AfriSam cement deal legal battle drags on

TANZANIA : The  planned acquisition of Tanga Cement by Scancem International DA has taken a new twist after a tribunal judge nullified the decision by the Fair Competition Committee (FCC) that sanctioned the merger at a second attempt in February this year.

The FCC approved the Scancem International DA’s acquisition of AfriSam’s Tanga Cement following a second application after the Fair Competition Tribunal (FCT) had blocked the initial application following an appeal by the now deregistered Chalinze Cement and Consumer Advocate Society.

While the government has already blessed the takeover, with the merger now subjected to regulatory processes by relevant government authorities, the legal battle is apparently dragging on.

In a latest judgment by the FCT, Judge Salma Maghimbi ruled that the decision of the FCC dated 28th February, 2023 was res judicata (a matter that has been adjudicated by a competent court and therefore may not be pursued further by the same parties) of its previous decision dated 6th April, 2022 and set aside by this Tribunal on 23rd, September, 2022.

“That decision as so admitted by the Solicitor General was res judicata of the previous decision of the FCC, which was eventually varied and prohibited by this Tribunal,” stated Judge Maghimbi in the ruling.

She added: “Much as I appreciate the possibility that the market forces may have changed, but given the short period of time which a subsequent merger application was filed, I am not convinced that the merger would not have been cured by moving the tribunal to review its decision as opposed to filing a fresh application.

My concern is both on the act of the Counsels for 2nd respondent and more shocking with the conduct of the 1st respondent (Fair Competition Commission) who is bestowed with the responsibility to oversee competition in the economy for the benefit of the consumer to have usurped powers of this Tribunal in review by proceeding to determine what was already prohibited by this Tribunal.

I must emphasise that the act or conduct of the two respondents did not send a good message to the public nor to potential investors who would have been interested in coming to invest in our country.”

Judge Maghimbi highlighted the fact the Tribunal had issued a restraining order restraining Scancem International DA and other government institutions to consummate the subsequent merger, an injunction which if maintained would leave Scancem International DA hanging with uncertainty while its interest to purchase shares in Tanga Cement is unquenched.

“Having nullified the decision of the 1st respondent (FCC) in the subsequent merger, I find it wise and just that I leave the parties at liberty if they so wish to move the Tribunal under Rule 50 (1) of the Fair Competition Tribunal Rules, 2012 to review our decision in the previous merger dated 23rd September, 2022 based on the alleged changes in the market. The review (if any), may be lodged in this Tribunal within thirty days from the date of this judgment,” she concluded.

It was a dissenting opinion since Judge Maghimbi, differed in opinion with fellow members; Dr Onesmo Kyauke and Dr Goodwill Wanga, with the other two judges striking out the application on the basis that the applicants in the Tribunal Appeal no 1 of 2023, Chalinze Cement Co. Ltd, is a deregistered company and thus have no locus standi to file the applications.

The two members agreed that since Chalinze was deregistered by operation of the law, the entity could not litigate and hence could not lodge an appeal.

While the dissenting judge agreed with her fellows on the deregistration of the applicants; she focused on the body of the application and not the technicalities as her colleagues.

During August House, the government defended the planned merger, with Finance Minister Dr Mwigulu Nchemba saying the acquisition will make it possible for Tanga Cement to be productive, maintain the supply of the cement and assure employment for the current employees of the company.

Dr Nchemba made the assurance when responding to queries by several legislators on the acquisition of Tanga Cement by Twiga Cement, saying that it is a very sensitive issue because the government itself has a lot of interest in the cement factory.

The legislators lamented that the proposed merger would create a situation where one company will dominate the market and hence dictate the supply and the prices.

In their key objection to the merger, the appellants argued that the merged firms would have commanded a 47.26 percent share of the cement market in Tanzania if the deal went ahead. This, they further argued, would have been well above the 35 per cent threshold allowed by the FCA.

The Minister for Industry and Trade, Dr Ashatu Kijaji defended the decision to re-approve the deal, saying the approved merger application was different from the one rejected by the FCT and that the market structure had changed.

The minister insisted that all the lawful procedures were followed in going through the request for the merger.

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