COMPETITION TRIBUNAL OF SOUTH AFRICA
Case No:77/LM/Dec10
In the matter between:
UNILEVER PLC Acquiring Firm
And
ALBERTO-CULVER COMPANY Target Firm
Panel : Norman Manoim (Presiding Member),
Yasmin Carrim (Tribunal Member)
Andreas Wessels (Tribunal Member)
Heard on : 23 March 2011
Order issued on : 23 March 2011
Reasons issued on : 12 April 2011
Reasons for Decision
Approval
1] On 23 March 2011 the Competition Tribunal (“Tribunal”) approved the
large merger between Unilever Plc and Alberto-Culver Company. The
reasons for approving the proposed transaction follow below.
The Parties to the transaction
2] The primary acquiring firm is Unilever Group (“Unilever”) which has two
parent companies, namely, Unilever Plc and Unilever N.V. Both Unilever
Plc and Unilever N.V are public companies listed on the London Stock
Exchange and Euronext Amsterdam respectively. Both are not controlled
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by any single entity. In South Africa, Unilever provides its activities
through Unilever South Africa (Pty) Ltd, which is controlled by Unilever
South Africa Holdings (Pty) Ltd, which in turn is controlled by Unilever
Best Foods Holdings LLC and Unilever Holdings BV.
3] The target firm is Alberto-Culver Company, a company listed on the New
York Stock Exchange.
The Rationale
4] Alberto-Culver submits that the proposed transaction will increase
competition because it will enable it to become effective in the face of
competition from larger companies with a more diversified offering and
greater financial resources.
The parties’ activities
5] Unilever is a worldwide supplier of fast moving consumer goods, food,
home care and personal care categories. In the food and beverages
category, Unilever supplies products such as soups, spreads, beverages,
sauces, oils and ice cream under the brands Lipton, Magnum, Bertolli and
Becel. In the personal care category, it provides deodorants, bath and
shower products, skin care products, oral care products and hair care
products under the following brands, Dove, Sunsilk, Organics and
Timonei. Of these only Organics and Sunsilk are currently marketed in
South Africa.
6] In South Africa, Alberto’s only activities involve hair care products under
brands such as, TRESemmé, Nexxus, Soft and Beautiful, Motions, and
Just for Me.
The relevant market and the impact on competition
1] The Commission found that there is a distinction in hair care products
based on the type of hair, that is, Caucasian and ethnic hair type. It
defined the relevant product market to include eight categories, being
ethnic shampoos, conditioners, styling and relaxers; and Caucasian
shampoos, conditioners, styling and hairs sprays.
2] With respect to all the ethnic products, and the Caucasian styling and
hairsprays, the Commission found that the proposed transaction is
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unlikely to prevent or substantially lessen competition, due to either low
combined market shares or low market share accretion. Unlike in the
Caucasian hair market where big brands tend to dominate, these other
markets as defined by the Commission seem to be populated by many
suppliers.
3] The Commission paid a lot of attention to the Caucasian hair shampoo
and conditioners market where there is high post merger combined
market share.
4] The combined post merger market share of Unilever in the shampoos and
conditioners market would be as follows:
Table 1: Shampoos
Market share Unilever Alberto-Culver Merged Entity
Shampoo 2009 13-15% 13-15% 26-30%
Shampoo 2010 13-15% 13-15% 26-30%
Caucasian
shampoo 2009
12-14% 12-14% 24-28%
Caucasian
shampoo 2010
13-15% 13-15% 26-30%
Table 2: Conditioners and treatments
Market share Unilever Alberto-Culver Merged entity
Conditioner 2009 14-16% 20-22% 34-38%
Conditioner 2010 13-15% 20-23% 33-38%
Caucasian
conditioner 2009
13-15% 20-22% 33-37%
Caucasian
conditioner 2010
13-15% 20-23% 33-38%
5] The merging parties’ prominent brands in the Caucasian shampoo and
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conditioners market are Sunsilk and Organics (Unilever) and TRESemmé
(Alberto Culver). The Commission found that these brands were likely to be
the closest competitors to each other. This was confirmed by views of
customers.1
6] Despite the high post merger market shares, the Commission found that
this did not raise concerns about unilateral or co-ordinated effects. This is
because entry in this market is easy both at a brand level and at adjacent
market level. It submitted that brands in the Caucasian shampoo and
conditioner market could be segmented into four categories such as
affordability, value for money, prestige, and premiums. However the
Commission did not deem it necessary to define the market with respect
to those particular segments because of the ease with which brands can
be re-launched from one segment to another. An example of this was
TRESemmé itself which had been re-launched from the salon segment
into the retail market in the value for money segment. The Commission
further submitted that there was potential entry, from competitors that
operate in adjacent ethnic markets, into the Caucasian market. It argued
that the market is a very dynamic and innovative one and that to remain
relevant and dynamic, even big companies re-launch brands all the time.
7] It was further submitted that the market is very price sensitive and that
market share increases and decreases were immediately discernable
when prices moved up or down. Further, that although brand recognition
is important, consumers are not particularly brand loyal, and that
consumers would respond to increases in process by trading down. The
merging parties confirmed this at the hearing and pointed to fluctuations in
market shares of specific brands as evidence of the sensitivity of these
products to changes in pricing.
8] The Commission further found that there is some level of countervailing
8] The Commission further found that there is some level of countervailing
power from large retailers because what they stock is determined by the
consumers’ preference. In the past retailers have simply taken product off
the shelves where sales volumes were too low due to high pricing.2
1 See Commission recommendation page 71
2 See the views expressed by customers of the merging parties at Competition Commission’s
recommendation page 81-82
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9] In light of the above, the Commission found that the transaction is unlikely
to substantially prevent or lessen competition in the relevant markets.
10]In relation to the concerns raised in the United States with regard to
TRESemmé, VO5 and some of Unilever brands, it was submitted on
behalf of the merging parties that it would be hard to draw comparisons
because the market conditions and circumstances in the United States
are different from those in South Africa, due to the fact that Alberto Culver
has a much bigger presence in the United States than in South Africa.
Drawing meaningful comparisons was also made more difficult because
the Unilever brands sold in South Africa are different from those in the
United States, an example being Organics, which is an exclusively South
African product.
11] In light of the above, we find that the transaction would not substantially
prevent or lessen competition in the relevant markets.
CONCLUSION
12] In relation to the public interest issues, Unilever undertook that out of a
total of 25 employees, there will be no more than 15 retrenchments.
Further that apart from four jobs which are more blue collar type, the
remainder are white collar employees who would not have too many
difficulties in finding alternative employment.
13] There are no significant public interest issues and we accordingly approve
the transaction.
____________________ 12 April 2011
YASMIN CARRIM DATE
N Manoim and A Wessels concurring.
Tribunal Researcher: Tebogo Hlafane
For the merging parties: Nortons Inc
For the Commission: Mr Mfundo Ngobese
Mr Nicholas Ngepah
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