Two major players in silica mining looking to overturn earlier decision of competition authority say they have no incentive to shut out competitors

 

TWO major players in the mining of silica said yesterday they had no incentive to shut out competitors if their merger was approved by the competition authorities.

Thaba Chueu, a subsidiary of Silicon Smelters, is asking the Competition Tribunal to approve its acquisition of SamQuarz, a subsidiary of JSE-listed Petmin, without conditions.

The mines would lose millions if they denied players such as Sublime Technologies and Silicon Technology (Siltech) access to their products, their legal team argued before the tribunal, during an application for a review of the Competition Commission's decision to prohibit the transaction. The commission concerns related to input foreclosure, access to commercially sensitive information and the likelihood of co-ordination between the merged entity and a competitor after the merger.

 

SamQuarz supplies silica chip and silica rock to Sublime and Siltech, as well as silica rock to Silicon Smelters' Rand Carbide Plant. Silicon Smelters is a subsidiary of Spanish company FerroAtlantic, and has two plants that will be acquiring its silica rock from the merged entity for its production of silicon metal and ferrosilicon.

 

It emerged that Sublime and Siltech, which were granted permission to intervene in the hearings, had since signed new supply agreements with Thaba Chueu and SamQuarz that were subject to the merger being approved.

Both had withdrawn their intervention applications, but decided to act as witnesses for the commission.

 

The commission argued there were no economically viable alternatives as the import of ferrosilicon was not an option. China, which produces ferrosilicon, had started restricting supplies.

 

Alfred Cockrell SC, appearing for the two parties, said input foreclosure needed three conditions: the ability to foreclose, the incentive to do so and the foreclosure must affect competition in the market. Even if the merged entity had the ability to foreclose in the upstream market (silica) it would not be able to make up for its losses by increasing prices in the downstream market (ferrosilicon) as there was real and potential import competition.

 

Mr Cockrell was surprised that the commission was still concerned about foreclosure after the signing of supply agreements that would last for at least nine years at a price that was acceptable to Sublime and Siltech.

 

The hearing continues.