COMPETITION TRIBUNAL OF SOUTH AFRICA
Case No.: 95/LM/Nov06
In the matter between:
SUPER GROUP DEALERSHIPS Acquiring Firm
and
VAN WYK AND WOLPE (PTY) LTD Target Firm
_______________________________________________________________
Panel : D Lewis (Presiding Member), N Manoim (Tribunal
Member), and M Mokuena (Tribunal Member)
Heard on : 20 December 2006
Order issued on : 20 December 2006
Reasons issued on : 10 January 2007
REASONS FOR APPROVAL
Approval
[1] On 20 December 2006, the Competition Tribunal unconditionally
approved the proposed merger between Super Group Dealerships (“SGD”) and
Van Wyk and Wolpe (Pty) Ltd (“Van Wyk & Wolpe”).
The parties and the merger transaction
[2] SGD, a wholly owned division of Super Group Trading (Pty) Ltd (“SGT”),
which in turn is a wholly owned subsidiary of Super Group Ltd (“SGL”) acquired
the business of Van Wyk & Wolpe trading as Leon’s Rustenburg. Post
acquisition, SGT will acquire sole ownership and control of Leon’s Rustenburg. 1
Rationale for the transaction
[3] For a number of years ago, Super Group identified the Rustenburg area
as having significant potential for sustainable growth going forward mainly due
to its developing mining, agricultural and tourism sectors hence the present
deal. The current owners of Van Wyk & Wolpe would like to exit their
investments in Leon’s Rustenburg in terms of their retirement strategy.
The relevant market
[4] SGL is an integrated supply chain management business operating in
both South Africa and abroad. Its primary operating activities comprise supply
chain management, fleet solutions, retail supply chain, African operations, motor
dealerships and certain inhouse treasury and insurance services. These
businesses form two core operating divisions, viz., supply chain and automotive,
and are supported by the services division. The Supply Chain division,
contributing in excess of 78% of the Super Group’s operating income, is the
largest division. As can be seen from our discussion below, the target firm is
involved in the motor dealership business hence our analysis will be focused on
the motor dealerships businesses of the merging parties. 2
[5] SGD business comprises 20 franchised commercial and passenger
vehicle dealerships. It represents the major brands in South Africa including
Toyota, Lexus, Volkswagen Commercial, Nissan, Ford, Honda, Mazda,
Mahindra, Land Rover, Volvo, MercedesBenz, Chrysler Jeep, Dodge, Opel,
Isuzu, Isuzu diesel Chevrolet, Renault and Nissan Diesel. SGD’s four
motorcycle dealerships comprise of the leading brands including Suzuki and
Honda. In essence, SGD is engaged in a number of activities pertaining to the
Honda. In essence, SGD is engaged in a number of activities pertaining to the
vehicle brands mentioned above. These include sales of new and used
vehicles, the provision of service, the sale of parts and accessories and the
provision of ancillary financial services.
[6] Leon’s Rustenburg provides the services similar to SGD, but limited to
four brands of motor vehicles, viz., Ford, Mazda, Land Rover, and Volvo.
[7] As is clear from the above there is an overlap in the services provided by
1 See page 148 of the merger record. SGT is one of the subsidiaries of Super Group Ltd
(“SGL”), a public company listed in the “Transport” sector of the JSE. No single shareholder
controls SGL. SGL’s major shareholders include the PIC (17,45%); Old Mutual plc (10,88%);
Peu Group (Pty) Ltd (a BEE Entity) (9,95%); SGT (9,55%); and Liberty Group Ltd (5,06%). Pre
acquisition, Mr At Van Wyk and Mr Leon Wolpe jointly controlled Leon’s Rustenburg.
2 For more information, please visit SGD’s website: www.supergroupdealerships.co.za. .
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the merging parties.
What is the geographic market?
[8] As already explained above, the SGD business comprises 20 franchised
commercial and passenger vehicle dealerships which represents the major
brands in South Africa. Of relevance to this transaction is that SGD owns and
operates three motor vehicles branches in the North West province, viz.,
Northwest Auto in Krugersdorp, Honda Auto Noordwes in Potchefstroom and
Lionel Motors Rustenburg in Rustenburg. 3 Leon’s Rustenburg sells new and
used motor vehicles in respect of 4 brands mentioned above and also provides
ancillary products and services from its only premises situated in Rustenburg,
also in the North West province.
