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COMPETITION TRIBUNAL OF SOUTH AFRICA
Case No.: LM202Feb21
In the matter between:
NMI Durban South Motors (Pty) Ltd Primary Acquiring Firm
And
The Barloworld Motor Retail Business Primary Target Firm
AW Wessels (Presiding Member)
Y Carrim (Tribunal Panel Member)
Panel:
T Vilakazi (Tribunal Panel Member)
Heard on: 21 May 2021
Order issued on: 21 May 2021
Reasons issued on: 02 June 2021
REASONS FOR DECISION
[1] On 21 May 2021, the Competition Tribunal (“Tribunal”) conditionally approved the
acquisition by NMI Durban South Motors (Pty) Ltd (“NMI DSM”) of the motor retail
business of Barloworld South Africa (Pty) Ltd (“Barloworld SA”) and the business
conducted by other members of Barloworld in respect of the motor retail sector (“the
Barloworld Motor Retail Business”). Barloworld SA is a wholly owned subsidiary of
Barloworld Limited (“Barloworld”).
[2] The proposed transaction involves NMI DSM acquiring the assets and assumed
liabilities related to the Barloworld Motor Retail Business and a number of subsidiary
companies that comprise of the Barloworld Motor Retail Business.
[3] NMI DSM is active in the retail sale of new and used vehicles, as well as vehicle
servicing and parts. NMI DSM owns various dealerships1 and represents the following
brands: Mercedes-Benz, Jeep, Smart, Fuso, Freightliner, Western Star, GWM, Haval,
and Mitsubishi.
[4] The activities of Barloworld Motor Retail Business include trading in new and used
vehicles, after-sales services (which include the service of vehicles and the sales of
parts and accessories), finance and insurance products, and the provision of customer
1 Mercedes Benz Umhlanga; Mercedes Benz Pinetown; NMI DSM Umhlanga; Mercedes Benz
Commercial Vehicle Durban; Garden City Motors Shelley Beach; Garden City Motors
Pietermaritzburg; Garden City Motors Mbombela; Garden City Commercial Motors Mbombela; and
NMI DSM Mbombela.
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services and other ancillary services. It represents inter alia the following brands:
Mercedes Benz, Toyota, Volkswagen, Audi, BMW, Ford and Mazda.
Competition assessment
[5] The Competition Commission (“Commission”) identified a geographic overlap in the
retail activities of the merging parties in KwaZulu-Natal. NMI DSM has dealerships in
Port Shepstone, Durban and Pietermaritzburg, whilst the Barloworld Motor Retail
Business is active in Durban and Pietermaritzburg.
[6] The Commission assessed the impact of the proposed transaction on the following
relevant product and (potential) geographic markets:
(i) the sale of new passenger vehicles (“PVs”) within 100 km of the Barloworld Motor
Retail Business dealership in Durban;
(ii) the sale of new light commercial vehicles (“LCVs”) within 100 km of the Barloworld
Motor Retail Business dealership in Durban;
(iii) the sale of new PVs within 100 km of the Barloworld Motor Retail Business
dealership in Pietermaritzburg;
(iv) the sale of new LCVs within 100 km of the Barloworld Motor Retail Business
dealership in Pietermaritzburg;
(v) the sale of new PVs within the KwaZulu-Natal province; and
(vi) the sale of new LCVs within the KwaZulu-Natal province.
[7] The Commission found that post-merger the merger parties’ market shares in the
abovementioned (potential) relevant markets will range between 5% to 30%. Further,
the merger parties will continue to face competition from numerous dealerships in all
the affected relevant markets.
[8] The Commission further found that the merger does not raise any concerns regarding
the provision of after-sale services, parts and accessories. It noted that most
dealerships normally sell maintenance plans with the new vehicles which entails that
the cost of servicing the vehicle is included in the purchase price. With respect to used
vehicles or vehicles that are no longer under the warranty and service plan, the
Commission noted that a customer has a choice of purchasing the spare parts from
Commission noted that a customer has a choice of purchasing the spare parts from
OEM-approved dealerships or independent workshops, motor body repairers or panel
beaters who offer after sale replacement spare parts. The Commission further noted
that there are several independent players who offer different spare parts and
accessories for different brands and model of cars. This includes AutoZone, Grandmark
International, Goldwagen, Allparts, Masterparts, Gaydons, Kotwals, Kapico and Midas.
[9] In relation to the effect of the proposed transaction on inter-brand competition, the
Commission identified a number of alternative competitor dealerships per brand of
vehicle available in KwaZulu-Natal within 100 km of the Barloworld Motor Retail
Business dealerships. According to the Commission the number of competing
dealerships in KwaZulu-Natal are an indication that the proposed transaction is unlikely
to lead to a substantial reduction or dilution of inter-brand competition. We found no
reason to disagree with the Commission’s findings.
