The Competition Commission (CompCom) has prohibited a proposed merger between Jasco Electronics Holdings and Cross Fire Management.
It found it would likely "substantially prevent or lessen competition in the provision of active fire protection systems".
Jasco planned to acquire 65.4% of Cross Fire for R52.3 million but the commission says the merger will likely lead to a consolidation of the market in Gauteng and the Western Cape.
"The merger will result in a reduction of the number of firms in markets that are already highly concentrated. This will make it easier to perpetuate existing cartel conduct of price fixing, market allocation and collusive tendering," the CompCom says in a statement.
Jasco Electronics provides converged ICT offerings for carriers and enterprises across various sectors, and its subsidiary, Jasco Fire, is active in the fire protection industry. Jasco Fire designs, supplies and installs fire protection systems, as well as manufactures the pipes used in fire protection systems.
Cross Fire provides the design, supply, fabrication, installation, servicing and maintenance of fire protection systems. It does not manufacture pipes used in fire protection systems but sources the supply of pipes and installation services from third parties. It offers a turnkey solution to customers although it outsources the fabrication and installation elements.
The CompCom says it is concerned the merger will result in the removal of a potential disruptor in the market, Jasco Fire, which has not been implicated in cartel conduct.
"The commission has referred several companies in the industry to the tribunal for price fixing, division of markets and collusive tendering. Two implicated companies in the cartel have already entered into settlement agreements with the commission.
"Cross Fire is one of the firms implicated in the cartel and the commission believes Jasco Fire will be incorporated into the cartel and the consolidation of the market will enhance or strengthen coordinated effects post-merger."
The authority says the remedies offered by the merging parties were not sufficient to address the harm identified and it therefore decided to prohibit the proposed transaction.
Jasco responded in a statement that it did not share the views of the Competition Commission and "might appeal the decision for reconsideration by the Competition Tribunal".
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