Tribunal approves British American Tobacco, Twisp merger with conditions
The Competition Tribunal has today conditionally approved the acquisition of South African e-cigarette seller, Twisp (Pty) Ltd (Twisp), by international cigarette giant, British American Tobacco (BAT).
The approval of the transaction is subject to a range of competition and employment conditions.
All retailers selling RRP products including large grocery retailers (such as Massmart, Pick ‘n Pay, Shoprite and Spar), branded service station forecourts (such as BP, Caltex, Engen, Sasol, Shell and Total) and owners or administrators of shopping malls should take note of the imposed competition conditions.
RRP products are products that have (the potential to present) less risk of harm to smokers than traditional cigarettes and include vaping products (such as e-cigarettes) and heat-not-burn tobacco products.
These stipulate that the merging parties shall not enter into agreements or arrangements with:
- owners or administrators of retail spaces, requiring or incentivising them not to rent retail space for the sale of any RRP products to the merging parties’ competitors;
- retailers (grocery or liquor chains, pharmacies, convenience stores, service station forecourts, speciality tobacconists and specialist RRP kiosks or stores), requiring or incentivising them not to sell any RRP products of the merging parties’ competitors;
- retailers, requiring or incentivising them to allocate to the merging parties more than 70% of the visible space allocated to RRPs.
Further conditions stipulate that the merging parties must not require or incentivise retailers to prohibit the merging parties’ competitors from:
- selling, displaying and/or promoting RRPs;
- being allocated shelf space for RRP products;
- bidding for or acquiring RRP slots i.e. periods of time during which point of sale material (such as cash mats, till clips, counter display units, etc.) can be displayed in retailers’ points of sale; and
- displaying communication, promotional, marketing or advertising material in relation to RRPs.
Further, the merging parties may not require or incentivise retailers (i) not to exercise their own discretion in the allocation of visible space for RRPs; and (ii) to prohibit or discourage employees from providing assistance and/or information to customers relating to RRPs manufactured or supplied by the merging parties’ competitors.
A further imposed condition relates to the prevention of linking the supply of traditional cigarettes by the merging parties to the supply of RRPs.
The competition conditions will be applicable for a period of five (5) years.
British American Tobacco Holdings South Africa (Pty) Ltd (BATSA) is required to publish the conditions on its website for 90 days. In order to promote awareness of the conditions it must also email the conditions to a list of grocery retailers, branded forecourts, specialist vape stores and tobacconists.
BATSA and Twisp will not be allowed to retrench any employees in contemplation of the merger or as a result of the merger for a period of two (2) years from the date on which the transaction is implemented. This includes employees on fixed term contracts of varying lengths who perform specific roles at BATSA and Twisp.
The full reasons for the Tribunal’s decision will be released in due course.
The Competition Commission, which refers large mergers to the Tribunal for a decision, initially recommended that the proposed transaction be prohibited due to competition concerns. After further economic input, it later changed its recommendation to a conditional approval.
Two large players in the tobacco industry, Gold Leaf Tobacco Corporation and Philip Morris South Africa, were granted leave to intervene in the merger proceedings. They made submissions at the hearing on portfolio / conglomerate effects that could result from the proposed transaction and argued for the significant enhancement of the two competition-related conditions recommended by the Commission to the Tribunal.
Gillian de Gouveia
Tel: +27 (0) 12 394 1383
Cell: +27 (0) 82 410 1195
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