COMPETITION TRIBUNAL OF SOUTH AFRICA
Case No: 47/LM/Apr08
In the matter between:
Volkswagen Aktiengesellschaft Acquiring firm
And
Scania Aktiebolag Target firm
Panel : D Lewis (Presiding Member), Y Carrim (Tribunal Member) and N
Manoim (Tribunal Member).
Heard on : 26 June 2008
Decided on : 26 June 2008
Reasons Issued : 22 July 2008
Reasons
Approval
[1] On 26 June 2008 the Competition Tribunal issued a Merger Clearance Certificate
approving the merger between Volkswagen Aktiengesellschaft and Scania Aktiebolag
unconditionally. The reasons appear below.
Parties
[2] The primary target firm is Volkswagen Aktiengesellschaft (“Volkswagen”) a public
company incorporated under German law, having its principal business address in
Wolfsburg, Germany. Volkswagen operates in South Africa through its wholly owned
subsidiary, Volkswagen South Africa (Pty) Ltd (Volkswagen SA”).
[3] The primary target firm is Scania Aktiebolag (“Scania”), public stock company listed
on the Stockholm Stock Exchange and has its principal place of business in S ödertälje,
Sweden. Scania operates in South Africa through its wholly owned subsidiary, Scania South
Africa (Pty) Ltd (Scania SA”).
Transaction
[4] This is an international transaction in terms of which Volkswagen intends to increase
1
its capital interest in Scania from 20.89% to 37.73% and its voting rights in Scania from
37.98% to 68.06%.
Rationale of transaction
[5] The parties have submitted that the transaction aims at safeguarding the strategic
interest of the Volkswagen Group in the commercial vehicles business and at finding a
friendly and mutually acceptable solution to the high synergies that exist between the two
groups.
Parties Activities
[6] Volkswagen’s main area of activity is the development, manufacture, marketing and
financing of passenger cars and light commercial vehicles, including spare parts and
accessories. The company also retails and distributes vehicles. The Volkswagen Group
includes the vehicle brands such as Volkswagen, Audi, Seat, Skoda, Bentley, Lamborghini
and Bugatti which are sold via imports and dealers in one hundred and fifty four countries. It
also has some diesel engine activities. 1 Volkswagen’s South African subsidiary conducts
business as a manufacturer, importer and exporter of motor vehicles and components and
also offers financing. 2
[7] Scania develops, manufactures, and sells trucks with a gross vehicle weight of more
than sixteen tones intended for longdistance haulage, regional and local distribution of
goods as well as construction haulage. Scania also manufactures and sells buses and
chassis for buses and industrial and marine diesel engines. Scania is mainly active in
Europe.3
The Relevant Market
[8] It is clear from above that the proposed transaction results in a horizontal overlap in
the activities of the merging parties in the supply of heavy trucks; the supply of bus chassis
and the manufacture of diesel engines markets. The Commission defines the geographic
1 In addition, Volkswagen holds a minority shareholding in MAN, a German producer of mediumsized and
heavy trucks, buses, and engines.
heavy trucks, buses, and engines.
2 In South Africa Volkswagen supplies the following products: Passenger Vehicles; Light Commercial Vehicles
(“LCH”); Trucks; Buses and Diesel Engines
3 The products supplied by Scania into South Africa include Trucks; Buses and Diesel Engines.
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market as national for all three product markets because the merging parties make use of
dealerships that are located throughout the country for the sale of their products.
Supply of Bus Chassis
[9] In the market for the supply of bus chassis in South Africa the Commission found that
the merged entity is estimated to have a postmerger market share of 23% with Scania
having a 21% market share and Volkswagen a 2% market share. According to the
Commission the change in concentration levels is approximately 84 points, which shows that
the market is less concentrated and not prone to unilateral conduct.
Table 1 Estimated market shares in the market for the Supply of Bus Chassis 2007 4
Manufacturer Total Sales Market Share
MAN 544 43%
MERCEDES BENZ SA 301 24%
SCANIA 272 21%
VOLVO 41 3%
DAF TRUCKS 38 3%
VOLKSWAGEN 31 2%
BMC 27 2%
IVECO 11 1%
NISSAN DIESEL 10 1%
TOTAL 1257 100.0%
Source: NAAMSA
[10] As can be seen above the leading suppliers in South Africa are MAN, Mercedes
Benz and Scania, with estimated market shares of 43%, 24% and 21% respectively.
Volkswagen is estimated to have 2% market share. We therefore agree with the
Commission that in this market as well, the proposed transaction is unlikely to raise any
serious competition concerns as the market share increments are insignificant.
4 According to the Commission, this table shows market shares of the merging parties and their competitors in
the market for the supply of bus chassis in South Africa in 2007. The Commission used a proxy for the number of
bus chassis sold, the total number of CBU buses sold in South Africa for 2007. As the final product used by the
end user is that of a CBU bus, these, when registered, capture the name of the chassis manufacturer even if the
body itself was not manufactured by that particular OEM.
