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Mpact share price tanks after CompCom raid

Commission says it has grounds to suspect New Era and Mpact engaged in collusive practices.

The share price of paper and plastic packaging company Mpact dropped sharply on Thursday following a raid by the Competition Commission (CompCom) on its offices as well as those of New Era Packaging in Gauteng and the Free State.

Despite rising as much as 1.8% in early trade, the price fell sharply by 3.4% to R37 after the CompCom sent out a press release. Shares closed down 2.9% at R37.19.

In a Sens statement, Mpact acknowledged the raid and said management is engaging with the commission. “Mpact management, together with its board of directors have zero tolerance towards anti-competitive behaviour. The company is committed to ensuring that its employees, management, and directors do not engage in any conduct that constitutes prohibited practice. To this end, Mpact has put in place numerous initiatives to ensure good corporate governance across all its operations,” the announcement read.

Earlier, the commission said in a statement that it has “reasonable grounds to suspect that New Era and Mpact have engaged in collusive practices” in contravention of the Competition Act.

“Packaging paper products are an important input and certainly contribute to the costs of various products requiring paper packaging and as such, the Competition Commission takes allegations of collusion in this sector seriously. Once this investigation has been completed, we will prosecute any firm found to have acted in contravention of the Competition Act,” Competition Commissioner, Tembinkosi Bonakele said in the statement.

New Era and Mpact are the two largest producers of various packaging materials. This includes various packaging sheets sold inter alia to other suppliers who manufacture and sell packaging products to various consumer goods and other sectors, mostly in competition with New Era and Mpact.

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Unfortunately, precedent is set, don’t stress, what’s the fuss, pay 10% fine like the Major Construction Companies and carry on business as usual, right? Or will the Competition Commission really try to impress their validity and take steps that will sink both companies, makes us wonder…..

End of comments.

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