Islamabad: After an in-depth second stage review, the antitrust regulator has approved Packages Limited (PL) to acquire Tri-pack Films Limited (TFL) from Mitsubishi Corporation (MC).

The approval means that Packages Limited can advance its plan to acquire shares in the business of Tri-pack Films Limited from Mitsubishi.

According to the merger order, a copy of it can be obtained from Business Recorder. The Chairman of the Competition Commission of Pakistan (CCP) is composed of its chairman Rahat Kaunain Hassan and members Shaista Bano and Mijtaba Ahmed Lodhi. Approval of Article 11.

The acquirer Packages Limited is a public limited company and investment holding company engaged in various businesses, including packaging materials, household paper and consumer products, industrial inks, insurance and power generation.

Mitsubishi Corporation (seller) is an enterprise group engaged in various businesses such as industrial materials, natural gas, mineral resources, finance, machinery, and petroleum and chemical solutions.

Tri-pack Films Limited produces and sells biaxially oriented polypropylene film (BoPP) and cast polypropylene film (CPP) films, which are most suitable for food and beverage applications such as snacks, confectionery, dairy products, fresh-cut vegetables and non- Food applications, such as outer packaging, lamination and bag making.

CCP notified the proposed transaction through the purchaser (Packages Limited) notice on the Pakistan Stock Exchange data portal on February 19, 2021.

After thorough communication with TFL and the acquirer regarding the submission of the pre-merger application, Packages Limited submitted an application for the transaction to CCP, and the information was completed on August 11, 2021.

The Commission stated in its first phase order that it expressed concerns about the compatibility of the subject merger with antitrust laws.

Therefore, the second-stage review was initiated in accordance with Article 11(6) of the Act.

Based on the information provided to the two members of the committee, the committee issued the first phase order, which was read in conjunction with Article 31 of the Act under Article 11(5), in which the relevant product market, in this case, was determined to be a two-way Stretched polypropylene film (BOPP or "Related Market 1") and cast polypropylene film (CPP or "Related Market 2"), and the relevant geographic market is Pakistan.

It is further determined that the proposed transaction complies with the presumption of dominance read in Article 2(1)(e) together with Article 3 of the Act. Therefore, a more detailed assessment is required during the second stage of the review to determine whether the transaction will significantly Reduce competition in related markets.

On September 7, 2021, after the first phase of the order was approved, the committee sent the first letter to the acquirer requesting information to assess the impact of the proposed acquisition on the packaging industry in Pakistan.

The required information includes, but is not limited to, the complete list and market share of competitors in the relevant market 1 and relevant market 2, a detailed list of products and services provided by the acquirer, the nature and details of the transaction, and the list of customers of the merging party separately providing all product and service.

In order to listen to the opinions of all parties to the merger, the CCP held a hearing on October 8, 2021.

At the hearing, the lawyer made a preliminary argument on behalf of the acquirer on the seller’s decision to withdraw from Pakistan, and argued that the transaction will not increase the acquirer’s dominant position because the acquirer has already occupied a dominant position in the market because the target company already has a relatively high position. Large market share, and the acquirer has management control over the target company before the transaction.

The lawyer further elaborated that all transactions with sister companies were conducted on a fair trade basis, which was disclosed in the annual report.

In addition, the target company has formulated a policy called "related party transaction policy" to ensure that related party transactions are conducted on the basis of fair transactions.

BOPP is one of the materials used for flexible packaging and labeling of food (such as candy, biscuits, snacks, tea, etc.) and non-food sectors (labels, textile bags, tobacco, medicines, etc.). The upstream of BOPP film manufacturers are polypropylene producers, and the downstream BOPP film is mainly supplied to processors and large multinational consumer goods manufacturers. BOPP film can be subdivided into transparent, white/opaque and metal-plated plastic materials.

Cast polypropylene film (CPP) is a cost-effective, low-density, high-performance transparent cast polypropylene film. CPP film is generally considered to have optical transparency, high gloss, good seal strength and processability, and resistance to tearing and puncture. These characteristics make this plastic suitable for medical, food packaging and textile industries.

The target company is only engaged in the manufacture and sale of BOPP and CPP films, so the relevant product markets are the same as those determined by the committee in its first phase order, namely the relevant market 1 and the relevant market 2. Given that the target company sells its products to customers located in various parts of Pakistan, the relevant geographic market has been regarded as the whole of Pakistan.

According to a theory of damage described in the order, the transaction increases the possibility that after the merger, the parties to the merger and their competitors may coordinate their actions in an anti-competitive manner because there are only three main factors related to market participation In addition, due to the high concentration of the market, smaller companies may be driven out of the industry.

The Securities Regulatory Commission conducted a detailed assessment of the competition in the relevant market by consulting all relevant materials, documents and facts filed, and believed that the purchaser's transaction would not have an adverse effect on the competition in the relevant market. The committee also found no history of collusion or any other anti-competitive practices in the relevant market.

The committee judge concluded in the order that the acquisition transaction is unlikely to significantly weaken competition in the relevant market, and it will neither create nor strengthen a dominant position, because the acquirer’s control position remains effective.

According to the order, the approval of this equity acquisition is based on the commitment submitted by both parties to the acquisition (ie the target company and the acquirer) that the parties to the acquisition will continue to operate in accordance with the principle of fairness in any transaction and will not abuse their dominant position. Strictly abide by the 2010 Competition Law and participate in or implement any anti-competitive practices. In addition, in accordance with Article 11 and Article 14 of the Competition Law, the Commission reserves the right to evaluate and review transactions in the relevant market on its own or at the request of any other relevant enterprise.

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