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[11] The Commission further investigated the likelihood of coordination that could be
facilitated by the proposed merger given the shareholding in Scania by Volkswagen and
MAN. The Commission found that the voting rights of shares of MAN remain unchanged
post merger. The also found no evidence of history of collusion in the motor vehicle market
particularly in the European Union and South Africa involving Scania, MAN and
Volkswagen.5 Furthermore the Commission’s investigation revealed that there are
numerous competitors in the relevant market that would make successful coordination in
the relevant markets unlikely.
Diesel engines
[12] With regards to diesel engines the Commission found that there is overlap in respect
of industrial engines and marine engines. However, the Commission found that the merging
parties’ engines were not considered as substitutes due to the fact that VW's engines were
significantly less powerful than those produced by Scania and they could not be used
interchangeably for the respective intended uses.
Supply of heavy trucks
[13] The Commission submitted that this Tribunal has previously found that the market for
commercial vehicles can be subdivided into light, medium, heavy vehicles, and buses and
coaches greater than ten tonnes. 6 Using this approach the Commission analysed the broad
product market that includes both the supply of heavy commercial vehicles (“HCV”) and
extra heavy commercial vehicles (“EHCV”). The Commission concluded that the narrowest
possible product market is that of extra heavy commercial vehicles (greater than 16 tons),
given that Scania only supplies trucks that have a gross vehicle weight in access of 16 tons
and that Volkswagen SA supplies trucks that are classified as heavy commercial vehicles
and extra heavy commercial vehicles.
[14] The Commission calculated market shares in line with the relevant product markets it
[14] The Commission calculated market shares in line with the relevant product markets it
identified above. The following tables contain market share data of each market participant
in the respective markets.
Table 1 7
5 During the Commission’s investigations the parties also submitted that no cross directorships exist at the
respective boards of Volkswagen SA, Scania SA, and MAN in South Africa.
6 See our decisions in the Daimler Chrysler SA (Pty) Ltd and Sandown Motors Holdings
(Pty) Ltd: Tribunal Case No. 44/LM/Jul01. Also refer to Tribunal Case No: 65/LM/Aug06:
Sandown Motor Holdings (Pty) Ltd and Paarl Motors (Pty) Ltd.
7 According to the Commission Table1 shows market shares of the merging parties and their competitors for the
sale of HCV and XHCV in South Africa for the period April 2007 to March 2008.
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Estimated market shares in the market of Heavy Commercial Vehicles and Extra
Heavy Commercial Vehicles in South Africa (April 2007March 2008).
Manufacturer EHCV Market
Shares
(%)
HCV Market
Shares
(%)
Combined Market
Shares
(%)
MERCEDES
BENZ SA
4408 33% 1291 17% 5699 27%
NISSAN DIESEL 1806 13% 1619 21% 3425 16%
TOYOTA 605 4% 1907 25% 2512 12%
MAN 1877 14% 178 2% 2055 10%
TATA 497 4% 1227 16% 1724 8%
GMSA 393 3% 1289 17% 1682 8%
VOLVO 1119 8% 0 0% 1119 5%
INTERNATIONA
L TRUCKS SA
1043 8% 0 0% 1043 5%
SCANIA 667 5% 0 0% 667 3%
IVECO 347 3% 76 1% 423 2%
SUPER GROUP 419 3% 76 1% 421 2%
DAF TRUCKS 163 1% 0 0% 163 1%
VOLKSWAGEN 74 1% 45 1% 119 1%
RENAULT
TRUCKS
89 1% 2 <1% 91 0%
BMC 2 0% 0 0% 2 0%
TOTAL 13509 100% 7636 100% 21145 100%
Source: NAAMSA
[15] As can be seen above the merging entity is estimated to have a post merger market
share of approximately 6% and 4% in the XHCV and HCV markets respectively. According
to the Commission in the broad market encompassing both XHCV and HCV, the merged
entity will have a combined market share of approximately 4% in South Africa. The
Commission concludes that the proposed transaction is unlikely to result in substantial
prevention or lessening of competition in either the market for XHCV or combined market of
HCV and XHCV, as the parties are estimated to have a low post merger combined market
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share in the affected markets. 8
Public Interests Issues
[16] There are no public interest issues.
Conclusion
[17] Based on the above the transaction will not result in a substantial lessening or
prevention of competition and is accordingly approved unconditionally.
___________________ 22 July 2008
Y Carrim Date
Tribunal Member
D Lewis and N Manoim concurring
Tribunal Researcher : J Ngobeni
For the merging parties : Bowman Gilfillan Inc
For the Commission : Marlon Dasarath (Mergers and Acquisitions)
8 In addition the Commission found that there are other major players in this market such as Mercedes Benz,
Nissan Diesel, Toyota and MAN, having an estimated 27%; 16%; 12% and 10% market shares respectively.
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