PRESS STATEMENT
4 October2007
The Commission recommends the prohibition of Mittal/DSP merger
The Competition Commission has recommended that the Competition Tribunal prohibit the proposed merger in whichMittal Steel Company N.V. (“Arcelor Mittal”)would acquire Duferco Steel Processing (Pty) Ltd (“DSP”) from Duferco Group and the IDC. Duferco and the IDC each currently owns 50% of DSP.
Drawing on the Tribunal’s previous rulings involving Mittal (the 2002 Iscor-Saldhana Steel merger andthe recent excessive pricing case), extensive market review and the behavior of the two parties where their products overlap, the Commission’s assessment concluded that the merger would substantially prevent or lesson competition.
DSP and Mittal are the only two local producers of cold rolled coil and galvanizedsteel products. Mittal is also the dominant producer of hot rolled coil (HRC), which is the key input for both these products. DSP sources its HRC from Mittal.
DSP only exports its products and does not sell locally. This is consistent with the historic restriction on DSP bySaldanha Steel which pre-dates Mittal’s acquisition of Saldanha. In approving the merger between Mittal and Saldanha, the Tribunal imposed a condition striking down the restriction. The Commission has observed that the Tribunal’s condition regarding the restriction on DSP has not led to change in behaviour in the market.
In the Commission’s assessment an independent DSP with access to competitively priced steel, not sold under actual or threatened restrictive conditions, is a competitive rival to Mittal. The Commission’s notes that the Tribunal’s remedy in the excessive pricing case against Mittal is explicitly aimed at ensuring that competitively priced steel is available to local customers. This remedy should provide an opportunity for a firm in DSP’s position to be an effective competitor to Mittal. Approving the merger would frustrate competition that would otherwise emerge as a result of the Tribunal’s ruling in the excessive pricing case ruling.
The Commission’s evaluationfocused principally on DSP’s ability or inability to act as a potential competitor to Mittal in the South African market and found that its current weak position was directly related to the structural conditions described in the Tribunal’s ruling on Mittal’s anti-competitive behaviour with regard to excessive pricing.
“As a priority sector, infrastructure development is a vital contributor to South Africa’s economic growth. Competition in the steel industry must be nurtured to protect the downstream market. This merger would undermine the competition authorities’ intention to promote more competition in this space,” concluded Bonakele.
ENDS
Prepared by:FD Beachhead
Jennifer Cohen- 011 214 2401/ 082 468 6469/
On behalf of: The Competition Commission
Further info:
Tembinkosi Bonakele, Manager, Mergers & Acquisitions Division
012 394 3294 / 082940 4182
Shan Ramburuth, Commissioner
012 394 3332 / 083 357 1685