COMPETITION TRIBUNAL
REPUBLIC OF SOUTH AFRICA
Case No: 33/LM/Jun01
In the large merger between:
Imperial Holdings Limited
and
Tourism Investment Corporation Limited
_______________________________________________________________________
Reasons for the Competition Tribunal’s Decision
_______________________________________________________________________
APPROVAL
On 4 July 2001 the Competition Tribunal issued a Merger Clearance Certificate
approving the merger between Imperial Holdings Limited and Tourism Investment
Corporation Limited without conditions in terms of section 16(2)(a). The reasons for the
approval of the merger appear below.
The merger transaction
1. The primary acquiring firm, Imperial Holdings Limited (“Imperial”), is acquiring
all or part of the ordinary shares in Tourism Investment Corporation Limited
(“Tourvest”), the primary target firm.
2. Both companies will postmerger retain their primary listings on the Johannesburg
Stock Exchange and continue to conduct their respective businesses separately.
EVALUATING THE MERGER
The relevant market
3. Imperial, has over 30 subsidiaries in South Africa. Though primarily known as a
transport and financial services group, it conducts through its various operations,
a vast array of services including transport, motoring, car rental and tourism,
trucking, aviation leasing, logistics and fleet management outsourcing and
forklifts. Its financial services wing is involved with the supply of banking, short
term insurance and life assurance products. Imperial’s financial services business
has recently been sold to Nedcor.
Imperial’s tourism arm consists of an inbound tourism service only. 1
It has two major brands operating in this market. SpringbokAtlas
focuses specifically on the European and Australasian markets. They
market standard tour packages to international operators and also
sell individual packaged holidays. This brand also has a transport
service which transports tourists on their fleet of luxury and semi
luxury coaches. Secondly, Imperial owns the Grosvenor Tours brand,
which caters to both the North and South American markets.
4. Tourvest is primarily engaged in two areas: (i) travel and financial services and
(ii) retail merchandise. Like Imperial, it also boasts a stable of over 30
subsidiaries in South Africa, through which these activities are conducted.
(i) Travel
Tourvest’s travel arm consists of three divisions: Inbound Tourism Services Unit,
Outbound Travel Solutions and a socalled “Dotcom unit”.
i.Inbound Travel
The Inbound Tourism Services Unit offers travel tour operators and product
companies targeting the incoming overseas and regional travel market. It
comprises a range of service operators including Autshumatu Marine Services ,
(offering ferry and leisure cruises in the Western Cape); Baz Bus (a backpacker
hopon hopoff bus service to tourist centers around the country) ; Africa
Shongololo Express (a train cruise service around the country); Crown Travel,
Incentive Touring, Welcome Tours & Safaris, Willson Collins Travel ( tour
operators specializing in individual, group and specialized scheduled holidays) as
well as Sunbound Toursand Safaris ( safari drives).
ii.Outbound Travel
Tourvest’s outbound travel arm is grouped with financial services and comprises
three categories of business, namely outbound travel agents, wholesalers and
product providers; adventure tourism & safari operators and foreign exchange.
Wellknown brands include Seekers Travel, American Express Travel, Starlight
Cruises, Safpar White River Rafting and Wild Horizons Elephantback Safaris.
Dotcom Unit
1 A generic term which describes international tourism into a particular country. It includes tour operators,
transport (car and coach rentals), accommodation and tour guide services. See Commission report page 3
Tourvest’s dotcom unit houses a range of ecommerce internet initiatives targeted
at both the inbound and outbound tourism community. Well known websites
include travel.co.za; amex.co.za and lastminute.com.
(ii) Retail Merchandise
5. The Retail Merchandise division houses the group’s tourist retail business,
designed to focus on inbound, foreign tourists. Outlets are predominantly
strategicallybased at Johannesburg and Cape Town International Airports and
major shopping centres. They include Curio MegaStore, Big 5 Duty Free Store,
Derek Bauer, Tanur Jewellery.
6. The Commission identified the area of overlap between the parties’ services as
being that of providing the services of inbound tour operators to the incoming
tourist market. Tourvest is not involved in either the transport or tour guide
services aspects of inbound tourism directly. 2 Similarly, Imperial does not
provide any outbound or retail merchandise tourism services.
7. The Commission identified the geographical market as the whole of South Africa
since both companies operate throughout South Africa.
9. The Tribunal agrees with this definition of the relevant market.
Impact on competition
10. The Commission calculated the market shares for the relevant market, inbound
tour operator services, as follows 3:
Firms No. of incoming tourists Market share
Imperial 40,000 0.62%
Tourvest 115,000 2,5%
Total 4,6 million 100%
Source: SATour figures
11. Accordingly, this would leave the parties with a 3.12% postmerger market share
in the relevant market. The Commission stated that exact empirical data was not
available. Conversations the Commission had with the South African Tourism
Service Association, (“SATSA”) revealed that these were not large players and
2 The Commission states that Imperial is vertically integrated into coaches and car rental services, however
its market position in this respect is not altered by this merger.
3 These calculations are based on figures provided by SATour, based on the estimated amount of tourists
coming to South Africa per annum. Clearly not all make use of the services of inbound tourist companies
so this statistic is unreliable.
that they were in no form, dominant or to be dominant post merger.
12. However at the hearing, the parties indicated that the inbound tour market is
further stratified into “niche” markets – the coachbased package tours and the
“FIT”, or individual itinerarybased traveller market. Accordingly, on the
narrower assessment of the market, it would seem that the Commission’s market
share estimates are somewhat general and could understate the true position. It
would appear that tour operators operate in differentiated “niche” markets. No
market share information was presented to reflect this market.
13. The parties conceded at the hearing that the largest operators in the small niche
coachbased tour market were Tourvest’s Welcome operation and Imperial’s Springbok
Atlas brand. Notwithstanding this admission, they allayed any competition concerns
raised by the merger of the two largest competitors in this niche market by stating that the
packagedtour market is presently relying on a rapidlydwindling customer base.
Consumers are now choosing FIT, itinerybased tours, a market for which there are
countless operators. As a result, a great deal of rationalization is required to keep pace
with the changing profile of the industry. In order to respond to the dynamic nature of
the industry, the parties are hoping to achieve significant synergies, economies of scale
and rationalization benefits through this merger.
Barriers to Entry
14. SATSA indicated that there are 650 registered tour operators straddling all niche
markets. The larger players in the inbound tourism industry include RCI,
Thompsons, Into Africa, Wilderness Tours and Safaris, Hilton Ross, Magari
Safaris and ERM. There are also many smaller operators.
15. It would appear that entry into the tour operator market is relatively easy. Tourism
is very accessible, with minimal capital outlay requirements. From the parties’
is very accessible, with minimal capital outlay requirements. From the parties’
submissions, it would appear that the inbound tourist customer base is very
sophisticated and discerning. They are likely to “shop around” and compare prices
in an industry where pricing is very transparent. Therefore any arbitrary price
increase by the merging parties via their tour operators would in all likelihood
result in consumers merely switching to alternate (cheaper) operators.
16. The Tribunal therefore endorses the Commission’s view that this merger will not
result in the substantial lessening or prevention of competition in any market.
Public Interest Considerations
17. The merger raises no public interest concerns since Tourvest and Imperial will
continue to conduct their operations separately.
_____________ 11 July 2001
N. Manoim Date
Concurring: D.H. Lewis, P. Maponya