COMPETITION TRIBUNAL
REPUBLIC OF SOUTH AFRICA
Case no.: 92/LM/Dec02
In the large merger between:
Wesbank, a division of FirstRand Bank Ltd
and
Barloworld Leasing, a division of Barloworld Capital
________________________________________________________________
Reasons for Decision
________________________________________________________________
Approval
On 6 February 2003 the Competition Tribunal issued a Merger Clearance
Certificate approving the merger between Wesbank, a division of FirstRand Bank
Ltd (“Wesbank”) and Barloworld Leasing, a division of Barloworld Capital
(“Barloworld”). The reasons for this decision follow.
The parties
The primary acquiring firm is Wesbank, a division of FirstRand Bank, which owns
and controls various companies operating in the financial services, asset
management and insurance industries. For purposes of this merger analysis the
only other relevant FirstRand subsidiary is the joint venture company, Avis Fleet
Services (Pty) Ltd (“Avis”). Wesbank does not have any subsidiaries.
The primary target firm, Barloworld Leasing, is part of Barloworld Capital, a
subsidiary of the international company Barloworld Limited. Barloworld leasing is
involved in the motor vehicle business and does not have any subsidiaries.
The transaction
The transaction is a sale of Barloworld’s vehicle finance leasing book in terms of
which Wesbank will acquire the “book” from Barloworld as a going concern.
In this instance the “book” comprises all the installment sale agreements, full
maintenance contracts and similar vehicle financing agreements concluded by
Barloworld leasing. All the rights, titles and interest on amounts owing to
Barloworld will accrue to Wesbank.
Barloworld submits that the rationale for the transaction is the lack of economies
of scale and that the vehicle financeleasing book is not a strategic component of
its offerings in the vehicle distribution market.
Evaluating the merger
The relevant market
Product market
The merging parties offer the following range of vehicle financing options to
customers:
Financing option Definition
1. Installment sale credit agreements In terms of this credit agreement the
vehicle is sold to the customer over a
predetermined period, at an agreed
interest rate and is paid in monthly
installments. Ownership only passes to
the customer upon payment of the final
installment.
2
2. Lease financing agreements
21. lease agreement
2.2 full maintenance lease agreement
These agreements provide the
customer with uninterrupted use of the
vehicle for the agreed period, at the
end of which the customer may return
the vehicle to the financier or take
ownership of the vehicle.
These agreements provide the
customer with uninterrupted use of the
vehicle for the agreed period, as well
as guaranteed maintenance of the
vehicle for a specific period. The
customer does not have the option of
taking ownership upon payment of the
final installment.
Based on the above the parties submitted that the relevant product market is
vehicle financing. On this definition, product overlaps occur in the financing of
new and used minibuses and trucks.
However, the Commission, on its reading of the Tribunal decision in the New
Republic Ltd/FBC Fidelity Bank Ltd 1case, sought to narrow this definition
according to the method of financing employed. Although competitors confirmed
that supply side substitutability exists, the Commission was not convinced that
from the consumer’s perspective, the above methods of financing could be
placed in the same market. This is because of the difference in the rights and
obligations, which flow from each type of vehicle financing option.
Nonetheless the Commission did not definitively define the relevant market, since
the transaction’s competitive impact on the broader market of vehicle financing or
the delineated markets according to the method of finance, is insignificant.
Geographic market
Both parties have a presence throughout South Africa. The Commission thus
concluded that the geographic market is national.
1 Tribunal case no 42/LM/Jul00.
3
Impact on competition
No independent market share data exists for the delineated markets according to
the method of financing, however the Commission verified that the parties do not
control a significant part of any segment of vehicle financing. These segments
are:
i. new vehicles
ii. used cars
iii. trucks and other land transport, and
iv. total vehicle finance.
In each of these segments Barloworld’s market share is insignificant and the
change in concentration is does not raise competition concerns.
At the hearing of this matter the parties also confirmed that the transaction will
not provide Wesbank with preferential access to future customers and contracts
concluded within Barloworld outlets.
Thus we agree with the Commission that the transaction will not substantially
alter competition in the vehicle financing market.
Conclusion
The transaction does not result in a significant competitive change from the
status quo. We conclude that the merger will not lead to a substantial lessening
of competition. There are no public interest concerns, which would alter this
conclusion. The merger is therefore unconditionally approved.
9 April 2003
N. Manoim Date
Concurring: D. Lewis, P. Maponya
For the merging parties: Adv. D Unterhalter instructed by Ms A Burger.
For the Commission: L. Oliphant, Legal Services Division, Competition
4
Commission.
5