COMPETITION TRIBUNAL
REPUBLIC OF SOUTH AFRICA
Case No: 63/LM/Jul05
In the large merger between:
Medicine Management Services (Pty) Ltd
and
Gerard Augustine t/a Direct Medicines Pharmacy
Reasons for Decision
APPROVAL
1. On 24 August 2005 the Competition Tribunal issued a Merger Clearance
Certificate unconditionally approving the merger between Medicine
Management Services (Pty) Ltd and Direct Medicines Pharmacy. The
reasons for the approval of the merger appear below.
The Parties
2. The acquiring firm is Medicine Management Services
(Pty) Ltd (“MMS”), a subsidiary of Afrox Healthcare
Services (Pty) Ltd. 1
3. The target firm is the dispensary business of Gerald Augustine trading as
1 The following three (3) entities control MMS, viz., Afrox Healthcare Services (Pty) Ltd (which holds
100% of the issued share capital of MMS); Afrox Healthcare Ltd (which recently changed its name to Life
Healthcare (Pty) Ltd; and Business Venture Investments 790 (Pty) Ltd (wh ich recently acquired the 100%
of the issued share capital of Life ).
Direct Medicines Pharmacy (“the Pharmacy Business”), which is
controlled by MMS (as its administrator and manager) and Gerard
Augustine (as its sole shareholder). 2
The merger transaction
4. Both Gerard Augustine t/a Direct Medicines Pharmacy and MMS entered
into a Sale of Business Agreement in terms of which MMS acquired the
pharmacy business as a going concern. Subsequent to the implementation of
the merger, sole control (on a direct basis) over the pharmacy business will vest
in MMS. 3
5.
Rationale for the Transaction
5. Owing to the recent amendments to the Regulations relating to the
Ownership and Licensing of Pharmacies it was no longer obligatory for
Gerard Augustine, who is a registered pharmacist, to run the pharmacy
business. Having regard to his desire to exit the pharmacy business it
was decided to consolidate the pharmacy business’ administration,
management and dispensing operations into MMS. 4
2 MMS exercises administrative and managerial control over the Pharmacy Business, and do not
directly or indirectly control any other firm. Mr Augustine does not control (directly or indirectly)
any firm save for holding all of the issued share capital of Direct Medicines (Pty) Ltd, a dormant
company. (See page 14 (item 2.2) of the record).
3 Page 25 (item 11.3) of the record.
4 See page 3 of the transcript dated 24 August 2005 as well as p age 45 of the record .
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The relevant product market
6. MMS undertakes administration and managerial services for Direct
Medicines. Direct Medicines in turn conducts the business of dispensing
prescription medicines to private sector patients. The parties contended
that the relevant product market for analyzing the proposed merger is the
market for the dispensing of prescription medicines to private sector
patients.
7. We found that no overlap exists with respect to activities of the merging
parties.
Retail Pharmaceutical (Dispensary) products
The relevant geographic market
8. Since the pharmacy business conducts the business of dispensing
prescription medicines to private sector patients throughout South Africa,
the market is defined as national.
Impact on competition
9.
A
9. ccording to the merging parties the total number of repeat prescriptions in
South Africa on a monthly basis amounts to approximately 1.4 million
repeat prescriptions of which the pharmacy business’ market share
3
accounted for 0.05%. The proposed merger would not give rise to an
aggregation of market shares because MMS is not involved in this market.
10. We are persuaded that the merger is unlikely to result in the substantial
lessening or prevention of competition given the significant number of
players in the market as well as the merging parties’ low market shares
postmerger. were compounded by the prospect that might not enter this
sector at all
.
“It is clear that the existence of Proctor at the edge of the industry
exerted considerable influence on the market. First, the market
behaviour of the liquid bleach industry was influenced by each
firm’s predictions of the market behaviour of its competitors, actual
and potential. Second, the barriers to entry by a firm of Proctor’s
size and with its advantages were not significant…”
–
.
.
Public Interest
11. The merging parties were confident that there would be no negative
effects on employment arising from the proposed merger as no job losses
were anticipated.
Conclusion
12. The proposed merger is therefore approved unconditionally.
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__________ 14 September 2005
N. Manoim Date
Concurring: M. Moerane, M. Mokuena
For the merging parties: Mark Garden, Edward Nathan Corporate Law
Advisers
For the Commission: Odie Strydom assisted by Leonard Lamola, Mergers
& Acquisitions
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