South African Pfizer Nutrition re-brand will create ‘viable competitor’ to Nestlé – anti-trust authority

By Mark ASTLEY contact

- Last updated on GMT

Related tags: Time

SA Pfizer Nutrition re-brand will create ‘viable competitor’ to Nestlé
The 20-year re-branding period imposed on Nestlé’s newly-acquired Pfizer Nutrition infant formula brands in South Africa will create a “viable competitor” to Nestlé in the long term, the country's Competition Tribunal has claimed.

In February 2013, the South African Competition Tribunal approved Nestlé’s $11.85bn takeover of Pfizer Nutrition. Under the terms of the merger approval, Nestlé is required to license out Pfizer’s infant formula brands in South Africa to an independent licensee for a period of 10 years.

The licensee will be under obligation to re-brand the products for the period.

This 10 year re-branding period will be followed by an additional 10-year ‘black-out’ period. During this time, Nestlé is not permitted to re-introduce the Pfizer brand in South Africa.

The remedy, which was recommended by the South African Competition Commission, was designed to prevent an increase in the price of infant formula that could have resulted as Nestlé’s share of the market grew.

In a document detailing its decision, the South African Competition Tribunal said that the remedy should create “an opportunity for the emergence of a viable, stand-alone competitor, independent of Nestlé and without any association or link to the Pfizer brand in the long run.”

“Credible, viable, stand-alone competitor”

“The Commission’s view is that the remedy will in the short to medium term ensure that products known in the relevant markets under the existing Pfizer Nutrition trademarks will remain on the market under new ownership and will continue to impose a competitive constraint on Nestlé and other market participants,” ​said the recently released document.

“The ultimate aim of the remedy is to provide an opportunity for entry by a credible, viable and stand-alone competitor in the long run.”

“In this regard the remedy provides, inter alia, that the purchaser must be independent from Nestlé or any of its affiliate members of possess the necessary financial resources, proven expertise and the incentive to maintain and develop the divested business as a viable and competitive force in competition with Nestlé.”

The remedy should “maintain the pre-merger competitive landscape in the short term while creating an independent and viable competitor in the medium to long term,” ​said the Competition Tribunal document.

Global anti-trust authority concerns

Nestlé faces an almost identical set of conditions in Australia. The Australian Competition and Consumer Commission (ACCC) approved the deal in November 2012 on the condition that Nestle licensed Pfizer’s infant formula brands in Australia to a third party for 10 years. This period would then be followed by a 10-year Pfizer branding black-out period.

Meanwhile, anti-trust authorities in Mexico have refused to authorise the deal, citing concerns that the acquisition would give Nestlé too high a share of the domestic infant formula market. The Mexican Federal Competition Commission (CFC) claimed that this would leave the door open for Nestlé to increase unit prices.

Despite the global regulatory concerns, Nestlé's acquisition of Pfizer Nutrition was completed in December 2012 after gaining approval from the majority of the markets involved, including China, India, Ireland, and Brazil.

Related topics: Manufacturers, Nestlé, Nutritionals

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