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[2016] ZACT 10
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MNI Durban South Motors Proprietary Limited v Union Motors Lowveld and Another (LM173Nov15) [2016] ZACT 10 (24 February 2016)
COMPETITION
TRIBUNAL OF SOUTH AFRICA
Case
No:
LM173Nov15
In
the matter between:
NMI
DURBAN SOUTH MOTORS
PROPRIETARY
LIMITED
Primary Acquiring Firm
and
THE
UNION MOTORS LOWVELD AND
UNION
MOTORS SOUTH
COAST
DEALERSHIPS
Primary Target Firms
Panel
: Norman Manoim (Presiding Member)
: Andiswa Ndoni (Tribunal
Member)
: Medi Mokuena (Tribunal
Member)
Heard
on
: 3 February 2016
Order
Issued on
: 3 February 2016
Reasons
Issued on
: 24 February
2016
Reasons
for Decision
Approval
[1]
On 3 February 2016, the Competition Tribunal ("Tribunal")
approved the proposed transaction between NMI Durban South
Motors
Proprietary Limited and The Union Motors Lowveld and Union Motors
South Coast Dealerships.
[2]
The reasons for approving the proposed transaction follow.
Parties
to proposed transaction
Primary
acquiring firm
[3]
The primary acquiring firm is NMI Durban South Motors
Proprietary Limited ("NMI Durban") which is a joint venture
between Barloworld SA and NH Partnership. NMI is owned as to 51% by
Barloworld SA, as such, Barloworld SA controls NMI.
[4]
Barloworld SA is a wholly owned subsidiary within the Barloworld
Group of firms ("Barloworld Group"). The proposed
transaction is taking place within the Barloworld Automotive division
of Barloworld Limited ("Barloworld Automotive").
[5]
Barloworld Automotive provides a wide range of integrated motor
vehicle usage solutions. These include vehicle
ownership,
short and long term rental, and asset disposal solutions. Currently,
Barloworld operates eight multi-brand dealerships
in Durban and
Pietermaritzburg through the NMI joint venture, which allows for the
sale of a range of passenger and commercial
branded vehicles. In
addition the various dealerships also carry out aftermarket services
ancillary to the dealership businesses
conducted.
Primary
target firms
[6]
The primary target firms are the Union Motors South Coast
Dealership located in Shelley Beach (Kwa-Zulu Natal) and Union
Motors
Lowveld dealership located in Nelspruit (Mpumalanga). Both firms are
owned by a partnership of firms which hold interests
in the
respective dealerships.
[7]
The businesses operate in terms of a dealership agreement concluded
with various manufacturers which allows for the sale of
a range of
branded vehicles. The dealerships are involved in the sale of new
passenger, new commercial and used cars. Additional
products and
services include aftermarket services of parts sales and services.
Proposed
transaction and rationale
[8]
NMI Durban intends to acquire the dealership businesses of
Union Motors South Coast and Union Motors Lowveld as
a going concern.
[9]
The primary acquiring firm submits that the proposed transaction
presents an opportunity for Barloworld Automotive to
expand its
product and service offering; and grow its motor retail business by
offering an enhanced link between manufacturers
and customers.
[10]
The primary target firms submit that the transaction will enable the
partners in the respective businesses to recoup their
investment.
They submit that selling the businesses to Barloworld Automotive as a
going concern will allow interest holders to
unlock the value of
their investments as well as ensure that business operations are kept
intact.
Impact
on competition
[11]
The Commission found that the proposed transaction would
result in a horizontal overlap as both NMI Durban
and the
Target Firms are involved in the selling and servicing of new and
used cars. However, the Commission found that the market
for the sale
of used passenger vehicles was highly competitive. The Commission
also identified various other avenues through which
a customer could
purchase a used vehicle, as such the Commission did not assess this
market further.
[12]
As noted above, both the primary and target firms are involved in
additional products and services which include aftermarket
services
of part sales and services. As such, for completeness, the Commission
also considered the parties activities with regards
to aftermarket
services. In terms of new vehicles, the Commission found that
maintenance plans came standard as one of the value
added products
when purchasing a new vehicle. In addition, the customer was found to
have a variety of dealerships from which to
choose from when
servicing their vehicles. With respect to used cars, the Commission
found that customers acquired the balance
of the warranty and
maintenance plan and as a result could service their vehicle with the
manufacturer or any dealer aligned to
the manufacturer. Upon expiry
of the maintenance plan, the Commission found that customers were
free to service their cars with
any independent service provider. The
Commission therefore did not assess this market further.
