Competition Commission puts the kibosh on British American Tobacco deal
BAT SA’s expansion plans included acquiring vaping company Twisp, but the commission says the deal would ‘result in unilateral effects’, such as price increases
The Competition Commission has dealt a blow to British American Tobacco (BAT) SA’s plans to expand into e-cigarettes in SA with the acquisition of the biggest vaping company Twisp, and has blocked the deal on the grounds that it would substantially lessen competition.
BAT SA announced in December that it would acquire Twisp for an undisclosed sum, subject to regulatory approval. At the time, its CEO Soraya Benchikh said the company was "committed to the growth of our next-generation products business and it was only natural that we extend our offering in SA with a range that is familiar to this market".
On Thursday, the Competition Commission said it would recommend to the Competition Tribunal that the transaction be prohibited, because it would result in the removal of a potential competitor. Its investigation found there were separate markets for the supply of cigarettes and e-cigarettes; BAT was a leading supplier of e-cigarettes in Europe and the US, while Twisp dominated the local e-cigarette market.
"Given BAT’s presence in the e-cigarette market internationally … BAT could have potentially entered the South African e-cigarette market absent this transaction and it would have been in a position to compete effectively against Twisp, the largest and dominant e-cigarette supplier in the country," said the Commission in an e-mailed statement.
"The merger is likely to result in unilateral effects, which may manifest in the form of an increase in prices of e-cigarettes in future (or a reduction in the rate of price reductions that could potentially occur with BAT’s entry), and/or a reduction in the quality or rate of innovation of e-cigarette products offered post-merger."
The commission said it had received a number of submissions from third parties. BAT SA had not provided any efficiency justifications or remedies to alleviate the concerns it raised. "For this reason, the commission recommends that the proposed transaction be prohibited."
BAT SA was not immediately available for comment. Twisp said it has yet to receive formal notification of the commission’s decision, and could therefore not respond.
Twisp was established in 2008 and sells vaping products that include devices, flavours and accessories through branded kiosks, retail outlets and online channels.