COMPETITION TRIBUNAL
REPUBLIC OF SOUTH AFRICA
Case No: 68/LM/Dec01
In the large merger between:
Unitrans Motors (Pty) Ltd
and
The Motor Division of Senwes Ltd
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Reasons for Decision
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APPROVAL
On 17 January 2002 the Competition Tribunal issued a Merger Clearance
Certificate approving the merger between Unitrans Motors (Pty) Ltd and the
Motor division of Senwes Ltd in terms of section 16(2)(a). The reasons for the
approval of the merger appear below.
The Parties
The primary acquiring firm Unitrans Motors (Pty) Ltd (“Unitrans”). Unitrans is
controlled by Unitrans Motors Enterprises (Pty) Ltd, which is ultimately controlled
by Unitrans Ltd. 1
The primary target firm is the Motor Division of Senwes Ltd (“Senwes”), the
majority of which is controlled by Senwebel Ltd, with the remaining shares being
held by a group of farmers.
Both companies operate motor vehicle dealerships. Unitrans is a franchise
dealer, that is, it distributes vehicles of a number of different manufacturers in
terms of franchise agreements.
1 Unitrans’ subsidiaries are the Motor Retail Division, Autocare Warranty (Pty) Ltd, Contract Lease Management
(Pty) Ltd, Unitrans Finance (Pty)(Ltd) and Alisa Holdings (Pty)(Ltd). Unitrans is listed, with Murray and Roberts
having shareholding of about forty odd percent, Steinhoff, the next biggest shareholder has thirteen (13) approximately,
and a there are a range of institutional and individual shareholders.
The merger transaction
Unitrans is acquiring ownership and control of the motor division of Senwes,
specifically its motor vehicle dealerships and petrol service stations
conducted under the Senwes names. These include 8 outlets located in
Kroonstad (Toyota, VW, Delta), Vryburg (Toyota), Hartswater (Toyota, Delta) and
Klerksdorp (Volkswagen and Ultra Motors). Senwes’ other remaining dealerships
will be either sold or closed.
The dealerships being acquired will be absorbed into Unitrans’ existing
administrative and management infrastructures and will augment Unitrans’
product offerings to clients in areas where they already have a retail presence. 2
Rationale for the Transaction
According to the parties, Senwes has invested in several socalled “platteland”
dealerships in the Free State, North West and Northern Cape. They have not
generated sufficient returns and are detracting from Senwes’ agricultural focus,
hence its desire to get out of motor retailing.
The relevant product market
The merging parties both sell new and used motor vehicles and provide parts
and servicing for the following motor vehicle brands:
Toyota
Delta
Volkswagen and
Audi
New Vehicle Sales
The segments where the activities of the merging parties overlap, or where both
parties are active, according to the Commission, are:
Entry level vehicles
Small vehicles
Light vehicles
Topline vehicles
2 Unitrans dealerships : See Annexure C1 to Competitiveness Report.
2
Medium vehicles and
Station wagons.
Commercial Vehicles
In the commercial vehicle market the Commission found the only area of overlap
to be busses, but did not elaborate further on this market in their report. During
the hearing it emerged that “busses” in this context refer to minivan busses such
as Hiace.
Other product offerings
The Commission did not examine in detail the used car, aftersales servicing or
spare parts markets since they found that in these markets the barriers to entry
are low; there are high levels of competition in each market, therefore there are
no competition concerns.
Geographical Market
Senwes has eight outlets located in Northern Cape, Free State, North West.
Unitrans’ outlets are located across the country. The parties delineated the
markets according to provinces – Northern Cape, Free State, North West – since
this coincides with the NAAMSA classification where data is rich; also Dealer
Area Responsibility is stipulated in franchise agreements. However, it was
conceded that customers are not bound to a particular area when buying cars
and the trend is to buy from dealers within close proximity to their work or
residence, suggesting a local market.
The Commission found that the only area of overlap where both parties are
active is Klerksdorp because this is where Unitrans and Senwes both have
dealerships. Senwes is involved in the VW and Audi brands here and Unitrans
with Toyota. Accordingly, within this geographic area of overlap, the merging
parties sell different brands:
Klerksdorp Kroonstad Vryburg Hartswater
Toyota Unitrans Senwes Senwes Senwes
Delta Senwes Senwes
Volkswagen Senwes Senwes
Audi Senwes
Therefore in Klerksdorp (shaded area is area of overlap):
Unitrans sells Toyota
3
Senwes sells Volkswagen, Audi.
