compelition trlbunal
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COMPETITION TRIBUNAL OF SOUTH AFRICA
Case No: LM~96Jan,ili7J
In the matter between:
SAMSUNG ELECTRONICS CO. LTD
and
HARMAN INTERNATIONAL INDUSTRIES, IN CORPORA TED
Panel
Heard on
Order Issued on
Reasons Issued on
Approval
: Norman Manoim (Presiding Member)
: Andiswa Ndoni (Tribunal Member)
: Enver Daniels (Tribunal Member
: 8 March 2017
: 8 March 2017
: 24 March 2017
Reasons for Decision
Acquiring Firm
Target Firm
[1] On 8 March 2017, the Competition Tribunal ("Tribunal") approved the proposed
transaction between Samsung Electronics Co. Ltd ("Samsung") and Harman
International Industries, Incorporated ("Harman").
[2] The reasons for approving the proposed transaction follow.
Parties to the Proposed Transaction
Primary Acquiring Firm
[3] The primary acquiring firm is Samsung, a public company incorporated in
accordance with the laws of South Korea. It is not controlled by any one
shareholder. Samsung operates in South Africa through Samsung Electronics
South Africa (Pty) Ltd ("Samsung SA"), a company incorporated in accordance
with the laws of South Africa.
[4] Samsung is a worldwide manufacturer and distributor of electronics and
information technology products as well as high tech electronics and digital
media products.
Primary Target Firm
[5] The primary target firm is Harman, a public company incorporated in accordance
with the laws of Delaware, United States of America and is not controlled by any
one shareholder. Harman controls a number of firms internationally but does not
have any subsidiaries operating in South Africa.
[6] Harman designs and engineers electronic products and solutions for
automakers, consumers and enterprises worldwide. The majority of Harman's
business is focused on automotive electronics. t
Proposed Transaction and Rationale
[7] The proposed transaction entails the acquisition of Harman by Samsung and will
be made through Samsung Electronics America Inc. ("Samsung USA"), a wholly
owned subsidiary of Samsung. Samsung USA has formed a new entity which
will merge with Harman. Post-transaction, Samsung will exercise sole control
over Harman which will operate as a wholly-owned subsidiary of Samsung.
1 Page 56 of the Merger Record .
2
[8] In terms of the rationale, the proposed transaction will allow Samsung to expand
into new markets and enhance certain of its products. Furthermore, the proposed
transaction will provide the merged entity with a broad range of capabilities,
expertise and experience, which will allow for growth and innovation.
Relevant Market and Impact on Competition
[9] The Commission considered the activities of the merging parties and found that
there is a potential horizontal overlap in the provision of home and mobile
electronics products. These products can be further delineated into the
provision of audio home systems, speakers and headphones. 2 The
Commission analysed these as three separate markets.
[1 O] Further, the Commission found that the proposed transaction gives rise to a
vertical overlap as Samsung is engaged in the upstream provision of DRAM and
NANO semiconductors as well as display panels that could be used by
downstream manufacturers in various automotive electronics applications where
Harman is active. 3 As such, the Commission identified three relevant vertical
markets, namely (i) the upstream market for the provision of NANO and DRAM
semiconductors (ii) the upstream market for the provision of display panels and
(iii) the downstream market for the provision of automotive electronics.
Horizontal Overlap
[11] In the horizontal assessment the Commission considered both global and
national markets. In the global market the Commission found that the merged
entity would have less than 20% in each of the relevant markets and that these
market shares are minimal to confer power on the merged entity.
[12] In respect of the national markets, the Commission was unable to obtain accurate
data on market shares as most players in the affected markets are international
2 Page 2 of the Transcript.
3 Page 2 of the Transcript.
3
players that apply their products in South Africa through distributors and are
unable to segment their revenues by specific products.4 However, the
Commission was able to show that there are viable competing brands sold and
available in South Africa including LG, Sony, Panasonic and Yamaha that would
continue to compete with the merged entity.
[13] Furthermore, the Commission found that the products of Samsung and Harman
do not closely compete with each other as Harman's products are premium audio
products which compete against other high end audio electronic products. The
premium audio products are sold at higher prices and are distributed through
different distribution channels. As such the products of Harman and Samsung
typically target different segments of customers.
Vertical Overlap
[14] In respect of the vertical assessment the Commission found that the vertical
overlap is unlikely to result in any input foreclosure concerns as Samsung is not
dominant in the upstream market for the provision of DRAM and NANO
semiconductors and display panels. It accounts for less than 5% in each of the
upstream markets and is therefore unlikely to have the ability to foreclose any
downstream rivals.
[15] With regards to potential customer foreclosure concerns, the Commission found
that the downstream market shares of Harman in the market for the provision of
automotive electronics are less than 2% and that the merged entity will continue
to face competition from large global players. In the narrower markets for
infotainment systems and information displays Harman will have a market share
of at most 15% and will continue to face competition.
[16] Furthermore, the Commission found that Harman does not purchase any
semiconductor or display products from Samsung or any other entities in South
4 Pages 3 and 8 of the Transcripts.
4
Africa. As such, the Commission concluded that any potential foreclosure
concern is unlikely to generate effects in South Africa.
[17] Accordingly the Commission concluded that the proposed transaction is unlikely
to substantially prevent or lessen competition in any of the horizontal or vertical
markets identified.
[18] The Commission did receive a number of concerns regarding the merger from
market participants. These included concerns about tying and bundling products
in the home audio markets, restricting the interoperability of products against
rivals, and/or incentivising dealers not to deal with rival products, and about
termination of co-partnership agreements and the sharing of competitor
information with Samsung obtained from those co-branding partnerships.
[19] However, the Commission maintained that the merged entity is not acquiring any
market power in any of the affected markets and therefore concerns of bundling,
interoperability restrictions and incentivising dealers to exclude are unlikely to
arise post-merger. Regarding the impact of the merger on Harman's business
relationships the Commission is of the view that Samsung has publically
committed to maintaining existing relationships and that Harman is prevented
from sharing information by contractual confidential provisions.
[20] We concur with the Commission's conclusion that the proposed merger is
unlikely to substantially prevent or lessen competition in any relevant market.
Public Interest
[21] The merging parties submit that the proposed transaction is unlikely to negatively
affect employment as Harman does not have any employees in South Africa. 5
[22] The Commission was of the view that the proposed transaction is unlikely to raise
concerns on any other public interest grounds.
s Page 77 of the Merger Record
5
Conclusion
[23] In light of the above, we conclude that the proposed transaction is unlikely to
substantially prevent or lessen competition in any relevant market or raise any
adverse public interest issues. Accordingly, we approve the proposed transaction
unconditionally.
MrNo
Ms Andiswa Ndoni and Mr Enver Daniels concurring
TribunalResea~he~
For the merging parties:
For the Commission:
Hayley Lyle
John Oxenham of Nortons Inc
Portia Bele
24 March 2017
DATE
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