Blow for Innscor

STAFF WRITER

The Supreme Court has delivered a decisive blow to Innscor Africa Limited, siding with the Competition and Tariff Commission (CTC) by overturning a High Court ruling that had approved the merger of Innscor subsidiaries Profeeds and Ashram Investments.

While the High Court previously upheld the merger, citing public interest benefits such as job creation and economic expansion, the Supreme Court rejected this rationale. In a judgment delivered on October 3, 2024, Justice Tendai Uchena highlighted the merger’s potential to create monopolistic dominance, which could harm market competition and public welfare in the long term.

Innscor Africa, through its subsidiary Ashram Investments, acquired a 49% stake in Profeeds, a leading stock feed manufacturer, and Produtrade, a property company leasing to Profeeds. However, the transactions, finalized in 2015, were only disclosed to the CTC in 2019 after legal advice prompted notification.

Initially, the CTC had blocked an attempt by Ashram to acquire a larger controlling stake in Profeeds, arguing that it would result in undue market concentration, especially given Innscor’s association with National Foods. The regulator also imposed a ZWL $40.5 million fine on Innscor for failing to notify the CTC about the merger within the legally prescribed timeframe.

Ashram Investments appealed to the High Court, which approved the transaction, reduced the penalty to a cautionary measure, and praised the merger’s economic benefits.

The Supreme Court, however, found that the High Court had erred by focusing on short-term economic benefits without considering the merger’s long-term anti-competitive risks.

“Monopolistic tendencies may initially seem advantageous, but over time, they could dominate the economy, resulting in overpriced or substandard goods,” said Justice Uchena.

The ruling emphasized that Innscor’s dual ownership of Profeeds and National Foods concentrated significant industrial power in two of the largest stock feed producers, increasing the likelihood of anti-competitive practices. Furthermore, the Court noted that Innscor had a track record of non-compliance with competition laws, citing similar violations in 2013 and 2018.

Reinstating the CTC’s decision, the Supreme Court prohibited the merger and upheld the ZWL $40.5 million fine. The judgment underscored the importance of adhering to regulatory requirements, asserting that competition laws are vital to protecting consumer interests and maintaining fair market practices.

“This ruling brings Zimbabwe in line with global competition enforcement trends,” Justice Uchena said, referencing international cases such as the U.S. Standard Oil ruling of 1911 and a 2022 COMESA decision against a monopolistic merger in the paint industry.

The decision solidifies the CTC’s role in safeguarding the economy against monopolistic threats and ensuring fair competition across industries.