. Stanger Brick and Tiles, now trading as Stanbrik, is a  
very   recent   entrant   into   this   market,   having   only   commenced   operating   in   the  
concrete tile market in   [CONFIDENTIAL], as an adjunct to its existing business in  
bricks.
[46]. Stanbrik is wholly owned by its founder. 32  By comparison, the merged firm not  
only operates nationally, but its controlling shareholder is a multinational.  33
[47]. Kulu Crete likewise is wholly owned by a single person, so it too suffers from

[47]. Kulu Crete likewise is wholly owned by a single person, so it too suffers from  
the same potential constraints as would Stanbrik. From a location point of view this  
firm is least favourably placed relative to the merged firm, situated as it is at southern  
boundary of the relevant market. 34
[48]. Marley,   whilst   a   well   established   firm   and   more   favourably   located   to   the  
merged firms Durban heartland has to date not been a vigorous competitor of the  
31  See Department of Justice and Federal Trade Commission Horizontal Merger Guidelines (1992)  
and footnote 11 supra.
32 See record page 208.
33 This will still be the case even if Lafarge goes ahead with the sale of some its equity internationally  
to   Paribus,   a   French   company,   as   we   were   advised   was   taking   place   during   the   hearing.   (See  
Transcript 13 December 2006 on page 41)
34 Recall that Kulu Crete is situated in Port Shepstone.
14

merged firms. According to the data submitted by Genesis, Marley has priced at the  
same prices as Lafarge both of which are more expensive than Kulu.  35
[49]. Kulu suffers from none of the limitations of the other competitors of Lafarge.  
Although   Kulu   does   not   have   a   major   corporate   shareholder,   it   has   three  
shareholders, is well established, and has operated nationally.
[50]. Its Queensburgh plant is closer to that of the Lafarge Durban plant than any  
other competitor, and given what we stated about the relationship between distance  
and competitive effectiveness in our analysis of the geographic market, this makes  
Kulu the best situated competitor to Lafarge.
[51]. According   to   the   Genesis   data,   Kulu   prices   lower   than   either   Lafarge   or  
Marley. Internal documentation from the Lafarge board, suggests that Kulu has lower  
production costs and this may explain its ability to price lower in the market. 36
[52]. But there are other reasons besides pricing and location for why Kulu can be  
considered to be Lafarge’s most effective competitor in the Greater Durban area. 
[53]. Kulu   has   the   largest   share   of   the   market,   calculated   in   terms   of   daily  
production capacity, with 35 %, while Lafarge is number two, with 24 %. Both firms  
produce   the   full   tile   product   range,   whereas   of   the   remaining   firms   only   Marley  
produces a similar range.   In contrast to Marley, Kulu’s tiles are interchangeable with  
those of Lafarge, a fact raised in the due diligence report.  37  Thus consumers in the  
course   of   a   job   could   substitute   with   Kulu   tiles   if   dissatisfied   with   pricing   from  
Lafarge. Whilst this is not determinative for every customer or for every job, it does  
exercise some constraint on Lafarge’s’ pricing power pre­merger. 38
[54]. Thus the merger leads to the removal of Lafarge’s most effective competitor in  
this region pre­merger.
Barriers to entry

this region pre­merger.
Barriers to entry
[55]. In its supplementary report the Commission echoes the views of the merging  
parties that barriers to entry in the market are low. They cite low capital costs for this.  
Whilst this may be correct, the Commission has not adequately considered problems  
associated with the most significant barrier to entry in this geographic market, which  
is obtaining supply of concrete, the key input for a tile producer. It is common cause  
35 See Exhibit A.
36 See page 444 of the record. 
37 See record page 33 Project K: Financial Due Diligence Report Draft November 2006.
38  The interchangeability has to do with technical reasons due to the manufacture of the tiles. The  
interchangeability was confirmed in evidence by Mr. Haywood. See transcript 27 February 2007 page  
62. 
15

