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[2018] ZACT 23
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Datacentrix Holdings Limited v DG Store (SA) (Pty) Ltd (LM275Jan18) [2018] ZACT 23 (23 March 2018)
COMPETITION
TRIBUNAL OF SOUTH AFRICA
Case
No: LM275Feb18
In
the matter between:
Datacentrix Holdings
Limited
Primary Acquiring Firm
And
DG Store (SA) (Pty)
Ltd
Primary Target Firm
Panel
: AW Wessels (Presiding Member)
: Medi Mokuena (Tribunal Member)
: Andiswa Ndoni (Tribunal Member)
Heard on
: 1 March 2018
Order Issued on
: 1 March 2018 Reasons
Issued on
: 23 March 2018
REASONS
FOR DECISION
Approval
[1]
On 1 March 2018, the Competition
Tribunal ("Tribunal") unconditionally approved the proposed
transaction involving Datacentrix
Holdings Limited ("Datacentrix")
and DG Store (SA) (Pty) Ltd ("DG Store"), hereinafter
collectively referred
to as "the merging parties".
[2]
The reasons for approval of the proposed
transaction follow.
Primary Acquiring Firm
[3]
The primary acquiring firm is
Datacentrix, a public company incorporated in accordance with the
laws of South Africa. Datacentrix
is a wholly-owned subsidiary of OCT
Holdings (Pty) Ltd ("OCT"). Alviva Holdings Limited
("Alviva") holds a
majority controlling interest in DCT. No
single shareholder exercises control over Alviva. Datacentrix
controls a number of entities
in South Africa.
[4]
Datacentrix and its subsidiaries operate
inter alia
as
a technology reseller and ICT (information and communication
technologies) systems integrator, including the provision of IT
infrastructure, services and business solutions.
Primary
Target Firm
[5]
The primary target firm is OG Store, a
private company incorporated in accordance with the laws of South
Africa. At the time of
the merger filing DG Store did not control any
firm. However, it is a condition precedent to the proposed
transaction that DG Store
will acquire Digital Generation Consulting
(Pty) Ltd ("DG Consulting") and Digital Generation
Education (Pty) Ltd ("DG
Education").
[6]
DG Store
operates as an ICT
systems integrator,
providing
inter
alia
infrastructure and business
solutions.
Proposed
transaction
[7]
Datacentrix intends to acquire 70% of
the issued share capital in OG Store and will therefore control DG
Store post-merger.
[8]
The activities of the merging parties
overlap in the provision of IT systems integration.
[9]
The Competition Commission
("Commission") however defined the relevant product market
as the broad market for the provision
of all IT products and
services. In support of this the Commission indicated that suppliers
within the broad IT market generally
are not limited to a single
category of IT service and tend to supply a range of IT solutions.
However, no further details were
provided of the firms that the
Commission spoke to or what products and services they offer. We find
that there is a lack of evidence
in this case to support the very
broad product market delineation as contended for by the Commission.
[10]
We shall focus our horizontal competition assessment on the area of
overlap between the activities
of the merging parties, i.e. the
provision of IT systems integration products and services. The
merging parties will have a post-merger
estimated national market
share of below 10% in this relevant product market. Furthermore, a
number of other firms are active in
this market, including
Telkom/BCX, Altron/Bytes, EOH and Dimension Data, that can exercise a
competitive constraint against the
merging parties. Customers also
confirmed that they have a number of alternative providers of these
services.
[11]
Furthermore, the Commission identified a
vertical relationship between the merging parties since Datacentrix
supplies hardware and
software to DG Store. The Commission however
found that post-merger foreclosure as a result of the proposed
transaction is unlikely
given that there are a number of alternative
customers and suppliers of hardware and software products. We concur
with this finding.
[12]
We conclude that the proposed
transaction is unlikely to substantially prevent or lessen
competition in the national market for
the provision of IT systems
integration and furthermore does not raise any foreclosure concerns.
[13] The merging
parties confirmed that the proposed transaction will not have any
negative impact
on employment.
[1]
[14]
The proposed transaction raises no other
public interest concerns.
Conclusion
[15]
In light of the above, we conclude that
the proposed transaction is unlikely to prevent or lessen competition
in any relevant market.
In addition, no public interest concerns
arise from the proposed transaction. Accordingly, we approve the
proposed transaction
unconditionally.
Mr
Andreas Wessels
Mrs
Medi Mokuena and Ms Andiswa Ndoni concurring
23 March 2018
Tribunal
Researcher:
Hlumelo Vazi
For
the Merging Parties:
H Muller of Tugendhaft Wapnick Banchetti
and
Partners
For
the Commission:
R Molotsi
[1]
Merger Record, pages 7, 66, 212 and 213.