Final report: Forestry sector impact study

Section 21A of the Competition Amendment Act no 18 of 2018 empowers the Competition Commission (Commission) to “study the impact of any decision, ruling or judgment of the Commission, the Competition Tribunal or the Competition Appeal Court”. The Commission and the Competition Tribunal (Tribunal) have, since their inception, assessed and decided on numerous mergers and acquisitions in the forestry sector, the majority of which were approved. These decisions are set out in Annexure A attached hereto. While these mergers and acquisitions were largely approved, they raised a central theme which continues to persist to date and this relates to deepening vertical integration in the forestry sector and log supply access concerns, particularly by small integrated and non-vertically integrated businesses. It is for this reason that the Commission has conducted this impact assessment, to assess the cumulative impact of the Commission and Tribunal’s merger decisions in the forestry sector. The need for the impact assessment of the Commission and Tribunal’s merger decisions in the forestry sector also received impetus following various concerns raised in a number of abuse of dominance complaints investigated by the Commission, since its inception, which raise the same issues. Although the Commission decided, for various reasons, to non-refer some of these complaints, it recommended a process of advocacy aimed at resolving same. These complaints are set out in Annexure B attached hereto. 2. These concerns primarily relate to challenges in accessing logs by, amongst others, Small and Medium-sized Enterprises (SMEs) and new Historically Disadvantaged Persons (HDP) entrants, particularly from large vertically integrated players. Securing such access from large integrated players is also the focus of conduct complaints. More importantly, the persistence of these concerns in each of these mergers and the complaints investigated by the Commission indicates that the decisions reached by the Commission in these matters have not been able to systematically address consistent and secure log access to small and non-vertically integrated businesses. While the Commission’s advocacy efforts on conduct have made some inroads in addressing the concerns, there are still some limitations as long-term contracts are not extended to small businesses or new HDP entrants.