COMPETITION TRIBUNAL
REPUBLIC OF SOUTH AFRICA
Case No: 70/LM/Sep02
In the large merger between:
Edgars Consolidated Stores Limited
and
Elixir Marketing (Pty) Ltd
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Reasons
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Approval
The Competition Tribunal issued a Merger Clearance Certificate on 16 October 2002
approving the merger without conditions. The reasons are set out below.
The merger
The Transaction
Edgars Consolidated Stores (“Edcon”) is purchasing the entire issued share capital in
Elixir Marketing (Pty) Ltd.
The parties to the transaction
The primary acquiring firm is Edcon, a public company listed in the JSE. Edcon is not
controlled by any firm.
The primary target firm is Elixir Marketing (Pty) Ltd, which trades as Super Mart. There
are currently 7 stores situated in Johannesburg, Pretoria, Germiston, Rustenburg,
Witbank, Klerksdorp and Vereeniging. Through a joint venture with Laurel Gold, of
which Super Mart owns 50.1%, it also offers a full range of clothing.
Rationale for the transaction
According to Edcon it is interested in expanding its existing clothing, footwear and
accessories business into product categories that are attracting a greater proportion of
consumers’ spend due to the changing needs of South African buyers Edcon will not re
brand the Super Mart Stores.
Evaluating the merger
Relevant market
Edcon trades predominantly in the retailing of clothing, foorwear and accessories
throughout South Africa and in neighboring countries. Edcon’s major retail formats are
Edgars, Jet, Sales House, Red Square, Cuthberts, Smiley’s Wearhouse and ABC, which
target the lowermiddle to uppermiddle income groups.
Super Mart stores are large discount departmental stores aimed at the middle to lower
income groups. It sells electrical appliances and sound equipment, house and
kitchenware, DIY products, flooring, blankets and linen, jewelry, beauty products and
cosmetics, music and video, schoolwear, stationery, toys and luggage. It also offers a full
range of clothing for men, ladies, kiddies and infants.
Both Edcon and Super Mart sell the same kind of products, however, the customer
profile, the different store formats and the large difference in prices charged for the
various product groups indicate that they do not compete in the same relevant product
markets, for example:
Apparel
Super Mart’s clothes are on average 20% less than that of Edcon and less
contemporary.
Schoolwear
Edcon only stocks standard schoolwear whereas Super Mart also stocks a small
amount of “unique schoolwear”. Edcon’s schoolwear offerings are priced, on
average, between 15% 60% higher than those sold by Super Mart.
Cosmetics
Edcon stocks “prestige” and “fastmoving” products and its prices are between
96% for hair care, 317% for fragrances and 288% for skincare products, higher
than those of Super Mart.
Textiles
Edcon’s textile products that overlap with Super Mart’s top twenty sellers are
approximately 32% more expensive, with bedroom products 119% and bathroom
products 255% more expensive.
Stationery
Edgars sells a small amount of greeting cards while Super Mart sells school
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exercise books, rulers and pens.
Music
One of Super Mart’s main products is music tapes and CD’s, which represents
16% of its turnover. Edcon is currently still experimenting with this product and
only sells music in four Edgars and eighteen Jet stores.
Moreover, Super Mart indicated to us that it competes with Shoprite’s nonfood divisions
as well as large retail stores such as Game. It has never perceived Edcon as a competitor.
Edcon, inter alia, competes with stores such as Truworths, Foschini and Woolworths.
Prices are set on a national basis and we, therefore, agree with the Commission that the
geographic market is national.
Effect on competition
Although Edcon is vertically integrated into the upstream manufacturing market, Super
Mart is not, nor does it purchase any of the trading stock from Edcon’s upstream
manufacturing business.
According to the parties a new competitor, Fashaf/Vetsacor, has recently entered in direct
competition with Super Mart in Johannesburg, indicating that barriers to entry into this
market are low.
In light of the above we find that competition will not be substantially lessened or
prevented as a result of the merger.
Public interest
The transaction does not raise any other substantial public interest grounds.
8 November 2002
N. Manoim Date
Concurring: D. Lewis, U. Bhoola
For the merging parties: Werksmans Attorneys
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For the Competition Commission: A Coetzee, Legal Services Division
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