COMPETITION TRIBUNAL OF SOUTH AFRICA
Case No: 22/LM/Feb07
In the matter between:
McCarthy Limited Acquiring Firm
And
Inyanga Motors (Pty) Ltd Target Firm
Panel : N Manoim (Presiding Member), Y Carrim (Tribunal Member),
and M Mokuena (Tribunal Member)
Heard on : 25 April 2007
Decided on : 25 April 2007
Reasons Issued: 8 May 2007
Reasons for Decision
Approval
1] On 25 April 2007, the Tribunal unconditionally approved the merger between
McCarthy Limited and Inyanga Motors (Pvt) Ltd. The reasons for approving the
transaction follow.
The parties
2] The primary acquiring firm is McCarthy Limited (‘MCL’), a company
incorporated under the company laws of the Republic of South Africa. 1
1 MCL controls Kunene Motor Holdings Limited; Autohaus Centurion (Pty) Ltd, McCarthy
Investments (Pty) Ltd, Eliance (Pty) Ltd and GAZ Motor Corporation Southern Africa (Pty)
Ltd. In addition MCL owns a number of motor vehicle related insurance firms, property and
investment firms and firms active in the provision of financial services. These firms are not
3] MCL is controlled by the Bidvest Group Limited (‘Bidvest Group’). 2 Bidvest
Group is listed on the JSE Securities Exchange and no single shareholder
controls it.
4] The primary target firm is Inyanga Motors (Pty) Ltd (‘Inyanga Motors’), a
company incorporated in terms of the company laws of the Republic of South
Africa. Inyanga Motors is controlled by the following shareholders in the
indicated percentages:
[4.1] Peter Cleary 42.50%;
[4.2] Sheila Ngubane 25%;
[4.3] Inyanga Holdings 12.5%;
[4.4] Andrew Cleary 2.5%;
[4.5] Susan Cleary 2.5%; and
[4.6] Caryn Lee Overton 2.5%.
5] Inyanga Motors owns two Daimler Chrysler South Africa (‘DCSA’) franchised
dealerships in the Zululand area.
Description of the transaction
6] The transaction involves the acquisition by MCL of the two DaimlerChrysler
franchised dealerships of Inyanga Motors, situated in Vryheid and Empangeni
within the Zululand region. Post merger McCarthy MCL will own 80% of the
issued shares of Inyanga Motors. The remaining 20% will be held by Peter
relevant for the current transaction.
2 Schedule A to Form CC 4(1) filed by MCL details companies, associated companies and
joint ventures controlled by Bidvest Group.
2
Cleary, the current Inyanga Motors majority shareholder and dealer principal.
Rationale for the transaction
7] The acquiring firm views this transaction as enabling it to strategically position
itself within the Empangeni Richards Bay area as there are planned
developments in the surrounding areas which has potential growth for its
dealership.3
8] The shareholders of the primary target firm wish to realise returns on their
investments.
The parties’ activities
Primary acquiring firm
9] MCL is involved in the sale of new and used passenger and commercial
vehicles through more than 100 of its whollyowned motor vehicle dealerships.
MCL is also involved in the sale of parts and services, provision of financial
services and fleet support, import and distribution activities, vehicle
auctioneering, online retailing and vehicle/truck rental.
The primary target firm
10] Inyanga Motors has two franchised DaimlerChrysler dealerships which are
involved in the sale of new and used DaimlerChrysler passenger and
commercial vehicles, including associated parts and services. Inyanga Motors
also sells used vehicles which essentially are tradeinns from Inyanga Motors’
customers.
11] Inyanga Plaza is a property leasing company which is a wholly owned
subsidiary of Inyanga Motors. 4
Relevant markets
3 MCL was further motivated by the impressive performance of Inyanga Motors for receiving
many accolades in various categories and being the current DaimlerChrysler SA Dealer of the
year.(Record p41).
4 Inyanga Plaza does not form part of this transaction and as a result, it is unnecessary to
analyse it in these reasons.
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12] The Commission submitted that the relevant market is the market for the sale of
passenger vehicles and commercial vehicles. 5 Such a definition would be
consistent with the Tribunal’s approach in DaimlerChrysler/ Sandown Motors. 6
In that case the Tribunal stated that the market for passenger vehicles can be
further segmented into various submarkets namely small cars, luxury cars,
specialty cars, sport utility vehicles and mini vans. The Tribunal further stated
that commercial vehicles can further be subdivided into light commercial
vehicles, medium commercial vehicles, heavy commercial vehicles, and extra
heavy commercial vehicles and buses.
13] With regard to the geographic market the Commission submitted that the
relevant geographic market in this transaction is the Zululand area as it is the
region where the parties’ activities overlap.
14] The Tribunal finds that the relevant market is the market for the sale of
passenger motor vehicles and commercial vehicles with the respective sub
markets as stated above. The geographic market is at least the Zululand area. 7
Market Shares
15] The Commission concluded that on the basis of the data received from
Response Trendline Group 8 overlaps do occur in the activities of the parties in
the BMedium passenger vehicles and sports utility vehicles in the broader
passenger vehicle market.
Table 1: Market shares in the BMedium passenger vehicles in the Zululand area
5 The retail of new motor vehicles takes place through motor vehicle dealerships. The
manufacturers either directly own dealerships but the majority are independently owned
franchised dealerships. The independently owned dealerships are either dedicated to a
particular manufacturer’s products. Dealerships can thus be classified into exclusive and multi
franchise dealerships.
6 Daimler Chrysler and Sandown Motors Case No. 44/LM/Jul01.
7 In the DaimlerChrysler and Sandown Motors case and in Unitrans/Senwes Case No. 68/LM/
Dec01 the Tribunal found that customers are not bound to a particular area when buying cars
and that the geographic market may be broader than the area where the parties are active and
that there is a trend to buy from dealers within customers’ close proximity to their work and
place or residence suggesting that the market is at least local.
