COMPETITION TRIBUNAL
REPUBLIC OF SOUTH AFRICA
Case No: 81/LM/Nov02
In the large merger between:
Edgars Consolidated Stores Limited
and
Central News Agency (Pty) Ltd & Consolidated News Agency (Pty) Ltd
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Reasons
________________________________________________________________
Approval
The Competition Tribunal issued a Merger Clearance Certificate on 6 November
2002 approving the merger without conditions. The reasons are set out below.
The merger
The transaction
In terms of the Sale of Business Agreement, Edgars Consolidated Stores Ltd will
purchase from Consolidated News Agencies (Pty) Ltd and Central News Agency
(Pty) Ltd (“CNA”) part of its business, comprising:
1) The business as a going concern conducted from the 139 stores 1, all of
which are situated in South Africa, constituting –
• The stock in trade in these acquired stores; and
• The fixed assets in these acquired stores;
2) The intellectual property rights of CNA, including trademarks, trade
names, logos, designs and signage;
3) Other stock and fixed assets situated in certain retail stores; which stores
are likely to be closed prior to the transaction becoming unconditional; and
1 In total there are 210 CNA stores of which 145 are located in South Africa.
4) Certain immovable properties situated in Johannesburg from certain
subsidiaries of CNA.
The parties to the transaction
The primary acquiring firm is Edgars Consolidated Stores (“Edcon”), a public
company listed on the JSE. Edcon is not controlled by any firm. Edcon recently
bought Retail Apparel (Pty) Ltd 2 and Elixer Marketing (Pty) Ltd trading as Super
Mart.3
The primary target firms are Consolidated News Agencies (Pty) Ltd and Central
News Agency (Pty) Ltd (“CNA”).
Rationale for the transaction
According to the parties, Edcon is interested in expanding its existing clothing,
footwear and accessories businesses into other product markets because of the
changing needs of South African customers. Through CNA Edcon will be able to
expand into some of those product categories that are currently attracting a
greater proportion of customers’ spend. Edcon, furthermore believes that it has
the knowledge and experience to improve CNA’s profitability, thereby ensuring
that the CNA brand continues to exist in the market.
Edcon will not rebrand the CNA stores.
Evaluating the merger
The relevant market
Edcon trades predominantly in the retailing of clothing, footwear, accessories and
cellular phones 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.
Through its recently acquired Super Mart stores, which 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
music and video, schoolwear, stationery, toys and luggage. It also offers a full
2 See Competition Tribunal Case No: 53/AM/Aug02
3 See Competition Tribunal Case No: 70/LM/Sep02
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range of clothing for men, ladies, kiddies and infants.
CNA operates mainly as a book and stationery retailer. It also sells newspapers
and magazines, audio and audiovisual products (music, video & DVDs) greeting
cards and gift wrap, photographic development and printing services, toys,
interactive games, software, cellular communication products, confectionery and
an assortment of collectables.
The following categories of product are sold by CNA and Edcon:
1. Cellular telecommunication services 4
2. Audio and audiovisual products 5
3. Toys6
4. Stationery7
With regard to the cellular telecommunication market the profile of CNA’s
customers corresponds to a large extent with that of Edcon’s customers i.e.
extending from lowermiddle to uppermiddle income families, with the majority in
the middleincome market.
With regard to the audio and audiovisual products, toys and stationery, sold by
CNA and Super Mart, the customer profile, the product range and quality, the
different store formats and the store location indicate that the merging parties do
not compete in the same relevant product markets. For example Super Mart
caters for different audio and audiovisual tastes and according to the merging
parties the degree of overlap between Super Mart and CNA’s repsective product
offerings in terms of music and audiovisual content is no more than 810%. The
parties estimate that the degree of overlap of similar products between Super
Mart and CNA in the toys category is no more than 15% and in the stationery
product market, the top 10 sellers list of each merging party, indicates that they
focus on different consumer groups. 8
CNA and Edcon buy merchandise, set prices and advertise their products on a
national level. We therefore agree with the Commission that the geographic
market is national for each of the relevant product markets.
market is national for each of the relevant product markets.
4 Edcon and CNA sell prepaid airtime, cellular handsets and accessories. This market comprises 25% of
the total cellular airtime markets.
5 This includes videos and music CD’s and tapes. Super Mart does not sell DVD’s. Although CNA and
Super Mart do not target the same customers, the merged entity’s national market share in the total music
market (CD’s and casettes) will be 10.2%, with Musica & CD Warehouse the largest with a market share of
32% and Look & Listen with 10.4%.
6 Super Mart sells predominantly lowerend recreational toys and CNA mainly educational.
7 Super Mart sells mainly to schoolgoing children while CNA sells to a range of customers from busineses
to upper middle income consumers, etc.
8 See page 224 of the record.
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Effect on Competition
Since Edcon and CNA do not compete in the same relevant product markets for
audio and audiovisual products, toys or stationary we will only consider the
effect on competition in the cellular telecommunication market.
There are a number of competitors in the cellular telecommunication market. The
following competitors are the largest players in the prepaid cellular market:
• Vodacom 25,7%
• MTN 15,4%
• Furniture Stores 10.3%
• Pick ‘n Pay 6.9%
• Makro 5.1%
• Dion 5.1%
The merged entity’s market share will be 8.6%. The Competition Commission, in
its recommendation, found the cellular telecommunication market highly
competitive and unconcentrated, with low barriers to entry.
We agree with the Competition Commission’s recommendation and find that the
merger will not substantially prevent or lessen competition in any of the relevant
markets. Since the merger will not adversely affect competition we do not need to
consider the additional fact that CNA is also a failing firm.
Public Interest Issues
The transaction does not raise any public interest grounds.
18 November 2002
N. Manoim Date
Concurring: F. Fourie, M. Holden
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For the merging parties: Werksmans Attorneys
For the Competition Commission: A Coetzee, Legal Services Division
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