The Competition Tribunal on Monday approved, with conditions, the merger between Nestlé South Africa and Pfizer’s infant nutrition business, Pfizer Nutrition.

Last year, the global Nestlé group announced that it would acquire Pfizer Nutrition for $11.85-billion to enhance its position in global infant nutrition.

The tribunal’s approval followed the Competition Commission’s recommendation that the local leg of the merger be approved, but with conditions.

The commission had expressed concern that, should the merger proceed without conditions, the merged company could increase the price of infant milk formula, having secured a considerable percentage of the market share.

As such, the approval conditions entailed a detailed transitional rebranding remedy, which provided for the licensing of the use of all infant milk formula brands of Pfizer in South Africa to a third party for a period of ten years.

This third party must rebrand the Pfizer brands within this ten-year period.

This was the first time that the tribunal had approved a rebranding remedy.

The tribunal’s conditional approval came after a hearing on February 6, at which it heard three witnesses representing the commission and the merging parties on the transitional rebranding remedy proposed in this merger and how it would address competition concerns created by the merger.

To alleviate the potential competition concerns without compelling the new merged company to sell off the existing Pfizer brands of infant milk formula, the commission recommended the transitional rebranding remedy.

Prior to making its recommendation, the commission undertook a comprehensive investigation that included consultation with competitors, potential licensees and an existing licensee in a similar arrangement in the European Union.

The concerns raised by these parties were incorporated in the detailed set of imposed remedies.

The imposed remedy incorporated terms which stated that the rebranding period, would be followed by a ten-year “black-out” period, during which Nestlé could not reintroduce any of the relevant Pfizer brands in South Africa.

Nestlé was ordered to further provide the proposed purchaser with developments to the relevant process technology for a certain period and detailed information in respect of key or unique product ingredients.

The merging parties were further required to preserve and maintain the economic and competitive value of the divested business until the date of disposal.

According to Nestlé and Pfizer Nutrition, the deal had been filed in 15 countries worldwide and has been cleared in ten of these.

Nicaragua and Colombia were yet to issue their decision, while the Australian competition authority had approved the merger with conditions.

However, the Mexican competition authority prohibited the transaction and rejected the rebranding remedy proposed by the parties.