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[2015] ZACT 52
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Spar Group Limited v Kwankcenke Trading CC and Others (LM006Apr15) [2015] ZACT 52 (8 June 2015)
COMPETITION
TRIBUNAL OF SOUTH AFRICA
Case
No: LM006Apr15
DATE:
08 JUNE 2015
In
the matter between:
The
SPAR Group
Limited
...............................................................................
Primary
Acquiring Firm
And
Kwankcenke
Trading
CC,
in respect of the
business
........................................
Primary
Target Firms
known
as Engcobo SUPERSPAR and Ndu’s SPAR CC, in respect of the
business known as Ndu’s SPAR
Panel
Norman Manoim (Presiding Member),
Medi
Mokuena (Tribuna! Member)
Andiswa
Ndoni (Tribunal Member)
Heard
on 25 May 2015
Order
issued on 20 May 2015
Reasons
issued on : 08 June 2015
Reasons
for Decision
Approval
[1]
On 20 May 2015 the Competition Tribunal
(“Tribunal”) unconditionally approved the large merger
between The SPAR Group
Limited (“the SPAR Group”) and
Engcobo SUPERSPAR and Ndu’s SPAR (“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 Engcobo
SUPERSPAR and Ndu’s SPAR. Engcobo SUPERSPAR is owned by
Kwankcenke Trading CC (Kwankcenke”)
and Ndu’s SPAR is
owned by Ndu’s SPAR CC (“Ndu”). For purposes of the
proposed transaction, Kwankcenke
and Ndu will collectively be
referred to as the “Sellers”. The Target firms are
jointly controlled in equal shares
by Mr John Phillip Kairuz and Mr
Demarl Jacques Myburgh. The Target firms do not control any firms.
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. Both
target firms are located in the Engcobo in the Eastern Cape Province.
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]
The Sellers have decided to exit the
retail market sector and accordingly Kwankcenke and Ndu have decided
to sell the Target firms.
This is in accordance with pre-emptive
rights enjoyed by the SPAR Group. The SPAR Group has decided to
purchase the Target firms
until a suitable buyer who wished to
purchase the businesses is found.
Competition
assessment
[6]
The Commission considered the activities
of the merging parties and found that there is a horizontal overlap
in the market for the
retail of food and groceries. The Commission
also found that there is a vertical relationship between the merging
parties as the
SPAR Group supplies goods to the Target firms.
[7]
The Commission identified the relevant
product market as the retail of groceries and food products. The
Commission defined the geographic
market to encompass an estimated
1.5 kilometre (“km”) radius of the Target firms.
[8]
The Commission’s analysis revealed
that the closest grocery retail store owned by the SPAR Group is
about 254 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.
[9]
The Commission therefore submitted that
the proposed transaction is unlikely to result in any competition
concerns. We agree with
the Commission’s findings.
[10]
The
vertical overlap of the proposed transaction is as a result of the
target firms purchasing between 42-48% of their products
from the
SPAR Group and the remainder from other suppliers. The Commission
contacted other suppliers of the Target firms such as
Komga
Packaging, Blue Ribbon Bread, Andrews Abattoir, and Dynamic Brands
inter
alia.
These suppliers indicated
that they supply to various retail stores throughout the Eastern
Cape, the Target firms therefore make
up only a small percentage of
their businesses. The Commission concluded that foreclosure concerns
as a result of the proposed
transaction are highly unlikely as the
third party suppliers will have alternative customers to supply.
Public
Interest
[11]
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.
[I]
The
proposed transaction raised no other public interest concerns.
CONCLUSION
[12]
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.
08
June 2015
DATE
Mr
Norman Manoim
Ms
fl/ledi Mokuena and Ms Andiswa Ndoni concurring.
Tribunal
Researcher: Caroline Sserufusa
For
the merging parties: Howard Stephenson of Garlicke &Bousfield Inc
For
the Commission: Hugh Dlamini
[I]
See page 139 of the merger record.