COMPETITION TRIBUNAL
REPUBLIC OF SOUTH AFRICA
Case Number: 41/LM/Mar00
In the large merger between
Imperial Holdings Limited
and
The Cold Chain (Pty) Ltd
Reasons for the Competition Tribunal’s Decision
Approval
The Competition Tribunal issued a Merger Clearance Certificate on 25 May 2000
approving the merger between Imperial Holdings Limited and The Cold Chain
(Pty) Ltd with conditions. The reasons for our decision are set out below.
The merger transaction
ICS and Foodcorp each own 50% of The Cold Chain. ICS is a wholly owned
subsidiary of Tiger Oats Limited and Foodcorp is a subsidiary of Foodcorp
Holdings (Pty) Ltd.
Imperial will acquire all the current shares held by ICS and Foodcorp in the Cold
Chain. It regards the merger as a diversification of its business.
The relevant market
The Cold Chain operates as a full service merchandiser and distributor. Its core
business is its interaction with retailers and food service providers (such as the
catering industry, army and prisons) on behalf of the manufacturers of frozen or
chilled products in order to meet the needs of the retailers (and food service
providers) and to increase the level of value that is offered to those entities. Its
bundled service include the warehousing and physical distribution under
refrigerated conditions of a manufacturer’s products, taking orders through tele
marketing, the bundling of products of various manufacturers for a specific
retailer and then distributing it on a regular basis, rotation of products on the
retailer’s shelves, invoicing and collecting of debt etc. It also operates as a del
credere agent in that it guarantees payments due to its customers by the persons
to whom products are distributed. The Cold Chain’s major competitors are I & J,
Sacca and various retail chains’ own distribution centers. Although I & J and
Sacca are mainly inhouse distribution companies they also distribute for outside
companies.
Imperial operates in the market for the provision of the long haulage of foodstuffs
at controlled temperatures in thirtyfour ton refrigerator trucks, such as inter
depot transport, transport between abattoirs and commercial cold stores, inter
factory transport and transport between farmers and fresh produce markets. Its
main competitors are Portnet, Kuyabunda/Supergroup, Van Der Fyfer and other
smaller competitors. This market, according to Imperial, generally operates
through the use of transport brokers that identify long haulage transporters on
behalf of a customer.
Evaluating the merger
Although the transportation of products at controlled temperatures is an aspect of
both the businesses of the Cold Chain and Imperial, the Tribunal is satisfied that
the bundled services rendered by Cold Chain cannot be substituted by those
offered by Imperial. Imperial offers long haul, single drop and bulk transportation
offered by Imperial. Imperial offers long haul, single drop and bulk transportation
services as opposed to Cold Chain’s bundled service of which the transport of
products are done over short distances in “small fleet” refrigerator vehicles. The
parties are therefore not competing in the same relevant product market.
The Tribunal was, however, concerned about the vertical aspect of the merger.
The merger might put Imperial in a position where it can tie the two relevant
service markets when concluding contracts with customers. However, we are of
the opinion that strong countervailing power exists in both the manufacturing and
the retail ends of the service markets. Moreover, the presence of Brokers in the
long distance haulage market should also ensure that there is sufficient
competition between competitors in this service market.
Another issue of concern to the Tribunal was clause 17.1 in the Sale of Shares
2
Agreement of the Parties, in which Tiger Oats undertook to give Imperial a
preferential right for an unlimited time should it decide to enter into a distribution
agreement. However, in reaction to our concerns the parties agreed to remove
this clause in its entirety.
The Tribunal is also satisfied that the merger does not raise any public interest
concerns listed in section 16(3).
D.H. Lewis Date 12 June 2000
Concurring: N.M. Manoim, D.R. Terblanche
3