The Commission accepted the information provided by NAAMSA and NAADA, to
the effect that the geographic area could conceivably be broader than
Klerksdorp, since customers of the merging parties can source their vehicle
requirements from the Klerksdorp, Potchefstroom or Orkney areas. The Tribunal
agrees that an analysis confined to the Klerksdorp area only would be too narrow
a market definition, therefore the geographic area to be analysed should rightly
be Klerksdorp including these three areas (which we shall for convenience refer
to as the “greater Klerksdorp” area).
Market Shares
The market shares furnished by the Commission for the greater Klerksdorp area,
in each of the overlapping market segments are as follows 3:
Table 1: Competition per Segments for the greater Klerksdorp area
Segment Toyota VW4 Post Merger
Entry Cars 12.9 9 21.9
Small Cars 8.6 17.2 25.8
Light Cars 17 12 29
Topline Cars 2 30 32
Medium Cars 5 21 26
Minivan Busses 25 25 50
Source: Competition Commission Report
Effect on Competition
New Vehicles
The merger will result in the coming together of two independent dealer
networks. In the affected area, the greater Klerksdorp area (including
Potchefstroom and Orkney), the effect is the combining of dealer outlets which
sell different brands. There can therefore be no reduction of intrabrand
competition.
Further, reduction in inter brand competition is not an issue because each party’s
3 These figures are NAAMSA figures that include cars registered in that area. The Commission advised
that cars purchased in another area could be reflected as a sale in the figures provided by NAAMSA.
Accordingly these figures may well be inflated.
4 VW market share figures include sales of Audi since the Audi brand is owned by Volkswagen SA.
4
dealership is brand specific. The parties state that outlets are managed on a
brand specific basis, by separate management teams. Each brand has its own
cost structure, sales targets and management team. Interbrand competition is
encouraged by the retail management team and they will be unlikely to promote
one brand at the expense of another. The motor manufacturers enforce this inter
brand competition, as they set targets – therefore, to this extent, dealers’ power
is constrained by the manufacturers. Furthermore, there are at least three other
sources of supply for each segment in the greater Klerksdorp area. 5
Although market shares in Klerksdorp alone were considerably higher, this is
mitigated by the fact that customers can source these brands (Toyota, VW, Audi)
from neighbouring areas such as Orkney and Potchefstroom. Taking these areas
into account, the market shares become more diluted (see table 1). The parties
also point out that much crossshopping takes place by consumers, who might
purchase vehicles outside their immediate vicinity. 6 The Klerksdorp customers
therefore have a choice to purchase Toyota or VW vehicles within even a 120km
radius, from areas as far afield as Lichtenburg, Carletonville and Vereeniging.
Commercial Vehicles
In the bus segment, the fact that combined market shares were high and that
there is only one other competitor in this market, namely Mercedes, initially
raised questions from the Tribunal panel. However, in subsequent submissions,
the parties and Commission assured that this would not raise competition
concerns for the following reasons: firstly there are other sources of supply of
minivans in the geographic area of overlap, namely Mercedes, as well as other
Toyota and Volkswagen dealers. Secondly where the minivan busses form part
of a fleet of vehicles, it is common practice for the purchasers to source them
of a fleet of vehicles, it is common practice for the purchasers to source them
beyond the relevant geographical market; and thirdly the parties referred to the
existence of competition from the second hand market. 7
Public Interest Issues
According to the parties, ten head office employees will be retrenched as a result
of the merger. None of the unions notified about the transaction filed an intention
to participate in the proceedings or expressed any reservations regarding the
merger.
5 During the hearing the parties confirmed there is a Cargo outlet in the greater Klerksdorp area.
6 Document 26 of record, page 2
7 The market shares for the sale of minivans in the greater Klerksdorp area were initially substantially
higher, but later amended by the Commission in a subsequent submission, to reveal a lower combined
market share, reflecting the more accurate position.
5
Conclusion
The Tribunal accords with the Commission’s finding that this transaction will not
substantially lessen or prevent competition in the relevant market and
accordingly approves the transaction without conditions.
_____________ 24 January 2002
D. Lewis Date
Concurring: N.M. Manoim, P. Maponya
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