The Competition Tribunal has granted paper and plastics packaging manufacturer Mpact leave to intervene in the intermediate merger proceedings between paper packaging company Corruseal and recycled containerboard company Neopak.
In March, the Competition Commission prohibited the proposed intermediate merger, following which the merger parties filed a request for consideration with the tribunal, seeking to have the proposed merger unconditionally approved or, alternatively, to have it approved with conditions deemed appropriate by the tribunal.
Thereafter, Mpact sought to be recognised as a participant in the request for consideration on the basis that it would be able to assist the tribunal in determining the competitive effects of the merger in the relevant markets.
However, Corruseal and Neopak opposed Mpact’s intervention application heard by the tribunal on June 22 on the basis of Mpact being a competitor to Corruseal and Neopak in the market for the supply of recycled containerboard and that is also active in downstream corrugating activities.
The tribunal’s order to Mpact limits its participation in the proceedings in terms of the merits to several issues, or theories of harm, including that the proposed transaction will increase the concentration of the 100%-recycled containerboard market. In this scenario, there will be a substantial lessening or prevention of competition in the market, Mpact believes.
It also details that the proposed transaction will give rise to input foreclosure in the corrugated board and corrugated packaging market, in that the customers of Corruseal and Neopak will be foreclosed from access to the merging parties’ 100% recycled containerboard.
This is both on the terms that they currently enjoy, or at all, in consequence of the merging parties supplying their 100% corrugated containerboard to Corruseal’s corrugator activities, and Corruseal expanding its corrugator activities.
Further, the tribunal notes that the proposed transaction will result in coordinated effects in the corrugating market, whereby Corruseal will have the incentive and power, from its increased supply of sheetboard to the Everest Group, to exercise disciplining power over the Everest Group in the corrugating market.