COMPETITION TRIBUNAL
REPUBLIC OF SOUTH AFRICA
Case No: 20/LM/Apr03
In the large merger between:
The Used Equipment Company (Pty) Ltd
And
Barloworld Equipment (Pty) Ltd and BLC Plant Company (Pty) Ltd
Reasons for Decision
________________________________________________________________
APPROVAL
On 4 June 2003 the Competition Tribunal issued a Merger Clearance
Certificate approving the merger between the Used Equipment Company
(Pty) Ltd and Barloworld Equipment (Pty) Ltd and BLC Plant Company (Pty)
Ltd in terms of section 16(2)(a). The reasons for the approval of the merger
appear below.
The Merger Transaction
1. Barloworld Equipment (Pty) Ltd (“BE”) and BLC Plant Company (Pty) Ltd
(“BLC”) are forming a joint venture company, the Used Equipment
Company (Pty) Ltd (“UEC”), which has not traded up until now. BE and
BLC will each have a 50% interest in this company. This company will
undertake the business of purchasing, refurbishing, marketing and selling
used earthmoving equipment.
Rationale for the Transaction
2. This transaction is effectively an entrenchment of an existing marketing
alliance between BE and BLC. BE is a subsidiary of Barloworld, and has
the sole dealership for the Caterpillar brand of earthmoving equipment.
They deal predominantly in new equipment, whereas BLC deals in used
earthmoving equipment of a range of brands. BE wants to move more
into the used earthmoving equipment market while BLC hopes to gain the
benefits of the national scale and infrastructure that BE provides. The
parties have also indicated that UEC will secure significant export orders
for its products.
The Relevant Market
3. BE sells used (primarily Caterpillar) equipment while BLC focuses on the
purchase, repair and resale of used earthmoving equipment of all brands.
Examples of such products include hydraulic excavators, skid steer
loaders, wheel loaders, and a variety of other products designed primarily
to move quantities of earth.
4. BE and BLC are essentially intermediaries or dealers in used equipment.
They buy and sell used earthmoving equipment, either from construction
companies or via import agents (auctioneers). Companies would sell the
used equipment to the dealers in exchange for other equipment.
5. The product overlap is in respect of the purchase and sale of used
earthmoving equipment.
6.
Geographic Market
6. The trade in earthmoving equipment occurs on a national, as well
as an international level, since products can be imported at very low
import duties. The commission defines the geographic market as national
and we will likewise confine ourselves to this narrower level of analysis.
Impact on competition
7. The parties submit that there is demand substitution between different
brands of earthmoving equipment and most suppliers keep a wide range
of earthmoving equipment.
8. The market shares of the new earthmoving equipment market were used
to calculate the likely market shares of the joint venture entity in the used
market. These figures do not raise competition concerns.
9. It further appears that entry barriers in the used earthmoving equipment
market are low, since there are many other participants who deal in all
brands of used earthmoving equipment. There is in addition countervailing
power from customers, who are able to source this type of equipment from
a variety of suppliers. Customers can furthermore source directly from the
manufacturers, thereby cutting out the intermediaries.
Conclusion
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 approved unconditionally.
_____________ 4 June 2003
D.Lewis Date
Concurring: U. Bhoola, L. Reyburn
For the merging parties: Deneys Reitz Attorneys
For the Commission: M. Worsley, M. Mohlala, Competition Commission