[13]
In defining the relevant geographic market the Commission relied on
Super Group/Zingaro
Trade
in
which the Tribunal held that the purchase of vehicles within an 80km
radius suggested that the market was regional. When the
Commission
applied the 80km radius, it found that the merging parties'
activities did not overlap. However, the Commission sought
to adopt a
more cautious approach and widened the geographic market to include
both the merging parties' respective dealerships.
[14]
In terms of the distance between the Acquiring Group's new car
dealerships and Union Motors Lowveld (Nelspruit) the Commission
found
that the shortest distance between the two was 189km, while the
furthest distance was calculated as 212km.
[15]
With respect to the Acquiring Group's dealerships and their distance
from Union Motors South Coast (Shelley Beach), the Commission
found
that the shortest distance between the two was 123km, while the
furthest distance was 184km.
[16]
Based on these findings, the Commission concluded that these
dealerships were unlikely to impose a strong competitive constraint
on each other. However the Commission still undertook to assess the
effects of the proposed transaction in the Kwa-Zulu Natal and
Mpumalanga provinces.
[17]
In assessing the relevant market the Commission defined the relevant
market as the market for the sale of (i) new Passenger
Vehicles in
KwaZulu-Natal and Mpumalanga, (ii) new Light Commercial Vehicles in
KwaZulu-Natal and Mpumalanga, (iii) new Medium
Commercial Vehicles in
KwaZulu-Natal and Mpumalanga (iv) new Heavy Commercial Vehicles in
KwaZulu-Natal, and (v) new Extra Heavy
Commercial Vehicles in
KwaZulu-Natal.
[18]
In assessing the market shares for the above relevant markets in the
KwaZulu-Natal region, the Commission found that market
shares were
less than 15% in each market. The Commission was therefore of the
view that the post-merger market shares were relatively
low and that
the merged entity would continue to be constrained by the behavior of
their competitors. The Commission concluded
that the proposed
transaction was unlikely to substantially prevent or lessen
competition in any relevant market in the KwaZulu-Natal
region.
[19]
Similarly, in assessing the market shares of the relevant markets in
the Mpumalanga region, the Commission found that the market
shares
were less than 10% in each relevant market. The Commission was
therefore of the view that the post-merger market shares
were
relatively low and that the merged entity would continue to be
constrained by the behavior of their competitors. The Commission
concluded that the proposed transaction was unlikely to substantially
prevent or lessen competition in any relevant market in the
Mpumalanga region.
[20]
The Commission also considered a possible vertical aspect given
that the merging parties have traded from time to time.
However,
given that these transactions only accounted for a negligible amount
of the merging parties' revenues, the Commission
did not assess this
aspect further.
[21]
Therefore based on the post-merger market shares of the merged
entity, the Commission was of the view that the proposed transaction
was unlikely to substantially prevent or lessen competition in any
market.
[22]
We concur with the Commission's conclusion that the proposed
transaction is unlikely to substantially prevent or lessen
competition
in any relevant market.
Public
interest
[23]
The
merging
parties
confirmed
that
the
proposed
transaction
will not result
in
any adverse
impact on
employment.
[1]
[24]
The proposed transaction further raises no other public interest
concerns.
Conclusion
[25]
In light of the above, we conclude that the proposed transaction is
unlikely to substantially prevent or lessen competition
in any
relevant market. In addition, no public interest issues arise from
the proposed transaction. Accordingly, we approve the
proposed
transaction unconditionally.
24
February 2016
DATE
__________________
Mr.
Norman Manoim
Ms
Andiswa Ndoni and Ms Medi Mokuena
Tribunal
Researcher:
Karissa Moothoo Padayachie
For
the merging parties:
Bowman Gilfillan
For
the Commission:
Nolubabalo Myoli
[1]
Inter
alia
merger
record page
3.