BALANCING GROWTH AND FAIR COMPETITION: INSIDE COMPETITION AND TARIFF COMISSION’S MERGER DECISIONS

1.    Introduction 
Mergers can reshape entire industries affecting prices, consumer choice, employment, and the ability of smaller firms to compete. When companies merge, the impact is rarely limited to the businesses involved. While some mergers drive efficiency and economic growth, others may reduce competition or concentrate too much power in the hands of a few firms. It is for this reason that merger regulation plays a critical role in Zimbabwe’s economy. As provided in the Competition Act [Chapter 14:28] (“Act”), the Competition and Tariff Commission (“Commission”) is mandated to assess mergers and ensure that they do not harm competition or undermine the public interest. In carrying out its merger regulatory function, the Commission does not simply approve or reject mergers. In many cases but adopts a more nuanced approach- allowing transactions to proceed, but subject to specific safeguards. These are known as conditional approvals and are one of the most important tools available to competition authorities.

2.    How Merger Decisions Are Made
Every merger notified to the Commission undergoes a structured assessment process that determines whether the transaction is likely to substantially prevent or lessen competition or create a monopoly situation contrary to public interest. Substantive competition analysis focusing on the likely impact of the merger on market structure and competitive rivalry is conducted. This considers factors such as market concentration, market power, barriers to entry, import competition, vertical integration, countervailing power, and whether the transaction may eliminate an effective competitor from the market. The assessment is not limited to market shares but also examines the broader competitive dynamics of the relevant market to determine whether the merger is likely to result in higher prices, reduced consumer choice or exclusion of competitors. The Commission also considers whether one of the merging parties is a failing firm and the extent to which new competitors can enter the market.

Beyond competition analysis, merger regulation in Zimbabwe also incorporates public interest considerations. The Act requires the Commission, when determining whether a merger is contrary to public interest, to have regard to the desirability of maintaining and promoting effective competition in Zimbabwe, promoting the interests of consumers in relation to the price, quality and variety of goods and services, and encouraging the reduction of costs, innovation, efficiency, and the development of new products and techniques. In applying these provisions, the Commission considers the broader socio-economic implications of a merger, including its likely impact on employment levels and job security, the participation and competitiveness of small and medium enterprises, industrial development, investment, consumer welfare, and alignment with national economic and development policies. Public interest considerations therefore ensure that merger regulation contributes not only to efficient and competitive markets, but also to broader national economic development objectives and inclusive economic growth.

3.    The Three Possible Decisions by the Commission
At the conclusion of its assessment, the Commission may reach one of three decisions:-

1.    Approval without conditions, where the merger raises no competition concerns;
2.    Approval with conditions, where competition concerns exist but can be addressed through remedies/conditions; or
3.    Prohibition, where the merger significantly lessens competitions and the competition concerns cannot be adequately remedied.

While outright prohibitions often capture the most public attention, they are, in practice, the exception rather than the norm. Experience at the Commission shows that even for transactions that raise competition concerns, a decision to prohibit is typically reserved for the most extreme cases where no workable solution can adequately address the risks to competition. In most cases, where concerns are identified, the Commission adopts a more pragmatic approach by issuing conditional approvals. Through this mechanism, identified competition concerns are addressed by requiring the merging parties to implement specific remedies designed to preserve market competitiveness and protect the public interest. These remedies, whether structural or behavioral, enable transactions to proceed while safeguarding against anti-competitive outcomes. The nature, design, and application of these remedies are discussed in detail in the sections that follow.

4.    What Is a Conditional Approval?
A conditional approval allows a merger to proceed, but only if the merging parties comply with specific requirements imposed by the Commission. These conditions are carefully designed to address identified risks, ensuring that the transaction does not harm competition or the public interest. In essence, conditional approvals reflect a balanced regulatory approach. Instead of blocking potentially beneficial transactions, the Commission crafts solutions that mitigate harm while allowing economic activity to continue. This approach is particularly important in developing economies, where mergers can bring investment, innovation, and efficiencies, but also carry risks if left unchecked.

5.    Types of Conditions
Conditions imposed by the Commission generally fall into two main categories: behavioral remedies and structural remedies. Each serves a distinct purpose and is applied depending on the nature of the concerns identified.