that   all   the   firms   in   this   market   are   supplied   concrete   from   one   supplier,   Natal  
Portland Cement (NPC). Concrete is an essential input and comprises roughly 56 %  
of   the   costs   of   production   of   a   cement   tile. 39  NPC   has   experienced   shortages  
recently, and as a result, had to impose supply quotas on its tile customers. This  
emerged   during   the   first   hearing   in   the   matter,   during   the   testimony   of   Mr.   Van  
Jaarsveld  of Lafarge, who stated:
“MR WILSON :  In the KZN area do you know where you source your  
cement requirements from?
MR VAN JAARSVELD :  Yes.
MR WILSON :  Who is that?
MR VAN JAARSVELD :   All our cement comes from NPC and we’ve  
got a quota and if we run over that quota we stop the factory we don’t  
get anything more than that.
MR WILSON :  And have had shortages along the way?
MR VAN JAARSVELD :  Yes we’ve had days where we stood.
MR WILSON :  When was that?
MR   VAN   JAARSVELD :     In   the   last   four   months   quite   a   number   of  
days.”40
 [56]. Subsequent  to   the   hearing   on  that   day,   the  Lafarge   version  on   the  supply  
problem underwent revision. In reply to questions from the Commission on this point  
the merging parties stated: 
“Both   Lafarge   and   Kulu   indicate   that   they   did   not   experience   cement  
shortages during the year. However, for those customers that did experience  
shortages,   this   has   been   addressed   by   NPC’s   investment   in   further  
capacity.”41
[57]. When   questioned   on   this   seeming   inconsistency,   Mr.   Van   Jaarsveld,   who  
testified again on the 27 th  February  2007, explained  that  although they had  been  
short supplied they knew what they were getting and hence did not consider that  
they had been restricted .  42
[58]. It   is  fairly  clear   that   Mr.   Van   Jaarsveld,   when  first   asked  about   the  supply  
39 See page 873 of the record
40 See transcript dated 13 December 2007 page 42

39 See page 873 of the record
40 See transcript dated 13 December 2007 page 42
41 See page 21 of the Commission’s Supplementary Report.
42 See transcript dated 27 February 2007 pages  75­76
16

problem in December 2006, was completely candid with the Tribunal. Subsequent  
attempts   after   this   testimony,   to   place   a   more   favourable   gloss   on   the   supply  
problem   are   unconvincing. 43  Moreover,   NPC   itself   acknowledges   the   supply  
shortages in its submission to the Commission. 44    Mr. Haywood from Kulu, testified  
that  by  February  of  this  year  [2007]  supply  constraints  will   start  to  be  overcome,  
because   NPC   is   expanding   production   at   its   new   plant   in   Samuma   in   Port  
Shepstone.   45   NPC informed the Commission that more clinker capacity would be  
available from August 2007.  46
[59]. We do not know at the time of deciding this merger, whether these expansion  
plans will solve the supply problems. If they do not, and quotas are applied again,  
they will prevent a rival which wishes to increase its markets share in response to a  
price rise by the merged firm, from being able to do so meaningfully. This is because  
the quotas are based on the previous years supply. This constrains the ability of a  
smaller firm, say Stanbrik, to increase supply in response to a price hike as it would  
not  get   the  supply  necessary  to  increase  production  over  and  above  what  it  had  
ordered   historically.   When   we   consider   barriers   to   entry,   we   consider   not   only  
whether firms can enter the market, but whether firms can expand in the market.  47 
The merged firm would have no reason to feel constrained by its rivals, if it knew that  
in response to an increase in price by it, its rivals could not expand their supply to  
customers who wanted to switch. Furthermore NPC past practice when it had to limit  
volumes was not to supply new customers.  48
[60]. This is not to say that the merging parties’ sanguine expectations of improved  
supply out of NPC may not prove to be well founded. Rather, the risk is so great that  
unless the supply problem could be remedied it would create an insuperable barrier