[9] The merging parties argued that the market is national. 4 They
nevertheless took what they considered to be a conservative approach to this
case and defined the market as regional and used the North West province as
the regional market. 5 The merging parties’ argument that the geographic market
is either national or provincial in nature is especially in this case – artificial. It is
3 See page 32 (i.e., Schedule 3: CC4(2) – Addendum B) of the merger record
4 They argued that a customer would typically first look for the vehicle model s/he wants at the
dealerships in the city or town that s/he resides in, but if s/he cannot find what s/he wants at the
right price, s/he would shop further afield to the nearest city or town and, failing that, throughout
South Africa. They further submitted that there are a number of dealerships with branches
throughout the country (for example, CMH, Imperial and Barloworld Motor) and that it is
customary for them to sell across their various branches, i.e., if the required model is not
available at one branch, it is procured from a different branch. They added that dealerships also
market their vehicles over the Internet and that these sales take place on a national basis. See
pages 153154 of the merger record .
5 The merging parties submitted that customers of the merging parties would shop at least
throughout the North West province if they wish to acquire a particular model of car. See page
154, paragraph 1.5.4, of the merger record .
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unlikely that the average consumer of this type of vehicle would look to dealers
nationally to source a vehicle. Nor is this consistent with the acquiring firm’s own
approach which is to identify Rustenburg as a niche area for a business
opportunity.6 A provincial boundary to an antitrust market is even more
arbitrary, particularly in the case of North West, whose provincial boundaries are
far from the location of the merged firm. Indeed the merged firm’s clients are
more likely to look to Gauteng dealers as alternatives, than dealers at the far
corners of the province. It is more probable that the geographic market is a
greater Rustenberg market. We do not need to delineate the boundaries of this
market rigidly as the merger does not give rise to a significant concentration.
[10] Usefully the merging parties provided us with market share figures for a
geographic area which would probably approximate the greater Rustenburg
area. Below is a table which depicts both Super Group and Leon’s Rustenburg’s
pre and postmerger market share estimates for the licensing districts of
Rustenburg, Brits, Koster and Swartruggens. 7
VEHICLE TYPE SUPER GROUP % VAN WYK &
WOLPE %
MERGED ENTITY’S
COMBINED
MARKET SHARE %
Light Commercial 11,49 13,89 25,38
Medium commercial 10,93 5,67 16,60
Small passenger 5,25 5,95 11,21
Middle passenger 8,04 11,80 19,84
Large passenger NIL 8,77 8,77
Luxury/sports and
exotics passenger
NIL 4,35 4,35
Speciality/recreational 10,65 7,69 18,34
6 This is evidenced by both the stated rationale for the transaction and internal documents from
Super Group which we have had access to.
7 See page 230 of the merger record.
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passenger
Minivans/panel vans 13,58 NIL 13,58
Heavy Commercial;
Extra Heavy
Commercial; Busses;
and Mini Busses
NIL NIL NIL
[11] Although the concentration in respect of some of the categories such as
light motor vehicles is on the high side entry into these markets is low and it is
not necessary for us to interrogate the geographic extent of the market with any
greater precision.
[12] The merging parties indicated that there are other significant dealers in
the greater Rustenburg area who compete with the merging parties. According
to the merging parties, it is also evident that new motor manufacturers are
penetrating the motor vehicle retail market with competitively priced models
such as Kia, SEAT, Proton, Tata, Chana and other Asian imports. 8 We are of
the view that even when the geographic market is defined as the greater
Rustenburg area, the proposed transaction is unlikely to give rise to
anticompetitive concerns.
Public Interest
[13] There will be no adverse public interest issues arising from the proposed
acquisition.9
8 See page 158, paragraph 6.6, of the merger record.
9 In confirming this, the merging parties submitted as follows: (1) we will acquire and recognise
the employees’ employment contracts with the previous ownership and will offer on the whole
equivalent or not less favourable employee benefits / working conditions of service; as
previously enjoyed under the old employer; (2) we will recognise the employee members’
continuity of employment; and (3) we will refrain from dismissing the members for any reason
related to the transfer of ownership.” See Super Group Dealerships’ letter to MISA/SAMU and
NUMSA respectively, that is, pages 3, 5 and 20 of the merger record .
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Conclusion
[14] Given our findings above, we accordingly approve the proposed
transaction unconditionally.
_______________
N Manoim
Tribunal Member
D Lewis and M Mokuena concurring.
Tribunal Researcher: T Masithulela
For the merging parties : P Coetser (Brink Cohen Le Roux)
For the Commission : M Ngobese assisted by H Ratshisusu
(Mergers & Acquisitions)
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