COMPETITION TRIBUNAL OF SOUTH AFRICA
Case No: 30/LM/Apr08
In the matter between:
RCS Investment Holdings (Pty) Ltd Acquiring Firm
And
Massdiscounters, a division of Masstores (Pty) Ltd Target Firm
Panel : D Lewis (Presiding Member), U Bhoola (Tribunal Member),
and M Mokuena (Tribunal Member)
Heard on : 4 June 2008
Order Issued : 4 June 2008
Reasons Issued: 21 August 2008
Reasons for Decision
Approval
[1] On 4 June 2008, the Tribunal unconditionally approved the merger between
RCS Investment Holdings (Pty) Ltd and the retail consumer division of
Massdiscounters, a division of Masstores (Pty) Ltd. The reasons for approving
the transaction follow.
The parties
[2] The primary acquiring firm is RCS Investments Holdings (Pty) Ltd (“RCS”), a
company jointly controlled by Foschini Limited (“Foschini”), which holds 55% of
the shareholding, and Standard Bank of South Africa Limited (“SBSA”), which
holds 45% of the shareholding and has minority protection rights.1 RCS controls
RCS Cards (Pty) Ltd (“RCS Cards”) and RCS Personal Finance (Pty) Ltd
(“RCS Personal Finance”).
1 The acquisition of 45% shareholding with Minority protection rights by SBSA in RCS was
cleared by the Tribunal under case number 90/LM/Sep05.
[3] Foschini is a public company listed on the JSE Securities Exchange and no
single shareholder controls Foschini. Foschini controls various companies in
South Africa.2
[4] SBSA is a subsidiary of the Standard Bank Group Limited (“SBG”), which is
listed on the JSE Securities Exchange. No single shareholder controls SBG.
SBG controls various companies in South Africa.3
[5] The primary target firm is Massdiscounters, a division of Masstores (Pty) Ltd
(“Masstores”), which trades as Game, Dion and Dion Wired. Masstores is a
wholly owned subsidiary of Massmart Holdings Limited (“Massmart”), a public
company listed on the JSE Securities Exchange. Massdiscounters does not
control any firm.
Description of the transaction
[6] In terms of this transaction, RCS intends to acquire the consumer credit
business of Massdicounters. On completion of the transaction, RCS will own
the consumer credit business of Massdiscounters.
Rationale for the transaction
[7] RCS views this transaction as an opportunity to use its financial services
expertise and capability to provide an outsourced service to retailers whereby
RCS will run financial/ retail credit services on behalf of the retailers.
[8] For Massdiscounters, this transaction enables it to grow the contribution of the
credit turnover relative to the total turnover earned from its stores through
outsourcing the retail credit business to a specialist firm.
The parties’ activities
Primary acquiring group
RCS
2 These include Foschini Retail Group (Pty) Ltd; Retail Credit Solutions (Pty) Ltd; What U Want
To Wear (Pty) Ltd; Markhams (Pty) Ltd; Fashion Retailers (Pty) Ltd; Foschini Finance (Pty)
Ltd; and Foschini Investments (Pty) Ltd.3 These include Diners Club SA; Blue Bond Investments; Standard Bank Insurance Brokers;
Melville Douglas Investment Management; Standard Insurance; Standard Executors and
Trustees; and Stanvest.
2
[9] RCS provides retail credit through RCS Cards and unsecured personal loans
through RCS Personal Finance. RCS Cards and RCS Personal Finance
operate as separate subsidiaries of RCS.
[10] The parties submitted that RCS Cards offers short term retail credit by means
of its “private label” 4 card facility to over 400 000 customers and has partnered
with 7 500 merchants by offering their customers finance for purchasing a
variety of goods with its “private label” cards.5
[11] RCS Personal Finance offers unsecured personal loans to persons within the
broad middle income group.
Foschini
[12] Foschini is a clothing and apparel retailer which also offers credit to customers
that purchase from its retail stores.
SBSA
[13] SBSA is an authorised financial services provider which provides, inter alia,
personal banking, corporate banking, investment banking, and business
banking. SBSA also provides products such as banking accounts, credit cards,
debit cards, overdraft facilities, loans, asset and vehicle finance, among other
things.
The primary target firm
Consumer credit business
[14] The consumer credit business of Massdiscounters provides retail consumer
credit in Game, Dion, and Dion Wired stores.
Relevant market
[15] There is an overlap in the activities of the parties with respect to the provision
of retail credit as SBSA, Foschini and RCS offer retail credit which competes
4 The parties submitted that a “private label” card is a revolving credit program which does not
require re-application for repeat purposes. In this regard it is similar to the traditional Visa or
Mastercard credit cards. See record pages 43-46.5 These merchants include Game, Dion, Dion Wired, Makro, Builderswarehouse, Tile Africa,
Mattress Factory, Look & Listen, Glomail, and Verimark, among others. See record page 45
for a list of merchants partnering with RCS.
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with or is a substitute of the retail credit offered by Massdicounters. As a result,
the parties and the Commission submitted that the relevant product market is
the market for the provision of unsecured credit. In addition, the parties and the
Commission concluded that the geographic market is national as
Massdiscounters operate nationally.
Competition analysis
[16] The major participants in the market for unsecured loans may include the major
banks, furniture and clothing retailers and a host of other players.
Table 1: Market shares of the competitors in the provision of unsecured loans
during 2006/2007
Entity Market Share
Standard 20
ABSA 19
FNB 15
Nedbank 11
ABIL/Ellerines 10
Edcon 6
JD Group 6
Woolworths 4
Lewis 2
Foschini 2
Others 4
Total 100
Source: Merging Parties
[17] As can be seen from the above market shares, SBSA and Foschini, the
controllers of RCS have market shares of 20% and 2%, respectively. The
parties submitted that SBSA, Foschini and the merged entity will not operate as
one entity post merger. Although RCS is jointly controlled by SBSA and
Foschini, each of its controllers independently operates its own retail credit
business. Even if the market shares of SBSA, Foschini and RCS were to be
combined, the accretion of market share is less than 1%. The parties submitted
that RCS and the target firm have less than 1% each in the market for the
provision of unsecured credit. 6 In addition, there are other players which will
continue to compete with the merged entity and these include ABSA, FNB,
6 See record page 33.
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Nedbank, ABIL/Ellerines, Edcon and Woolworths, among others. As a result,
the proposed transaction is unlikely to substantially prevent or lessen
competition.
Public Interest
[18] There are no public interest issues.
Conclusion
[19] The merger is approved unconditionally.
________________ 21 August 2008
D Lewis DATE
Tribunal Member
U Bhoola and M Mokuena concur in the judgment of D Lewis
Tribunal Researcher : R Kariga
For the merging parties: Bowman Gilfillan Attorneys.
For the Commission : K Mahlakona and X Nokele (Mergers and
Acquisitions)
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