COMPETITION TRIBUNAL
REPUBLIC OF SOUTH AFRICA
Case no.: 93/LM/Dec02
In the large merger between:
Masstores (Pty) Ltd
and
Masana Limited & MGS Handy House (Pty) Ltd
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Reasons for Decision
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Approval
On 3 March 2003 the Competition Tribunal issued a Merger Clearance Certificate
approving the merger between Masstores (Pty) Ltd (“Masstores”) and Masana
Limited (“Masana”) & MGS Handy House (Pty) Ltd (“MGS”). The reasons for this
decision follow.
The parties
The primary acquiring firm is Masstores, a subsidiary of Massmart, which is listed
on the JSE Securities Exchange. Masstores incorporates Massdiscounters,
trading as “Dion” and “Game” and Masswarehouse, trading as “Makro”.
The primary target firms are Masana and MGS, which are jointly controlled by the
Matziah and Mitzvah trusts. Masana trades as “Builders Warehouse” and MGS
trades as “Tile Warehouse”.
The transaction
The transaction is a sale of business in terms of which Masstores will acquire
and continue operating all the businesses conducted by Masana and MGS.
Evaluating the merger
The relevant market
Product market
Masstores operates in the retail market offering a wide variety of consumer
goods and general merchandise. It is comprised of the Game and Dion chains of
cash discount stores and the Makro chain of large warehouse outlets. These
stores primarily market branded food, liquor, household and related
merchandise.
As the name suggests, MGS’s Tile Warehouse stores offer ceramic and other
tiles including adhesives and related goods. The is no product overlap between
the goods offered at Tile Warehouse and the Masstores chains, hence this part
of the transaction raises no competition concerns and we do not pursue it any
further.
Masana’s Builder’s Warehouse stores sell motor accessories, DIY products,
household, electrical and lighting goods, paint power tools garden and patio
goods, swimming pool accessories, timber, cement and related products.
The Commission thus determined a functional product overlap between some of
the goods sold by the Masstores chains and Builder’s Warehouse in respect of
the products listed above sold by Builder’s Warehouse. However, after
considering various factors the Commission found that within this broad product
range, submarkets exist and furthermore, that the parties do not compete in a
submarket of their own. The Masstores chains stock a wide variety of general
merchandise and its customers’ purchases of hardware or DIY products are
much smaller compared to their total purchases. Builder’s Warehouse stores, on
the other hand, are onestop home improvement stores and caters for the
customer who is uniquely home improvement driven.
Masstores chains do not offer credit facilities, while Builders Warehouse stores
Masstores chains do not offer credit facilities, while Builders Warehouse stores
do, particularly to customers who are building contractors or merchants. The
format of the stores and the range of specific products sold differs vastly.
The Commission concluded that the range of products in which the overlap
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occurs constitutes the relevant product markets.
Geographic market
Builder’s Warehouse has six stores in the Gauteng region only. Masstores
operate through national chains which follow a national pricing policy. The
Commission therefore analysed the parties market share figures in the different
product markets both nationally and within the Gauteng region only.
On either basis, it is clear that the parties do not enjoy a market share in excess
of 14.8% in any of the product markets. The parties face competition from well
established specialized firms such as Timbercity, Mica Hardware, Cashbuild, as
well as large retail stores who trade in these products.
Impact on competition
The parties operate in a variety of product markets in which national and local
competitor firms exist. The parties do not control a significant part of any of the
relevant product markets either nationally or within Gauteng.
Thus the transaction will not substantially alter competition in the relevant
markets.
Public interest Issues
The parties submit that the transaction will not result in any job losses instead it
will positively affect employment by providing employees with greater opportunity
for movement within the Massmart Group.
No other public interest issues arise. Accordingly, we agree with the
Commission’s recommendation that the transaction be unconditionally approved.
1 April 2003
N. Manoim Date
Concurring: D. Lewis, P. Maponya
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For the merging parties: Edward Nathan Friedland Corporate Law Advisers
For the Commission: H. Shozi, Legal Services Division, Competition
Commission
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