COMPETITION TRIBUNAL OF SOUTH AFRICA
Case No.115/LM/Dec12
016147
In the matter between:
Professional Provident Society Acquiring Firm
Insurance Company Limited
And
The PPS Life and Disability Insurance Scheme Target Firm
Panel : Takalani Madima (Presiding Member)
Anton Roskam (Tribunal Membe r)
Andiswa Ndoni (Tribunal Member)
Heard on : 20 March 2013
Order issued on : 20 March 2013
Reasons issued on : 08 April 2013
Reasons for Decision
Approval
[1] On 20 March 2013 the Competition Tribunal (“Tri bunal”) approved the merger
between Professional Provident Society Insurance Co mpany Limited (“PPS
Insurance”), and The PPS and Life Disability Insura nce Scheme (“The
Scheme”).The reasons for approving the proposed transaction follow below.
Parties to the transaction
[2] The primary acquiring firm is PPS Insurance whi ch is a long term insurance
company registered in terms of the Long Term Insurance Act.1 PPS Insurance
operates as a mutual insurer which provides life, i llness and other benefits
such as pension and medical scheme benefits to poli cyholders by way of
various types of long-term insurance policies.
[3] The primary target firm is The Scheme, which is jointly controlled by PPS
Insurance and Sanlam Life Insurance Company Limited (“Sanlam”). The
Scheme provides long term insurance policies in the form of life and disability
risk cover and operates as a closed scheme.
Proposed transaction
[4] The proposed transaction involves the substitut ion of liability between PPS
Insurance and Sanlam in terms of which Sanlam’s lia bility to policyholders in
respect of The Scheme would be substituted with the liability of PPS
Insurance towards policyholders.
The relevant market and the impact on competition
[5] The relevant product market is the market for t he provision of long term
insurance policies. Registered long term insurers o ffer individual and/or group
policies and the market can further be delineated i nto narrower markets
depending on the type of risk cover as set out in t he Long Term Insurance
Act.
2
[6] There is a horizontal overlap in the activities of the merging parties as they
both active in the provision of long term insurance market, offering long term
individual insurance policies.
[7] The Commission and merging parties submitted th e market for long term
insurance to be national as insurance policies are sold throughout the country
and prices are not differentiated by regions.
1 The Long Term Insurance Act 52 of 1958.
2 See page 15 of Commission’s Report.
Barriers to Entry
[8] During the hearing, the merging parties submitt ed that barriers to entry in the
market are not prohibitive and are similar to those of short term insurance.
The minimum capital requirements in terms of solve ncy requirements of a
long term insurer is set by the Financial Services Board (“FSB”) to be R10
million. There have been seven entrants in the market, from 2008-2010. 3
[9] Post merger, the merged entity will have a mark et share of less than 2%. It is
evident from this, that the merging entities post m erger, will face sufficient
competition from other competitors in the market. 4
Public Interest
[10] The Merging parties submitted that the propose d transaction will not result in
any job losses. Furthermore, the proposed merger ra ises no clear public
interest concerns. 5
[11] We conclude that that the proposed transaction is unlikely to substantially
lessen or prevent competition in any relevant market.
CONCLUSION
[12] We unconditionally approve the merger.
____________________ 08 April 2013
Takalani Madima DATE
Anton Roskam and Mondo Mazwai concurring.
Tribunal Researcher: Caroline Sserufusa
For the merging parties:
Paul Cleland of Werksmans Attorneys
For the Commission: Zanele Hadebe
3 See page 3 para 20 of the Transcript.
4 See page 19 0f the Commission’s Report.
5 See page 20 of the Commission’s Report.