COMPETITION TRIBUNAL OF SOUTH AFRICA
CASE NO: 70/LM/JUN08
In the matter between:
HEWLETT PACKARD COMPANY Acquiring Firm
and
ELECTRONIC DATA SYSTEMS CORPORATION Target firms
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Panel : N Manoim (Presiding Member), Y Carrim (Tribunal Member), and
U Bhoola (Tribunal Member)
Heard on : 14 August 2008
Order issued on : 14 August 2008
Reasons issued on : 9 September 2008
REASONS FOR DECISION
APPROVAL
1. On 14 August 2008 the Tribunal approved the international merger between
Hewlett Packard Company (“HP”) and Electronic Data Systems Corporation
(“EDS”).
THE PARTIES
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2. The primary acquiring firm HP, a corporation listed on the New York and Pacific
Stock Exchanges, controls several subsidiaries worldwide. In South Africa HP
controls Hewlett-Packard South Africa Pty Ltd (“HPSA”). HP is not controlled by
any single shareholder. The primary target firm is EDS, a company listed on the
New York and London Stock Exchanges, and which has several subsidiaries
worldwide. In South Africa EDS controls EDS Enterprise Solutions Africa (Pty)
Ltd (“EDS Enterprise Solutions”), Atraxis Africa (Pty) Ltd (“Atraxis”); and EDS
South Africa (Pty) Ltd) (“EDS SA”). EDS is also not controlled by any single
shareholder.
THE TRANSACTION AND RATIONALE
3. The mechanics of this transaction which takes place in the United States, do not
concern us, but the relevant fact is that following various stages of the deal HP
will acquire the business of EDS and thus for our purposes be considered to
control it. This deal has been notified and won approval from U.S antitrust
authorities on June 30, 2008, and the European Commission approval on or
about end of July 2008.
4. According to HP this transaction offers an opportunity for it to gain a significant
presence in other IT services segments.
RELEVANT PRODUCT MARKET
5. The merging parties both offer IT services in South Africa. This transaction leads
to a horizontal overlap in consulting services development and integration
services, as well as in Information Technology (“IT”) management services.
6. There is also a vertical relationship between the merging parties in that EDS SA
procured certain services for its customers (including among other things; server
maintenance training, replacement of cabling and replacement of motherboard)
from HP resellers and distributors.
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RELEVANT GEOGRAPHIC MARKET
7. The parties operate within a global market for the provision of the relevant
products and services. The Commission has analysed the merger on the basis
that the market for the provision of these services is national. We have no reason
to question this assessment in the present transaction. The parties had argued
that the market was international but have supplied market share figures for both
an international and national market.
COMPETITION EVALUATION
Horizontal analysis
8. According to the parties, premerger, HP has approximately 2.4% and EDS has
3.2% market shares in the worldwide broad IT services market. In addition, they
will continue to face effective competition from over 150 competitors in this
market post merger; the largest competitors include, IBM, Fujitsu, Accenture,
Computer Sciences Corporation and Lockheed Martin.
9. In South Africa, HPSA is said to have 2.2% and EDS SA, 1.3% market shares
pre-merger, in the IT services market. Other large competitors include; Business
Connexion, Dimension Data, Siemens Communications, Arivia.kom and
GijimaAst.
10. In each of the identified markets being: consulting services, development and
integration services, and IT management services, each of the parties has less
than 5% of the market, and again faces effective competition from other players.
Vertical analysis
11. The value of the services procured by EDS SA from HP amounts to less than
1% of EDS’s annual turnover and less than 1% of HP’s annual turnover in the
previous financial year in South Africa. Therefore, no foreclosure concerns arise.
CONCLUSION
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12. Given the low market shares the merger will not lead to any concentration in
the affected overlap markets, whilst the vertical relationship is too insignificant to
alter the merged firms’ incentives. We conclude that the merger will not result in
any substantial lessening or prevention of competition in any of the relevant
markets. Accordingly, we approve the merger without conditions.
13. There are no public interest issues.
_______________ 9 September 2008
N Manoim Date
Tribunal Member
Y Carrim and U Bhoola concur in the judgment of N Manoim
For the merging parties : Bowman Gilfillan
For the Commission : K. Mahlakoana
(Mergers and Acquisitions)
Tribunal Researcher: L Xaba
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