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[2018] ZACT 57
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Hyundai Automotive South Africa (Pty) Ltd and Kia Motors South Africa (Pty) Ltd v The Kia and Hyundai Motor Vehicle Dealership conducted by Navigli Trading (Pty) Ltd (LM019Apr18) [2018] ZACT 57 (18 October 2018)
COMPETITION
TRIBUNAL OF SOUTH AFRICA
Case
No: LM019Apr18
In the
matter between:
HYUNDAI
AUTOMOTIVE SOUTH AFRICA (PTY) LTD
Primary Acquiring Firm(s)
AND KIA
MOTORS SOUTH AFRICA (PTY) LTD
and
THE
KIA AND HYUNDAI MOTOR VEHICLE DEALERSHIP
Primary Target Firm
CONDUCTED
BY NAVIGLI TRADING (PTY) LTD
Panel
: Norman Manoim (Presiding Member)
: Enver Daniels (Tribunal member )
: Yasmin Carrim (Tribunal Member)
Heard
on
: 05 July 2018
Order
Issued on : 05 July 2018
Reasons
Issued on : 18 October 2018
Reasons for Decision
Approval
[1]
On
05 July 2018, the Competition Tribunal ("Tribunal")
unconditionally approved the proposed transaction involving Hyundai
Automotive South Africa (Pty) Ltd and Kia Motors South Africa (Pty)
Ltd and The Kia and Hyundai motor vehicle dealerships conducted
by
Navigli Trading (Pty) Ltd.
[2]
The
reasons for approving the proposed transaction follow.
Parties
to the proposed transaction
Primary
acquiring firm
[3]
The
primary acquiring firms are Hyundai Automotive South Africa (Pty) Ltd
(Hyundai SA) and Kia Motor South Africa (Pty) Ltd (Kia
SA). Both
Hyundai SA and Kia SA are wholly-owned subsidiaries of Matus
Corporation (Pty) Ltd (Matus). Matus is in turn wholly-owned
subsidiary of Imperial Holdings Limited (Imperial), a JSE public
listed company.
[4]
Hyundai
SA controls Taylor Truck Bodies (Pty) Ltd. Kia SA does not control
any firm. Matus directly and indirectly controls a number
of firms in
South Africa and worldwide. Imperial controls numerous other firms in
South Africa.
[5]
Imperial,
Matus, Hyundai SA and Kia SA will collectively be referred to as the
Acquiring Group.
Primary
target firm
[6]
The
primary target firms are the Kia Sandton Motor Vehicle Dealership
(Kia Dealership) and Hyundai Sandton Motor Vehicle Dealership
(Hyundai Dealership). The Kia Dealership and the Hyundai Dealership
will collectively be referred to as the Target Dealerships.
[7]
The
Target Dealerships are controlled by Navigli Trading (Pty) Ltd
(Navigli Trading).
Proposed
transaction and rationale
[8]
In
terms of the Sale of Assets Agreement, Matus intends to acquire the
Target Dealerships through its wholly-owned subsidiaries
Hyundai SA
and Kia SA. Post merger, Hyundai SA will own and control the
Hyundai Dealership, while Kia SA will own and control
the Kia
Dealership.
[1]
[9]
The
Acquiring Group submits that the proposed transaction allows for
growth of its Kia and Hyundai brands at retail level.
[10]
Navigli Trading submits that Mr Venter who holds a 30% shareholding
in Navigli Trading has expressed
his desire to retire from his
position as operational director of the business and as such, the
remaining shareholders of Navigli
Trading have agreed to sell the
Hyundai Dealership and the Kia Dealership.
Impact
on competition
[11]
Imperial operates in the wider transportation and mobility markets in
Southern Africa, Europe, Australia
and the United Kingdom. Of
relevance to the proposed transaction are the activities of its
subsidiary Matus. Matus operates across
the motor vehicle value
chain. This includes the importation, distribution, retail, rental,
aftermarket parts and vehicle-related
financial services. Kia SA has
exclusive distribution rights to the KIA brand in South Africa. Kia
SA is responsible for the importation
and distribution of new Kia
branded vehicles and parts. Hyundai SA has exclusive distribution
rights to the Hyundai brand in South
Africa. Hyundai is responsible
for the importation and distribution of new Hyundai branded vehicles
and parts.
[12] The
Target Dealerships are franchised by Kia SA and Hyundai SA. The
Target Dealerships sell new and
used passenger vehicles as well as
light commercial vehicles. It also offers after-sales services and
after sales part and accessories.
[13] The
Commission considered the activities of the merging parties and found
that the proposed transaction
results in horizontal overlaps in the
market for the sale of new passenger vehicles, the market for the
sale of new light commercial
vehicles and in the market for the sale
of medium commercial vehicles. The Commission found that in the
market for the sale of
new passenger vehicles, the parties will have
an estimated market share of 23.7% with an accretion of 0.64%, in the
market for
sale of new light commercial vehicles, the merged entity
will have an estimated market share of 11.3% with an accretion of
less
than 0.4% and in the market for sale of medium commercial
vehicles, the merged entity will have an estimated market share of
13.2%
with an accretion of 0.5%.
[14] Based
on the above, the Commission submitted that the proposed transaction
is unlikely to substantially
prevent or lessen competition in in
abovementioned markets as the merging parties' post-merger market
shares remain relatively
low. Furthermore, the Commission submitted
that there are alternative players in the market that will constrain
the merged entity
post-merger.
[15] In
addition, the Commission found that there is a vertical dimension
between the activities of the
Acquiring Group and the Target
Dealerships, as the Acquiring Group is the exclusive supplier of Kia
and Hyundai vehicles to dealers,
including the target firms. As such,
the Commission is of the view that the proposed transaction is
unlikely to change the structure
of the market and will not
substantially prevent or lessen competition in any of the relevant
markets.
[16] Given
the above, the Commission concluded that the proposed transaction is
unlikely to substantially
prevent or lessen competition in any
relevant market in South Africa.
[17] We
concur with this finding.
Public
interest
[18] The
merging parties confirmed that the proposed transaction will not give
rise to any adverse effect
on employment.
[19]
Furthermore, the proposed transaction raises no other public interest
concerns.
Conclusion
[20] 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.
Mr
Norman Manoim
Mr
Enver Daniels and Ms Yasmin Carrim concurring
18
October 2018
Date
Tribunal
Case Manager: Busisiwe Masina
For the merging parties:
Ms Candice Upfold of Norton Rose Fulbright
For
the Commission:
Mr Billy Mabatamela
[1]
Please see further paragraph 9 page 13 of the Record.