8 The Response Group Trendline is an official supplier of National Automobile Association
Manufacturers of South Africa (‘NAAMSA’) retail sales statistics, car prices and specifications.
4
Market participant Estimated market share in Zululand
(%)
Ritchie Auto 26
Inyanga Motors 20.6
NT Motors (Vryheid) 14
Renault (Richardsbay) 10.7
Provincial Delta (Richardsbay) 10.7
McCarthy 7.4
Nissan Intercity (Empangeni) 4.1
Toyota (Vryheid) 4.1
East’s Toyota 2.8
FASA Inercity 0.8
Provincial Delta (Mtubatuba) 0.2
Others 0.6
Total 100
16] The post merger market share in the market for the Bmedium passenger
vehicles market in the Zululand would be 28%.
Table 2: Market shares in the sports utility vehicles in the Zululand area
Market participant Estimated market share in Zululand
(%)
Inyanga Motors 36
McCarthy 15.3
Land Rover (Empangeni) 12.2
East’s Toyota 8.3
Toyota (Vryheid) 8.3
Nissan Intercity (Empangeni) 5.6
Renault (Richardsbay) 5.4
NT Motors 4.8
Provincial Delta 2.6
FASA Intercity 0.6
Others 0.9
Total 100
17] The post merger market share in the market for sports utility vehicles in the
Zululand would be 51.3%.
Table 3: Market shares in the light commercial vehicles market in the Zululand
area
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Market participant Estimated market share in Zululand
(%)
Ritchie Auto 31.8
Iyanga Motors 14.7
East’s Toyota 12.6
Nissan Intercity (Empangeni) 11.2
McCarthy 11
Toyota Vryheid 8.8
FASA Intercity (Empangeni) 3.8
Provincial Delta (Mtubatuba) 2.8
Provincial Delta (Richards Bay) 2.3
Renault (Richards Bay) 0.3
Others 0.7
Total 100
18] The post merger market share in the market for light commercial vehicles in the
Zululand area would be 25.7%.
Table 4: Market shares in the medium commercial vehicles market in the
Zululand area
Market participant Estimated market share in Zululand
(%)
Inyanga Motors 28.5
McCarthy 26.7
Richie Auto 12.5
East’s Toyota 10.7
Provincial Delta (Richards Bay) 10.7
FASA Intercity (Empangeni) 5.3
Toyota Vryheid 5.3
Others 0.3
Total 100
19] The post merger market share in the market for medium commercial vehicles in
the Zululand would be 55.2%.
Competition analysis
20] From the market shares above, it is clear that the market shares which might
raise competition concerns are in the market for sports utility passenger
vehicles (with a post merger market share of 51.3%) and the medium
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commercial vehicles (with a post merger market share of 55.2%). 9
21] The Commission is of the view that the post merger high market shares are
mainly because of the quality of the brands, price variety (number of different
branded products available to choose from and after sales services). In
addition, the Zululand area, which is the relevant geographic market in this
transaction can be categorised as a periurban area and dealership outlets are
widely dispersed. Accordingly, large franchised dealerships based in the
broader KwaZulu Natal market such as Imperial Holdings Ltd, Barloworld
Limited, Super Group Limited and others neighbouring the Zululand region,
could potentially be regarded as competitors in the Zululand region due to the
geographic overlap.
22] In addition, there is competition from other dealerships supplying different
brand vehicles such as Renault, Volvo, Toyota, BMW, Chevrolet, MAN and
Scania. They compete with the merging firms in almost every category of new
and used passenger vehicles market. Different dealership outlets compete for
customers on the basis of better service offerings, price, quality, attractive
maintenance contracts and related services.
23] The parties submitted that it is difficult for a single retail dealer to effectively
exercise market power in any of the identified segments since the competitive
landscape is much wider. Competition between brands (as opposed to intra
brand competition) at manufacturing level seems to filter through to the retail
level and customer preference.
24] These markets are highly competitive, especially as they are dependent on
various factors which include continuous innovation, customer preference,
affordability in terms of price and attitude towards a particular brand of vehicle.
affordability in terms of price and attitude towards a particular brand of vehicle.
9 In the market for BMedium passenger vehicles the merged entity will have a post merger
market share of 28% and will continue to face competition from Ritchie Auto (with a market
share of 26%) and NT Motors (with a market share of 14%), among others. In the market for
light commercial vehicles the merged entity will have a post merger market share of 25.7%
and will continue to face competition from firms like Ritchie Auto (with a market share of
31.8%) and East’s Toyota (with a market share of 12.6%), among others.
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25] The barriers to entry are low. There are no regulatory barriers to entry but a
new entrant into the market would have to consider various factors which
include seeking the permission of the municipalities and local authorities to
develop suitable premises to operate from; getting approval from franchise
principal to operate as a franchised dealer; significant capital requirements
required to commence business as a motor vehicle retailer; high working capital
requirements; and capital requirements in respect of custom built facilities and
plant equipment.
26] Accordingly the Tribunal finds that the transaction will not lead to a substantial
lessening of competition in the relevant market
Public Interest
27] There are no public interest issues.
Conclusion
28] The merger is approved unconditionally.
________________ 8 May 2007
Y Carrim DATE
Tribunal Member
N Manoim and M Mokuena concur in the judgment of Y Carrim
Tribunal Researcher: R Kariga
For the merging parties: S Ramluckan, Garlicke and Bousfield Attorneys
For the Commission : L Lamola and HB Senekal (Mergers and Acquisitions)
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