Structural Remedies: Changing the Market Itself
Structural remedies address competition concerns by directly altering the structure of the market to preserve effective competition. These remedies typically require merging parties to divest certain assets, business units, subsidiaries, brands, shareholding interests, or operational facilities where the transaction is likely to create or strengthen market power. The objective is to prevent excessive market concentration and maintain competitive rivalry in the affected market. Examples of structural remedies include the divestiture of overlapping product lines or business units, sale of production plants, distribution facilities, retail outlets, or other strategic assets, and disposal of shareholding interests in competing firms. In certain cases, the Commission may also require the transfer of intellectual property rights, brands, or licenses to an independent competitor. Depending on the nature of competition concerns identified, a merging party may further be required to exit a specific geographic market or line of business altogether. 

Structural remedies are commonly imposed in mergers involving horizontal overlaps between direct competitors, particularly in markets characterized by high levels of concentration or significant barriers to entry. In such markets, likelihood of new firms entering and effectively constraining the merged entity may be limited, thereby increasing the risk of anti-competitive effects. One of the major advantages of structural remedies is that they generally provide a permanent and self-sustaining solution to competition concerns. Once implemented, they reduce the need for continuous regulatory oversight and ongoing behavioral monitoring. Structural remedies are therefore often regarded as both effective and administratively efficient, particularly in cases where the competition concerns arise directly from changes to market structure.

Structural remedies are commonly imposed in mergers involving horizontal overlaps between direct competitors, particularly in markets characterized by high levels of concentration or significant barriers to entry. In such markets, the likelihood of new firms entering and effectively constraining the merged entity may be limited, thereby increasing the risk of anti-competitive effects. One of the major advantages of structural remedies is that they generally provide a permanent and self-sustaining solution to competition concerns. Once implemented, they reduce the need for continuous regulatory oversight and continuous behavioral monitoring. Structural remedies are thus often regarded as both effective and administratively efficient, particularly in cases where competition concerns arise directly from changes to market structure.

Behavioral Remedies: Regulating Conduct Over Time
Behavioral remedies are designed to regulate the conduct of the merged entity following implementation of the merger. Unlike structural remedies, these do not alter the structure of the market, but rather impose obligations intended to prevent the merged firm from engaging in conduct that may harm competition, consumers, or other market participants. These remedies are particularly useful where competition concerns arise from the potential for anti-competitive behavior rather than from the merger itself creating excessive market concentration. Under behavioral remedies, the merged entity may be required to provide competitors with access to essential infrastructure, facilities, or services on fair, reasonable, and non-discriminatory terms. Other behavioral obligations may include prohibitions against exclusionary practices, discriminatory treatment of competitors or customers, tying and bundling arrangements, or refusal to supply. In certain cases, the merged entity may further be required to continue supplying existing customers, preserve separate brands, or maintain specified levels of production or employment for a defined period.

Behavioral remedies are generally ongoing in nature and therefore require continuous monitoring and enforcement by the Commission. To facilitate compliance, the Commission may impose reporting obligations, periodic compliance audits, or independent monitoring arrangements. 

6.    Conclusion
The Commission’s merger review process reflects a balanced and pragmatic approach to competition regulation. While the Commission retains the power to prohibit mergers that are likely to substantially prevent or lessen competition and cannot be adequately remedied, prohibition remains relatively rare in practice. In most instances, identified concerns are effectively addressed through conditional approvals, which allow transactions to proceed subject to safeguards aimed at preserving competition and protecting the public interest. Use of structural and behavioral remedies enables the Commission to tailor solutions to specific concerns arising from each transaction. Structural remedies are primarily aimed at preserving market structure and competitive rivalry, while behavioral remedies regulate the future conduct of the merged entity where ongoing obligations are necessary to prevent anti-competitive outcomes. Through these mechanisms, the Commission can address competition and public interest concerns without unnecessarily hindering investment and commercial activity.

As markets continue to evolve and businesses increasingly pursue strategic consolidations, merger regulation remains an important tool in ensuring that economic growth takes place in a manner that promotes fair competition and broader national development objectives. Through careful merger assessment and the effective application of remedies where necessary, the Commission continues to promote markets that are competitive, efficient, and responsive to the needs of the economy.