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[2018] ZACT 4
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Unitrans Automotive (Pty) Ltd v Action Ford Ltd (LM228Nov17) [2018] ZACT 4 (13 February 2018)
COMPETITION TRIBUNAL OF SOUTH
AFRICA
Case
No: LM228Nov17
In
the matter between
Unitrans
Automotive (Pty)
Ltd
Primary
Acquiring Firm
And
Action
Ford
Ltd
Primary Target
Firm
Panel
: Mr Enver Daniels (Presiding Member)
: Prof. lmraan Valodia(Tribunal
Member)
: Ms Andiswa Ndoni (Tribunal
Member)
Heard on
: 24 January 2018
Order Issued on
: 24 January 2018
Reasons Issued on
: 13 February 2018
REASONS
FOR DECISION
Approval
[1]
On
24 January 2018, the Tribunal conditionally approved the large merger
between Unitrans Automotive (Pty) Ltd ("Unitrans Automotive")
and Action Ford Ltd ("Action Ford"), hereinafter referred
to as the merging parties.
[2]
The
reasons for approval follow.
Parties
to the transaction
Primary
Acquiring Firm
[3]
Unitrans
Automotive is active in the sale of new and pre-owned vehicles, parts
and accessories and after-market services. It has
numerous car
dealerships across the Republic of South Africa (RSA) which include
various vehicle brands,
inter alia,
BMW, Lexus, Nissan and Ford. In
addition, Unitrans Automotive also assists customers with acquiring
consumer credit, insurance products,
fleet management services and
car rentals.
[4]
Unitrans
Automotive is a wholly-owned subsidiary of Steinhoff International
Holdings Limited, and owns a number of entities in South
Africa.
Primary
Target Firm
[5]
Action
Ford only sells new and pre-owned Ford vehicles. Apart from its
vehicle sales, its key service offerings include a service
and parts
department. It does not, however, offer heavy commercial vehicles nor
does it engage in fleet sales. Action Ford also
acts as an
intermediary by offering customers access to financial services
related to the purchase of vehicles.
[6]
Of
relevance to the proposed transaction is Action Ford's five
dealerships in Gauteng (Krugersdorp and Roodepoort), North-West
(Zeerust and Lichtenburg) and Western Cape (Citrusdal).
[7]
Action
Ford is controlled by P.P Vorster, H.J Streicher and H.J Meyer.
Action Ford does not control any firm.
Proposed
transaction and rationale
[8]
In
terms of the Sale of Shares and Claims Agreement, the proposed
transaction entails Unitrans Automotive acquiring Action Ford's
motor
vehicle dealership as a going concern. Post-merger, Unitrans will own
and operate Action Ford's motor vehicle dealership
business.
[9]
Action
Ford has experienced a depletion in cash reserves owing to the growth
of car dealerships. The proposed transaction is therefore
a corollary
of Action Ford's rather uncertain financial position.
Relevant
market and impact on competition
[10] The
Commission considered the activities of the merging parties and found
a horizontal overlap in the
market for the sale of new and used
passenger and light commercial vehicles. The Commission did not
further consider the market
for the sale of used passenger and light
commercial vehicles as the market is very competitive. Ultimately,
the Commission limited
its investigation to the market for the sale
of new passenger and new light commercial vehicles in Gauteng, North
West and Western
Cape.
[11]
In
the market of the sale of new passenger vehicles, the Commission
found that the merging parties will have a combined post-merger
market share of less than 10%, with an accretion of less than 5%.
[12]
In the market for the sale of new light
commercial vehicles, the Commission found that the merging parties
will have a combined
post-merger market share of less than 15%, with
an accretion of less than 5%.
[13]
In view of the above, the Commission
concluded that the insignificant post merger market share
accretions in each relevant
market shows no evidence of market power
that could be exercised by the merged entity. The proposed
transaction is unlikely to
alter the pre-merger market structure and
that the merged entity will continue to face competition from other
firms,
inter alia,
McCarthy
Ltd, Imperial Holdings Ltd and Barloworld SA (Pty) Ltd. As such, the
proposed transaction is unlikely to lead to a substantial
prevention
or lessening of competition in the relevant market. We find no reason
to differ with the Commission's findings.
Public
interest
[14]
The merging parties submitted that the
proposed transaction will not result in any adverse effects on
employment as all employees
employed by Action Ford will be taken
over by Unitrans Automotive as contemplated in
section 197
of the
Labour Relations Act 66 of 1995
. In the same vein, the Commission
emphasised that Action Ford is being acquired as a going concern and
thus no job losses will
occur as a result of the proposed
transaction. The Commission therefore concluded that the proposed
transaction is unlikely to
raise any employment or other public
interest concerns.
