THE Competition and Tariff Commission (CTC) has approved without conditions Old Mutual Zimbabwe (OMZ)’s acquisition of Marsh Zimbabwe (Marsh), an insurance and reinsurance broker business.
marsh has an insurance and reinsurance broker business in Zimbabwe, and also offers pension administration services.
Old Mutual is a Zimbabwean-registered company with various subsidiaries operating in the financial services sector and related markets.
Its operations involve short-term and life insurance, asset management, stock broking, funeral, and banking services.
In its latest newsletter, CTC indicated that it was notified of the acquisition in October last year.
In 2017, CTC launched its competition policy whose goal is to address challenges related to the control of mergers and acquisitions, anti-competitive agreements, cartels, and misuse of market power in key sectors.
“The commission classified the transaction as a vertical merger because there is a customer-supplier relationship between Old Mutual and marsh,” said CTC.
“The commission defined the relevant markets as the provision of short-term and life insurance and insurance broking services to the whole of Zimbabwe.
“Though both merging parties offer pension administration service, their contribution to the total fund administration services offered in the market is less than six percent and its contribution towards the business revenue and activities is insignificant.”
In considering the acquisition, the commission noted that it looked at the theories of harm that affect vertical mergers namely input and customer foreclosure.
Foreclosure, in this case, was analysed in line with the insurance broking and short-term insurance services only, said CTC.
Input foreclosure arises when the merges entity restricts access to the products or services that it would have supplied if the merger had not taken place.
CTC said the risk for competition relates to the effects from increases in input costs for rivals on the downstream market, especially if the merging firm has market power in the upstream market.