Summary of Judgment

1. Introduction

This matter concerned merger proceedings before the Competition Tribunal of South Africa in which the Tribunal was required to determine whether a proposed acquisition should be approved in terms of South African competition law merger control.

The parties to the proceedings were DSV A/S as the primary acquiring firm and Panalpina Welttransport Holding (Panalpina World Transport Holding) AG as the primary target firm (collectively referred to in the reasons as the merging parties). The Competition Commission of South Africa participated in the proceedings in its statutory capacity, having investigated the transaction and presented its assessment to the Tribunal.

From a procedural perspective, the matter was heard on 26 June 2019, on which date the Tribunal issued an order unconditionally approving the transaction. The Tribunal’s written reasons for that approval were subsequently issued on 25 July 2019.

The general subject-matter of the dispute was whether the proposed transaction—DSV’s acquisition of 100% of the issued share capital in Panalpina—was likely to substantially prevent or lessen competition in any relevant market in South Africa, and whether the merger raised any public interest concerns, including in relation to employment.

2. Material Facts

DSV A/S was described as a public company incorporated in Denmark that is not controlled by any individual shareholder. It controlled a number of firms active in South Africa (referred to collectively as the Acquiring Group). The Acquiring Group provided freight-forwarding and logistics services globally, including arranging freight-forwarding by air, land (road and rail), and sea, and related services such as assisting with border clearance requirements, customs and excise arrangements, and warehousing while goods are in transit. The Tribunal recorded that the Acquiring Group did not own transport equipment/assets, and that the actual transport operations were performed by external shipping companies and airlines.

In South Africa, the Acquiring Group had a presence in Durban, Johannesburg, Port Elizabeth, East London, and Cape Town. The freight-forwarding services it provided in South Africa were recorded as being in respect of non-perishable products such as pharmaceutical products, hazardous goods, automotive parts, and clothing. A material factual feature relied upon by the Tribunal was that the Acquiring Group did not currently provide freight-forwarding services in South Africa in respect of perishable products.

Panalpina Welttransport Holding (Panalpina World Transport Holding) AG was described as a public company incorporated in Switzerland, also not controlled by any individual shareholder. It controlled a number of firms with activities in South Africa, including Skyservices (Pty) Ltd. Panalpina was characterised as a global freight-forwarding and logistics company, also involved in cargo security solutions and supply chain management services. In South Africa, through Skyservices, Panalpina offered solutions directly related to air freight-forwarding, and the Tribunal recorded that the majority of these air freight-forwarding services were in respect of perishable goods. The provision of these services involved operating facilities at O.R. Tambo International Airport and Cape Town International Airport, and the Commission described these services as requiring specialised facilities such as cold rooms, fumigation chambers, force coolers, and ozone purification systems.

The proposed transaction was that DSV would acquire 100% of the issued share capital in Panalpina, with DSV obtaining sole control over Panalpina upon implementation. The merging parties’ stated rationale included that the transaction would create an opportunity for the Acquiring Group to diversify its freight-forwarding services in South Africa by enabling it to provide such services in respect of perishable products after implementation.

As to competition conditions, the Commission identified a horizontal overlap between the merging parties in the (broad) market for freight-forwarding and clearing services in South Africa and assessed the merger on that basis. The Tribunal recorded that there was no publicly available information on market shares in South Africa, and that the Commission referred to information suggesting there were in excess of 300 providers of freight-forwarding and clearing services active in South Africa, with the majority being very small providers. The Tribunal also recorded the Commission’s estimate that the total market size was approximately R211 billion by annual turnover, but treated this figure as unreliable because the Commission could not adequately explain the sources or methodology when questioned.

The Tribunal relied on the Commission’s analysis that there were a number of other larger players active in South Africa in the provision of freight-forwarding and clearing services, including Bidvest-Sebenza, Kuehne + Nagel, OHL, Expeditors International, and DB Schenker. The Tribunal further took into account that none of the merging parties’ customers raised concerns during the Commission’s investigation.

On public interest, the merging parties confirmed that the transaction would not have negative effects on employment in South Africa, and the Tribunal recorded that the transaction raised no other public interest concerns.

3. Legal Issues

The central legal questions the Tribunal was required to determine were whether the proposed transaction was likely to substantially prevent or lessen competition in any relevant market in South Africa, and whether any public interest concerns arose that would justify conditions or refusal of approval.

A further issue—treated as relevant to the competition assessment—was the appropriate delineation of the relevant product market. The Tribunal expressly considered that the market might be defined broadly (freight-forwarding and clearing services generally) or more narrowly (by mode of transport such as air, land, or sea, or by specialisation such as services related to perishable goods). The Tribunal ultimately treated market definition as an open question in the circumstances of this case.