[15]
Although we agreed with the submissions
made above, we suggested that the parties include a condition that
would restrain the merged
entity from any merger specific
retrenchments at least for a period of 2 years, as reflected in
'Annexure A'. This condition serves
as some measure of comfort that
jobs will be protected in light of Action Ford's rather precarious
financial position.
[1]
Conclusion
[16]
In light of the above, we concluded that
the proposed transaction is unlikely to substantially prevent or
lessen competition in
any market. In addition, no other public
interest issues arise, save for those safeguarded by the conditions
imposed. Accordingly,
we approved the proposed transaction with
conditions marked as
'Annexure A'.
Mr
Enver Daniels
Prof.
lmraan Valodia and Ms Andiswa Ndoni concurring.
13 February 2018
Tribunal
Case Manager
: Kgothatso
Kgobe and Ndumiso Ndlovu
For
the Merging Parties
: G Bothma
and N Kotze of Unitrans Automotive
For
the Commission
: I Mhlongo and Z Hadebe
ANNEXURE A:
Unitrans
Automotive (Pty) Ltd
And
Action
Ford Ltd
CC Case Number: 20170ct0062
CT Case Number: LM228Nov17
CONDITIONS
1.
DEFINITIONS
The
following expressions shall bear the meanings assigned to them below
and cognate expressions bear corresponding meanings -
1.1
"Acquiring Firm"
means
Unitrans Automotive (Pty) Ltd;
1.2
"Approval Date"
means
the date referred to in the Tribunal's merger clearance certificate;
1.3
"Commission"
means
the Competition Commission of South Africa;
1.4
"Competition Act"
means
the
Competition Act 89 of 1998
, as amended;
1.5
" Conditions"
mean
these conditions;
1.6
"Implementation Date"
means
the date on which the Merger is implemented;
1.7
"Merger"
means
the acquisition of the Target Firm by the Acquiring Firm;
1.8
"Merging Parties"
means the Acquiring Firms and the
Target Firms;
1.9
"LRA"
means
Labour Relations Act;
1.10
"Rules
"
mean the Rules for the Conduct of Proceedings in the Competition
Commission and the Rules for the Conduct of Proceedings in
the
Competition Tribunal;
1.11
"Target Firm"
means
Action Ford; and
1.12
"Tribunal"
means
the Competition Tribunal of South Africa.
2.
CONDITIONS
TO THE APPROVAL OF THE MERGER
2.1
The
Merging Parties shall not retrench any employees as a result of the
Merger for a period of two (2) years from the Implementation
Date.
2.2
For
the sake of clarity, retrenchments do not include (i) voluntary
separation arrangements; or (ii) voluntary early retirement
packages,
(iii) unreasonable refusals to be redeployed in accordance with the
provisions of the LRA; (iv) resignations or retirements
in the
ordinary course of business; (v) retrenchments lawfully effected for
operational requirements unrelated to the Merger; (vi)
terminations
in the ordinary course of business, including but not limited to,
dismissals as a result of misconduct or poor performance;
and (vii)
any decision not to renew or extend a contract of a contract worker.
3.
MONITORING OF COMPLIANCE WITH THE
CONDITIONS
3.1
The Merging Parties shall circulate a
copy of the Conditions to all their employees and their relevant
trade unions or employee
representatives within 5 (five) business
days of the Approval Date.
3.2
As proof of compliance thereof, the
Chief Executive Officer of the Merging Parties shall within 10 (ten)
business days of circulating
the Conditions, submit an affidavit
attesting to the circulation of the Conditions and provide a copy of
the notice that was sent
to the employees.
3.3
The Acquiring Firm shall inform the
Commission of the Implementation Date within 5 (five) business days
of it becoming effective.
3.4
The Acquiring Firm shall, on an annual
basis on the anniversary of the Implementation Date, submit an
affidavit confirming compliance
with Condition 3.1.
4.
BREACH
4.1
In the event that the Commission
receives any complaint in relation to non compliance with the
above Conditions, or otherwise
determines that there has been an
apparent breach by the merger entity of these Conditions, the breach
shall be dealt with in terms
of Rule 39 of the Competition Commission
Rules.
4.2
Any individual who believes that the
Merging Parties have not complied with or have acted in breach of
these Conditions may approach
the Commission.
5.
VARIATION
5.1
The
Merging Parties shall be entitled, upon good cause shown, to apply to
the Tribunal for a waiver, relaxation, modification and/or
substitution of one or more of the Conditions.
6.
GENERAL
6.1
All
correspondence in relation to this Condition should be forwarded to:
mergerconditions@compcom.co.za.
[1]
Unitrans reiterated that they are protecting jobs and adding 250
more employees.