Toyota, CFAO Malawi merger worrisome

Experts have expressed concern over the pending merger between Toyota Malawi and CFAO Malawi, arguing it will affect competition, quality of service and employment in the motor industry.

Business News gathered that the Competition and Fair Trading Commission (CFTC) issued an interim approval for the merger of the two companies in December 2012.

In an e-mailed response on Monday, CFTC acting executive director Charlotte Malonda confirmed the application and said the process to authorise the merger is still underway.

“An application was made on October 9 2012, for authorisation of acquisition of 41.99 percent shares in CFAO by Toyota Tsusho Corporation, giving it exclusive control of CFAO Malawi Limited. CFTC issued an interim approval for the merger, pending a final order after relevant market players have made an input. Relevant stakeholders include competitors, relevant government ministries and the leading customers for the companies in Malawi. A final relevant order of the commission shall be given thereafter,” said Malonda.

In an interview on Tuesday, Toyota Malawi managing director Rosemary Mkandawire said the two companies are separate entities and will continue to operate as such.

But CFAO managing director David Blair when contacted on Tuesday declined to comment on the matter. The company—which sells and services Nissan, Ford and Suzuki motor vehicles—said it was yet to be briefed of the developments by their parent company based in France.

In an interview on Tuesday, Economics Association of Malawi (Ecama) executive director Nelson Mkandawire said the pending merger will certainly affect competition and quality of service on the local market.

“We have enjoyed the products and services of the two companies separately and this acquisition will certainly affect choice. This will give consumers a challenge on choice in terms of quality and prices. Obviously, the quality of services will be compromised since these are the biggest companies in the local motor industry,” said Mkandawire.

He pointed out that there might be some gains in terms of technology transfer and sharing but overall he said the customer would lose out.

In December 2012, Toyota Tsusho bought CFAO, a French trading company, an acquisition approved by the EU Commission.

Toyota Tsusho bought the first 29.8 percent of CFAO in August 2012, followed by a tender offer that began in October 2012 that raised its stake to 88.2 percent.

In Zambia, the Competition and Consumer Protection Commission rejected the merger of Japanese conglomerate Toyota Tsusho Corp and France’s CFAO, arguing it would lessen competition in that country’s car market.

Zambia’s regulator noted that the local companies are both involved in the selling and distribution of new vehicles and parts as well as servicing vehicles. The regulator argued that allowing the merger would give the two companies a combined market share of 75 percent.

The regulator said the merger would create a situation where decisions of the merged entity may influence others as far as market dynamics are concerned, such as pricing and product availability.