The Competition Commission has prohibited a proposed transaction whereby Amsterdam-based chemicals company AkzoNobel intended to acquire paint and coatings manufacturers Kansai Plascon Africa (KPA) and Kansai Plascon East Africa (KPEA).

The commission found that the proposed merger would result in a substantial lessening of competition in the market for the manufacturing and supply of decorative coatings as a result of the proposed merger combining the largest and second-largest manufacturers of decorative coatings.

AkzoNobel manufactures Dulux-branded paint products, while KPA manufactures Plascon-branded decorative and industrial coatings and paints.

This would create a dominant firm with a considerable market share, the commission said.

The commission also found that the merging parties are close competitors in terms of price, quality and product range and that the merger would remove competitive rivalry between two notable brands, thus reducing consumer choice.

In addition, the commission found that the proposed merger is likely to result in substantial input foreclosure concerns relating to the manufacturing and supply of colourants, as the merging parties have both the ability and incentives to foreclose some of their competitors’ access to colourants.

Dulux products are used in various segments – primarily divided into decorative coatings and industrial coatings, which in turn include automotive and specialty coatings, marine and protective coatings, wood finishes, coil coatings and powder coatings. These products are sold in South Africa as well as other African countries.

In South Africa, AkzoNobel controls AkzoNobel Powder Coatings South Africa, AkzoNobel South Africa, ICI Dulux and P J A (South Africa).

In South Africa, AkzoNobel has three manufacturing plants – two in Gauteng, in Alberton and Vanderbijlpark and one, its largest, is in KwaZulu-Natal, in Umbogintwini.

KPA and KPEA are controlled by Kansai Paint Company – collectively having four manufacturing plants in South Africa – two located in Gauteng, in Krugersdorp and Clayville, one in KwaZulu-Natal, in Mobeni and one in the Eastern Cape, in Gqeberha.

Decorative coatings contribute the largest portion to net sales within KPA.

Outside of South Africa, KPA has four manufacturing plants – one each in Malawi and Zambia, and two in Zimbabwe.

KPA also manufactures colourants, which are substances used to add colour to or change the colour of a factory-produced base paint using paint tinting equipment.

The commission noted that the merging parties did not provide evidence of merger-specific technological, efficiency or another pro-competitive gain that would be greater than, and offset, the effects of the prevention or lessening of competition arising from the proposed transaction, nor substantially weighty public interest commitments that would outweigh the competition concerns.

In addition, the commission said the merging parties had also not put up remedies likely to adequately address the anti-competitive effect of the merger.

Therefore, the commission concluded that the proposed merger was likely to result in a substantial prevention or lessening of competition.