The dispute primarily concerned the application of competition law standards to the factual context of the merger (including market structure, presence or absence of overlap, and potential constraints), together with an evaluative assessment of whether the evidence supported a finding of likely harm to competition and whether any public interest impacts were triggered.

4. Court’s Reasoning

The Tribunal approached the competition analysis by first recording the Commission’s assessment that there was a horizontal overlap between the merging parties in a broad market for freight-forwarding and clearing services in South Africa. However, the Tribunal made clear that it took no view on the exact parameters of the relevant product market in this matter. It expressly contemplated multiple plausible market formulations, including a broad market for all freight-forwarding and clearing services, narrower markets based on transport modality, and narrower markets based on areas of specialisation such as perishables.

In considering a potential narrow market relating to perishable goods, the Tribunal referred to evidence indicating that providing freight-forwarding and clearing services for perishables involves a degree of specialisation and would typically require a firm to make a conscious decision to enter at scale, including potentially leasing or having access to appropriate facilities. The Tribunal treated this as suggesting that a narrow market focused on perishables could be relevant. Nonetheless, it did not finally delineate the market because, on that narrower approach (specifically, a market for air freight-forwarding and clearing services for perishable goods), the Tribunal found that there was no overlap between the merging parties’ activities in South Africa, and therefore no competition concerns arose on that framing.

Turning to a potential broad market for freight-forwarding and clearing services, the Tribunal noted the lack of publicly available market share information and examined the Commission’s reliance on the presence of numerous providers (in excess of 300). The Tribunal expressed a reservation about whether a large number of very small players, considered individually, would effectively constrain the merged entity. The Tribunal therefore did not treat the mere existence of many small firms as determinative.

The Tribunal also scrutinised the Commission’s estimate of market size (approximately R211 billion in turnover). Because the Commission could not adequately explain the data sources and methodology used to arrive at that figure when questioned by the Tribunal, the Tribunal stated that it placed no reliance on that estimate. This formed part of the Tribunal’s evaluative approach to the evidence, in which it declined to rely on unsupported quantitative assertions.

Despite these reservations, the Tribunal considered that the competitive landscape included a number of other significant competitors active in South Africa, identified in the Commission’s analysis as including Bidvest-Sebenza, Kuehne + Nagel, OHL, Expeditors International, and DB Schenker. The Tribunal also relied on the absence of customer complaints or concerns raised during the Commission’s investigation as an additional indicator that the transaction was not likely to generate substantial competitive harm.

Synthesising these considerations, the Tribunal concluded that there was no reason to believe the merger was likely to substantially prevent or lessen competition in any plausible relevant market in South Africa. The Tribunal then addressed public interest, recording the merging parties’ confirmation that the merger would not negatively affect employment in South Africa and finding that no other public interest concerns arose. On this basis, the Tribunal determined that unconditional approval was appropriate.

5. Outcome and Relief

The Competition Tribunal approved the proposed transaction unconditionally.

No conditions were imposed in relation to competition or public interest factors, and the Tribunal recorded that no public interest concerns (including employment effects) arose on the facts presented.

The reasons provided do not record any separate or specific costs order.

Cases Cited

No cases were cited in the Tribunal’s written reasons.

Legislation Cited

No legislation was expressly cited in the Tribunal’s written reasons.

Rules of Court Cited

No rules of court were cited in the Tribunal’s written reasons.

Held

The Tribunal held that the proposed acquisition of Panalpina by DSV was unlikely to substantially prevent or lessen competition in any relevant market in South Africa, including on a narrower consideration of services for perishable goods where the Tribunal found no overlap between the merging parties’ activities in South Africa. The Tribunal further held that the transaction raised no public interest concerns, including in relation to employment. The merger was therefore approved unconditionally.

LEGAL PRINCIPLES

A competition assessment may proceed without a definitive finding on the precise relevant market definition where, on the available facts, the outcome is not dependent on choosing among plausible market delineations. In this matter, the Tribunal left the product market definition open because the merger raised no competition concerns on the narrower perishables framing and was not shown to be problematic on a broader framing.

Claims about market size or quantitative market indicators must be supported by an intelligible source and methodology before they can be relied upon in evaluating competitive effects. Where the proffered market-size estimate could not be adequately explained, the Tribunal treated it as insufficiently reliable for its assessment.

In evaluating likely competitive effects, the presence of other substantial competitors and the absence of concerns raised by customers during an investigation may be treated as relevant contextual indicators when determining whether a merger is likely to substantially prevent or lessen competition, particularly where market-share evidence is limited.

Public interest considerations, including employment effects, form part of the merger assessment. Where the parties confirm no adverse employment impact and no other public interest concerns are identified, the Tribunal may approve the merger without public interest conditions.