COMPETITION TRIBUNAL
REPUBLIC OF SOUTH AFRICA
Case No: 91/LM/Oct05
In the large merger between:
JD Group Limited
and
Connection Group Holdings Limited
Reasons for Decision
________________________________________________________________
Approval
On 24 November 2005 the Competition Tribunal issued a Merger Clearance
Certificate approving the merger between the JD Group Ltd and Connection Group
Holdings Ltd. The reasons for the decision appear below.
The transaction
1. The JD Group Ltd (“JD”) will acquire the entire issued share capital of the
Connection Group (“Connection”). Connection’s listing on the JSE will be
terminated after the merger, however, it will continue to trade under its own
brand identity, merchandise range and market profile.
2. JD, a holding company listed on the JSE, owns the following furniture,
electrical and electronic retail chains that offers a wide variety of home
furniture, home electrical appliances and consumer electronic goods
nationally:
• Barnetts
• Price and Pride
• Joshua Doore
• Russels
• Bradlows
• Morkels
• Electric Express
• HiFi Corporation
3. Connection is involved in the sale of consumer electronic goods through
two national retail chains:
• Photo Connection
• Incredible Connection
Rationale for the Transaction
d. The transaction affords Connection the opportunity to expand its
business by accessing the credit granting skills and the asset,
customer and capital base of JD.
e. According to JD the transaction will expand its business into product
markets in which it has limited exposure. JD intends to introduce
credit sales in Connection thereby affording lower LSM’s the
opportunity to acquire computers and various photographic products.
Effect on Competition
f. The Competition Commission identified the following national
product markets:
o photographic imaging products and related services,
o computer hardware and software products and related
services,
o small business machines,
o mobile telephony termination devices, and
o media and multimedia products.
g. Within these relevant markets the merging parties’ market shares,
post the transaction, will change as follows:
2
Product market JD Connection Merged entity
Photographic 1.47% 7.09% 8.56%
Computer 1.69% 13.53% 15.22%
Small Business
machines
1.05% 13.47% 14.52%
Mobile telephony 0.25% 0.08% 0.33%
Multimedia Not available Not available Not available
h. The parties were not able to provide estimated market shares for the
Media and Multimedia products market but the Commission found
that, based on the revenues generated by each, the market share of
the merged entity post the transaction would represent an
inconsequentially small proportion of the total market, less than 2%.
i. According to the Competition Commission large retail chains
compete with the merging parties in all of the above product markets.
In the photographic imaging market Massmart (with a market share
of 20%) and NuWorld (with 10%) compete with the merged entity. In
the computer hardware product market Massmart (13.53%) and
Metcash (2%), as well as computer manufacturers, offer products
through retail and wholesale distribution outlets. In the market for
small business machines Massmart (45%) and Metcash (1.54%)
compete while the merging entity’s market share in the mobile
telephony and the media and multimedia markets are too
insignificant to substantially affect competition.
j. Connection has exclusive supply agreements with vendors such as
Acer, HP, Packard Bell and Sony to supply their computer products.
However, these agreements relate only to specific models within
each brand and not to the whole product range within each brand.
Other brands that compete with these are Mecer, Dell, Fujitsu
Siemens, IBM, Epson, LG and Toshiba.
k. In light of the above we find that the merger would not substantially
prevent or lessen competition in any of the relevant markets.
Public Interest issues
prevent or lessen competition in any of the relevant markets.
Public Interest issues
l. There are no significant public interest issues arising from the
transaction.
3
29 November 2005
N Manoim Date
Concurring: Y. Carrim, M Mokuena
For the merging parties: Adv Willem Pretorius acting for Feinsteins Attorneys
For the Commission: Thamsanqa Kekana
4