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[2015] ZACT 34
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SPAR Group Limited v Florida Foodliner (Pty) Ltd (020925) [2015] ZACT 34 (10 April 2015)
COMPETITION
TRIBUNAL OF SOUTH AFRICA
Case No: 020925
In the matter
between:
The SPAR Group
Ltd
...................................................................................................
Primary
Acquiring Firm
And
Florida
Foodliner (Pty)
Ltd
..............................................................................................
Primary
Target Firms
in respect of
Florida Junction SUPERSPAR
Florida Junction
Tops@SPAR and
Memoire Trading 130
(Pty) Ltd in respect of
Gordon Road
SUPERSPAR and
Gordon Road
Tops@SPAR
Panel: Norman Manoim
(Presiding Member),
Fiona Tregenna
(Tribunal Member)
Andreas Wessels
(Tribunal Member)
Heard on: 25 March
2015
Order issued on: 25
March 2015
Reasons issued on :
10 April 2015
Reasons for
Decision
Approval
[1] On 25 March 2015
the Competition Tribunal (“Tribunal”) unconditionally
approved the large merger between The SPAR
Group (Pty) Ltd (“the
SPAR Group”) and Florida Foodliner (Pty) Ltd (“Florida
Foodliner”), in respect of
Florida Junction SUPERSPAR and
Florida Junction Tops@SPAR (“Florida Junction Businesses”)
and Memoire Trading 130 Pty
Ltd (“Memoire Trading”), in
respect of Gordon Road SUPERSPAR and Gordon Road Tops@SPAR (“Gordon
Road Businesses”)
(“collectively referred to as the
“Target firms”). The reasons for approving the
transaction follow.
Parties to the
transaction
[2] The primary
acquiring firm is the SPAR Group, a public company incorporated under
laws of the Republic of South Africa (“RSA”)
and listed
on the Johannesburg Securities Exchange. The SPAR Group conducts a
wholesaling operation throughout South Africa. It
acquires goods at
best possible prices as far as possible directly from manufacturers
and sells these goods to the SPAR Guild members.
The SPAR Group also
operates the SPAR Distribution centres. These distribution centres
warehouse and distribute dry goods, perishable
goods, liquor, general
merchandise, personal care goods, etc. to the SPAR Guild stores. The
SPAR Group also operates nine retail
stores.
[3] The primary
target firms are the Florida Junction Businesses and Gordon Road
Businesses. The Florida Businesses are controlled
by Florida
Foodliner, whilst the Gordon Road Businesses are controlled by
Memoire Trading. The target firms do not control any
firm. The target
firms are retail supermarkets that sell a wide range of fresh and
processed foodstuffs, toiletries, household
products and other
similar supermarket-style items to the general public. The target
firms also retail liquor in off-consumption
liquor stores that sell a
wide range of liquor and associated products to the public. Both
target firms are located in the Gauteng
province in Roodeport.
Proposed
transaction and rationale
[4] The acquisition
of the target firms by the SPAR Group is a short term strategy of the
SPAR Group which ultimately wants to place
the businesses with a
suitable retailer who is a member of the SPAR Guild of Southern
Africa NPC.
[5] Florida
Foodliner and Memoire Trading offered to sell the businesses to the
SPAR Group in terms of the pre-emptive right enjoyed
by the SPAR
Group as no suitable purchaser could immediately be found to purchase
the businesses.
Competition
assessment
[6] The Gommission
considered the activities of the merging parties and found that there
is a horizontal overlap in the retail of
food, groceries and liquor.
The Commission also found that there is a vertical relationship
between the merging parties as the
SPAR Group supply goods to the
target firms.
[7] The Commission
identified two relevant product markets, namely one for the retail of
groceries and another for the retail of
liquor. In both instances,
the Commission defined the geographic market to encompass an
estimated 1.5 kilometre (“km”)
radius of the target
firms.
Horizontal
overlap
Retail of liquor
[8] The Commission’s
analysis revealed that the closest liquor retail store owned by the
SPAR Group is about 36 km away from
the target firms and is unlikely
to constrain the target firms. The Commission thus concluded that
there is no geographical overlap
in the activities of the merging
parties in relation to the market for the retail of liquor.
Retail of grocery
[9] The Commission’s
analysis revealed that the closest grocery retail store owned by the
SPAR Group is about 54.7 km away
from the target firms. The
Commission thus concluded that there is no geographical overlap in
the activities of the merging parties
in relation to the market for
the retail of groceries.
[10] The Commission
therefore submitted that the proposed transaction is unlikely to
result in any competition concerns. We agree
with the Commission’s
findings.
Vertical overlap
[11] The vertical
overlap of the proposed transaction is as a result of the target
firms purchasing between 92-96% of their products
from the SPAR Group
and the remainder from other suppliers. This means that only in few
instances where the SPAR Group does not
have the products, the target
firms source from third parties. The Commission concluded that
foreclosure concerns as a result of
the proposed transaction are
highly unlikely as the status quo will remain post-merger.
Public Interest
[12]
The merging parties submitted that the proposed transaction will not
have a negative impact on employment as the SPAR Group
will continue
to run the businesses of the target firms if the transaction is
approved. The employees of the businesses are required
to keep the
businesses running and they shall continue to be employed after the
sale, on the same terms and conditions as applied
prior to the sale.
1
The
proposed transaction raised no other public interest concerns.
CONCLUSION
[13] We agree with
the Commission’s findings that the proposed transaction is
unlikely to substantially prevent or lessen
competition in the
identified markets. We therefore approve the transaction without
conditions.
10 April 2015
DATE
Mr Norman Manoim
Prof. Fiona
Tregenna and Mr Andreas Wessels concurring.
Tribunal
Researcher:
Caroline
Sserufusa
For the merging
parties: Howard Stephenson of Garlicke &Bousfield Inc
For
the Commission: Hugh Dlamini
1
See
page 15 of the merger record.