unless the supply problem could be remedied it would create an insuperable barrier  
to entry as NPC is presently the only source of supply to concrete tile firms in this  
market.
Conclusion on the Greater Durban Market
43  This was not the only occasion when the merging parties have given unreliable testimony about  
the market. In Mr. Van Jaarsveld's initial testimony he testified about Brickor, which has a plant in  
Gauteng, becoming an entrant into KZN the market. (See transcript dated 13 December 2006, page  
40). The Commission, at our request, attempted to verify this with Brickor. Brickor stated that it does  
not sell from its inland plant into the KZN region because of transport costs and that would still be the  
case   even   if   post   merger   the   price   of   tiles   increased   by   5­10%.   See   record,   supplementary   file  
page234.
44 See record supplementary file page 240.
45 See transcript dated 27 February 2007 pages 67­68
46 See record supplementary file page 241.
47  See   Simon   Bishop   and   Mike   Walker—The   Economics   of   EC   Competition   Law:   Concepts,  
Application and Measurement 2 nd (Sweet & Maxwell Edition 2002) page 298. 
48 See record supplementary file, page 240.  “NPC did not take on any new customers during periods  
when the volumes to existing customers were limited.”
17

[61]. The merger leads to further concentration in an already concentrated market,  
the removal of Lafarge’s most effective competitor. While this on its own may not be  
decisive in condemning a merger if entry was easy, we have noted that because of  
the history of supply constraints, entry may be constrained in the future.   For this  
reason   the   probabilities   are   the   merger   will   lead   to   a   substantial   prevention   or  
lessening of competition in this market. We discuss below how this can be remedied.
 Remedy
[62]. In this merger we have imposed two remedies. The first is a structural remedy  
in relation to the Western Cape market, which as we noted earlier, was the subject of  
an   agreement   between   the   merging   parties   and   the   Commission.   We   have   not  
tampered with this arrangement, apart from some fine tuning on procedural issues,  
to   resolve   a   dispute   on   these   points   between   the   merging   parties   and   the  
Commission.
[63]. A   divestiture   of   the   Kulu   Western   Cape   plant   will   at   least   restore   the  
competitive state pre­merger provided the purchaser is a viable competitor.
[64]. The second remedy is to deal with the substantial lessening of competition  
that we concluded the merger will bring about in the Greater Durban market. The  
purpose of the remedy is to lower entry barriers into this market and to allow for the  
expansion of existing and future competitors by ensuring that the source of cement  
supply is not constrained in the future as it once was in the past. Given the demands  
on cement suppliers at present due to ambitious infrastructure programs, the World  
Cup   in   2010,   and   the   fact   that   the   new   NPC   plant   may   take   time   to   meet   its  
production expectations, the supply constraint problem is most critical in the near  
future. For this reason we have imposed the condition for a limited period of three

future. For this reason we have imposed the condition for a limited period of three  
years.   The   merging   parties   agreed   to   the   condition.   Had   they   been   unwilling   to  
accept such a condition we would have had to seriously contemplate whether the  
merger could be approved without the divestiture of one of the merged firm’s two  
Durban plants. 49
[65]. Although there is always a concern that a behavioural condition such as this  
may be difficult to enforce, we take note that in this case, past practice indicates that  
NPC has been able to administer a quota to deal with shortages, and secondly, that  
competitors, who in terms of the order have been informed of the condition by the  
Commission, will be the parties best placed to police its adherence and hence this  
will not require any resources from the Commission.
49 That is either the Lafarge plant or the Kulu plant at Queensburgh.
18

Public Interest
[66]. This merger raised no public interest concerns and hence they have had no  
bearing on our consideration of the merger and the remedies discussed above.
Conclusion
[67]. The merger is approved subject to the conditions contained in the Annexure.  
A confidential version of the conditions was sent to the merging parties on 12 March  
2007, and a non­confidential version was also circulated on the same day.
___________________ 18 June 2007
N. Manoim  Date
Tribunal Member
Y Carrim and M Mokuena concurring.
Tribunal Researcher :  J Ngobeni
For the merging parties :   Adv   Jerome   Wilson   instructed   by   Webber  
Wentzel Bowens
For the Commission :  Seema Nunkoo and Dumisani Motsamai
19

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