Merger Controls in Tanzania: Key Lessons from the Fair Competition Tribunal’s decision in Tanga Fresh Limited v The Fair Competition Commission, Tribunal Appeal No. 5 of 2014

Tanga Fresh Limited (the Appellant), a dairy company operating in Tanzania, was found by the Fair Competition Commission (FCC) to have contravened merger notification requirements under the Fair Competition Act, No. 8 of 2003 (the FCA).

In 2011, the FCC was informed that the Appellant had acquired Morani Dairy Company Limited and International Food Processors Limited (the Acquired entities). The acquired entities were both engaged in the collection of milk from local farmers and the processing of dairy products in the Tanga region. Following these acquisitions, the Appellant became the dominant dairy producer in the region.

The FCC investigated the matter and found that the Appellant had failed to notify it of the transactions as required under section 11 of the FCA. Nevertheless, between 2012 and 2013, the FCC issued statements of objection and provisional findings, to which the Appellant submitted responses. However, the Appellant later failed to pursue settlement discussions and did not attend the scheduled hearings.

Consequently, the FCC found that the Appellant had:

(a)    failed to make the required merger notification; and

(b)    strengthened its dominant market position in contravention of the FCA.

The FCC imposed a fine of TZS 460,945,000, representing 5% of the Appellant’s annual turnover for the year 2009. Aggrieved by the decision, the Appellant appealed to the Fair Competition Tribunal (the Tribunal).

Issues for determination on the Appeal

The Tribunal was called upon to determine whether:

(a)    there was contravention of principles of natural justice as the appellant was not given the right to be heard;

(b)    the FCC erred in law by holding that the appellant had admitted the offences;

(c)    the FCC erred in law and fact in holding that the alleged transactions amounted to a merger;

(d)    the FCC erred in law and fact in failing to realize that, during the alleged transactions the sellers thereof were no longer in business;

(e)    the FCC erred in fact and in law by finding that the appellant was in contravention of the law without proof of acting negligently and with intention to contravene the law; and

(f)    the FCC was wrong in holding that the appellant’s actions were in contravention of the law.

Findings by the Tribunal

Procedural fairness and right to be heard

The Tribunal held that the Appellant was not denied the right to be heard and that the proceedings before the FCC were conducted in full compliance with the law. It found that the FCC complied with the Fair Competition Commission Procedure Rules, Government Notice No. 73 of 2013 (the FCC Rules), particularly Rules 20, 21, and 23.

The Tribunal found that the Appellant was duly notified of the allegations, provided with the evidence relied upon by the FCC, afforded an opportunity to submit written representations, invited to attend an oral hearing, and given the opportunity to engage in settlement discussions.

The Tribunal further affirmed that administrative bodies are masters of their own procedures and, relying on Knight v Indian Head School Division (Supra) as persuasive authority, concluded that the requirements of procedural fairness were fully satisfied.

Alleged admission of offence

With respect to the allegation that the Appellant had not admitted the offence, the Tribunal found that the Appellant had acknowledged the allegations and initiated settlement discussions. The Appellant’s subsequent failure to attend scheduled hearings, despite reminders and rescheduling, amounted to an abandonment of the process.

Accordingly, the Tribunal held that the Appellant could not rely on an alleged lack of admission to challenge the FCC’s findings. Rule 22(9) of the FCC Rules was deemed inapplicable, as the Appellant had already admitted the allegations and sought settlement.

Merger determination and notification requirement

The Tribunal rejected the Appellant’s argument that the transactions constituted mere asset purchases rather than a merger. It held that, under section 2 of the FCA, a merger includes the acquisition of shares, a business, or assets resulting in a change of control over a business or part thereof.

The Tribunal found that the acquired assets formed part of an economic entity actively engaged in milk collection and dairy processing. Furthermore, the value of the transactions exceeded the threshold prescribed under the Fair Competition (Notification Threshold) Order, rendering notification mandatory.

Moreover, the Tribunal dismissed the Appellant’s reliance on ordinary dictionary definitions and the mischief rule, emphasising that competition law requires an economic, rather than a purely linguistic, interpretation. It also relied on international guidance from the International Competition Network (ICN) Recommended Practices for Merger Notification and Review, which recognises acquisitions of all or substantially all of a business’s assets as notifiable mergers.

Failing firm defence

The Appellant contended that the acquired entities were failing firms. However, the Tribunal found no evidence to support this claim. Moreover, the Appellant had neither applied for merger clearance under section 11(2) nor sought an exemption under section 13(1)(a) and (c) of the FCA, both of which are prerequisites for invoking the failing firm defence.

The Tribunal reiterated that, to successfully rely on the failing firm defence, the following conditions must be satisfied:

(i)    the failing firm would in the near future be forced out of the market because of financial difficulties if not taken over by another undertaking;

(ii)   there is no less anti-competitive alternative than the merger, and

(iii)  that in the absence of the merger, the assets of the failing company would inevitably exit the market.

Negligence versus Intentional Conduct

The Tribunal considered whether the Appellant’s conduct was negligent or intentional. It concluded that, although there was no evidence of malicious intent, the Appellant had acted negligently by failing to conduct proper regulatory compliance due diligence prior to the acquisitions. The failure to comply with statutory notification requirements amounted to gross negligence and constituted a violation of the FCA.

Legality of the appellant’s conduct

The Tribunal ultimately held that the transactions met the statutory definition of a merger, exceeded the applicable notification threshold, and were implemented without prior clearance or exemption from the FCC. Accordingly, the Appellant’s conduct was unlawful under sections 11(2) and 13 of the FCA.

Additional Observations

The Tribunal noted that the merger had been implemented and operational since 2009 without notification, amounting to a breach of the standstill obligation, commonly referred to as “gun-jumping”. It emphasised that merger control plays a critical role in protecting competition and consumer welfare.

The Tribunal also considered Tanzania’s broader industrial and competition policy framework, including the Sustainable Industries Development Policy (SIDP 1996–2020), observing that proper merger scrutiny could have promoted efficiency and sustainable growth in the dairy sector.

No third-party interventions were filed under Rule 17 of the FCC Rules, 2012, suggesting an absence of demonstrated harm to competitors or consumers. The Tribunal further referenced European jurisprudence on penalties for non-notification of mergers, citing cases such as IV/M.920 – Samsung/AST and IV/M.969 – A.P. Moller.

Conclusion

This decision firmly establishes that asset acquisitions resulting in a change of control constitute notifiable mergers under Tanzanian competition law. The Tribunal confirmed that failure to notify a merger attracts liability irrespective of intent, with negligence alone being sufficient. The judgment underscores the importance of early competition law assessment and strict compliance with merger notification requirements, particularly in concentrated markets.