COMPETITION TRIBUNAL
REPUBLIC OF SOUTH AFRICA
Case No: 79/LM/Oct02
In the large merger between:
Adcock Ingram Holdings (Pty) Ltd and Adcock Ingram Intellectual Property
(Pty) Ltd
and
Robertsons (Pty) Ltd and Robertsons Homecare (Pty) Ltd
Reasons for Decision
_________________________________________________________________
APPROVAL
On 6 November 2002 the Competition Tribunal issued a Merger Clearance
Certificate approving the merger between Adcock Ingram Holdings (Pty) Ltd
and Adcock Ingram Intellectual Property (Pty) Ltd and Robertsons (Pty) Ltd
and Robertsons Homecare (Pty) Ltd in terms of section 16(2)(a). The reasons
for the approval of the merger appear below.
The Parties
1. The
acquiring firms are Adcock Ingram Holdings (“AIH”) and
Adcock Intellectual Property (“Adcock IP”). AHI is controlled
by Tiger Brands Limited. Tiger Brands’ participation herein
is limited to the extent that its Healthcare brands are
managed and owned by the Adcock Ingram Group. 1
2. The target firms are Robertson Homecare (Pty) Ltd (“Homecare”) and
Robertsons (Pty) Ltd (“Services Company”). Both these firms are
collectively referred to as “Robertsons”. Robertsons is ultimately controlled
by Remgro Limited.
1 The other brands of Tiger Brands, namely foodstuffs and retail are not relevant to this analysis.
Rationale for the Transaction
3. Robertson is divesting itself of a noncore business division. This is in line
with the recent merger with Unilever wherein its foods division was sold to
Unilever.
The Merger Transaction
4. The transaction comprises the sale of a portion of the business of
Robertson Holdings. Specifically, Robertsons Holdings is selling the
Homecare and Service Company Shares ( via one indivisible transaction) to
AIH and Adcock IP respectively. AIH will continue the Homecare business
as a going concern, with all homecare brand names, trademark and
designs. The acquisition by Adcock IP of the Services Co is to facilitate the
acquisition of the trademarks etc, and not the services activities previously
rendered by it.
The Relevant Market
5. The AIH Group is a leading pharmaceutical group, focused on three key
areas, namely Healthcare, Critical Care and Consumer Products.
6. Robertsons’ business activities involve the manufacture of household
products, specifically household disinfectants (comprising toilet sanitizer
and surface cleaners), insecticides and air fresheners.
7. The Commission identified the area of overlap as being the broader home
disinfectant market. This market comprises toilet sanitizers and surface
cleaners. Within this market, the overlapping products manufactured by the
relevant parties are set out below 2:
Name Relevant Party Type of Product
Jeyes AIH Toilet Sanitizer
Flush Clean Robertsons Homecare Toilet Sanitizer
ICU Robertsons Homecare Toilet Sanitizer
ICU Robertsons Homecare Surface Cleaner
2 It is not necessary, for the purpose of this analysis to list the entire range of products manufactured by the
parties since our concern is solely the home disinfectant market.
Jeyes Disinfectant 3 AIH Surface Cleaner
Geographic Market
We accept that insofar as the parties supply to large national retain chains, the
market is national.
Impact on competition
Toilet Sanitizers
8. It is possible to evaluate the merger on the basis of a narrow market
definition, namely the toilet sanitizer market alone, excluding abrasive
cleaners and bleaches, or on the basis of a broader market definition,
namely the market which would include, in addition to the above products,
other household disinfectants such as bleaches, multipurpose surface
cleaners and abrasive products. This is because consumers would readily
switch from using specific toilet products to the other more broadbased
products.
9. On the basis of market share information submitted, it is apparent that the
merger raises no competitive concerns on either of the two market
definitions.
Table 1: Market Shares in respect of Toilet Cleaning ProductsNarrow
Market4
Firm Product Market Share
Unilever Domestos 22.1%
Adcock Ingram Jeyes 19.3%
SC Johnson Duck 17.5%
Sara Lee Ambi Pur 12.1%
Reckits Benkizer Harpic 11.3%
Robertsons Flush N Clean, ICU 9.4%
Other (incl house
brands)
8.2%
Combined market
share post merger:
28.7%
Pre merger HHI 1596.88
Post merger HHI 1843.77
3 The Commission initially found no overlap in the surface cleaner market, however on questioning
of the parties at the hearing, it emerged that AIH does indeed produce such a multipurpose
product, in addition to AIH’s toilet sanitizer products.
4 Calculated by excluding abrasive cleaners and bleaches.
Change in HHI 246.89
Table 2: Market Shares in respect of Toilet Cleaning ProductsBroad Market 5
Firm Product Market Share
Unilever Domestos 27.4%
Adcock Ingram Jeyes 14.1%
SC Johnson Duck 12.8%
Sara Lee Ambi Pur 8.9%
Reckits Benkizer Harpic 16.3%
Robertsons Flush N Clean, ICU 6.8%
Other (incl house
brands)
13.4%
Proctor & Gamble P&G 0.3%
Combined market
share post merger:
20.9%
Pre Merger HHI 1684.20
Post Merger HHI 1875.96
Change in HHI 191.76
10. In the narrow toilet sanitizer market, the current HHI is 1596.88, increasing by 246.89 to
1843.77 post merger 6. In previous decisions, we referred to the possibility that
notwithstanding the high levels of concentration and anticompetitive features identified, the
markets may nevertheless remain contestable 7. In this narrower market, the combined
market share of 28.7% would not raise competition concerns, particularly in light of the
number of competing manufacturers and brands, of which there are at least 4. In addition,
the entry barriers are low, since the products are not complex compounds requiring heavy
investment into manufacturing infrastructure. Supply side substitution is relatively easy,
since other manufacturers can, and have, switched to manufacturing toilet sanitizers.
Finally, the parties referred to the countervailing power of retailers acting as a curb on the
merging parties. Although we have expressed the view in other mergers that this power
does not necessarily entail procompetitive benefits for the ultimate consumer, we
conclude that the harmless nature of this transaction makes it unnecessary to delve into
the precise effect of countervailing power in this transaction.
5 All products used by consumers in cleaning their inhouse toilets including multipurpose materials.
6 According to the United States Department of Justice’s 1992 Horizontal Merger Guidelines if the post
merger HHI exceeds 1800 and the merger increases the HHI by 100 points or more the merger will be
presumed to create or enhance market power or facilitate its exercise. This presumption may be rebutted by a
showing that “nonstructural factors reveal that such an exercise of market power is unlikely”.
7 See Nestle (SA)(Pty) Ltd and Pets Products (Pty) Ltd 21/LM/Apr01.
11. We moreover accept the argument that to the extent that they are
substitutable for the products of the merging parties, other cleaning agents
such as abrasives and bleaches could well erode the parties’ market shares
in the toilet sanitizer market. This argument is borne out by the lower
market share figures in respect of the broader market (Table 2).
Conclusion
We conclude that the merger will not lead to a substantial lessening of
competition. The Tribunal therefore approves the transaction unconditionally.
There are no public interest concerns which would alter this conclusion.
_____________ 18 November 2002
N. Manoim Date
Concurring: Prof. M. Holden, Prof. F. Fourie
For the merging parties: Edward Nathan Friedland Attorneys
For the Commission: A.Coetzee, Competition Commission