[10] No third parties raised concerns regarding the effects of the proposed transaction on
competition.
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[11] We concur with the Commission’s conclusion that the proposed transaction is unlikely
to substantially prevent or lessen competition in any relevant market.
Public interest
[12] In relation to employment, the merger parties made an unequivocal undertaking that
there shall be no retrenchments as a result of the proposed transaction.
[13] The Minister of Trade Industry and Competition (DTIC) raised public interest concerns
relating to the effect that the proposed transaction may have on the ability of small
businesses, or firms controlled or owned by historically disadvantaged persons, to
become competitive.
[14] To address the concerns raised the merger parties tendered certain conditions relating
to post merger participation in a Supplier Development Programme (“SDP”) for a certain
period. Barloworld currently has such a programme. The Barloworld Supplier
Development Programme affirms that black owned and women owned qualifying small
enterprises are afforded the maximum opportunity to participate in providing products
and services to Barloworld.
[15] The Tribunal approved the proposed transaction subject to the following conditions
relating to SDP participation:
(i) Barloworld SA and NMI DSM shall ensure that the merged entity continues to
participate in the Barloworld Supplier Development Programme for a period of 2
(two) years following the implementation date;
(ii) during the abovementioned period, the merged entity shall develop its own SDP
which will replace the target firm’s participation in the Barloworld’s Supplier
Development Programme; and
(iii) in furtherance of above condition, the merged entity shall contribute a minimum of
a certain percentage of its profit after taxation to the SDP.2
[16] The above conditions will remain in place for a period of 10 years following the
implementation date of the transaction. This will encompass the period of two years for
the condition in (i) above and a further period of 8 years for the conditions in (ii) and (iii)
above.
above.
2 See conditions for further details. A non-confidential version of the conditions is available.
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[17] The imposed conditions address any potential public interest concerns. The set of
conditions is attached as Annexure A.
2 June 2021
Mr Andreas Wessels Date
Ms Yasmin Carrim and Dr Thando Vilakazi concurring
Tribunal Case Manager: D Mogapi
For the Merging Parties: L Mtanga and N Khumalo of Lulama Mtanga Legal
Consultancy
For the Commission: R Ncheche, R Maphwanya and A Mfuphi
NON-CONFIDENTIAL
ANNEXURE A
IN THE LARGE MERGER BETWEEN
NMI DURBAN SOUTH MOTORS (PTY) LTD
AND
THE BARLOWORLD MOTOR RETAIL BUSINESS
CT CASE NUMBER: LM202FEB21
CONDITIONS
1. DEFINITIONS
1.1. The following expressions shall bear the meanings assigned to them below and cognate
expressions bear corresponding meanings -
1.1.1. “Acquiring Firm” means NMI Durban South Motors (Pty) Ltd;
1.1.2. “Approval Date ” means the date referred to on the Tribunal’s merger clearance
certificate (Form CT 10);
1.1.3. “Barloworld” means Barloworld Limited;
1.1.4. “Barloworld SA” means Barloworld South Africa (Pty) Ltd or the Seller, which is only
mentioned herein as the Seller of the Target Firm;
1.1.5. “Beneficiaries” mean the motor retail business Small Medium and Micro Enterprises
that have been accepted as participants and that are currently participating in the SDP
operated by Barloworld;
1.1.6. “Commission” means the Competition Commission of South Africa;
NON-CONFIDENTIAL
1.1.7. “Conditions” mean the conditions set out herein;
1.1.8. “Days” mean any calendar day which is not a Saturday, Sunday or an official holiday
in South Africa;
1.1.9. “DTIC” means the Department of Trade, Industry and Competition;
1.1.10. “Implementation Date” means the date, occurring after the Approval Date, on which
the Merger is implemented by the Merging Parties;
1.1.11. “Merged Entity” means NMI DSM and The Barloworld Motor Retail Business;
1.1.12. “Merger” means the acquisition of control by the Acquiring Firm over the Target Firm;
1.1.13. “Merging Parties” mean NMI DSM and The Barloworld Motor Retail Business;
1.1.14. “NMI DSM” means NMI Durban South Motors (Pty) Ltd or the Acquiring Firm;
1.1.15. “SMMEs” mean Small Medium and Micro Enterprises;
1.1.16. “Supplier Development Programme” means a programme within Barloworld which
affirms that black owned and women owned qualifying small enterprises are afforded
the maximum opportunity to participate in providing products and services to
Barloworld.
1.1.17. “Target Firm” means The Barloworld Motor Retail Business;
1.1.18. “The Barloworld Motor Retail Business ” means the motor retail business of
Barloworld SA and the business conducted by other members of Barloworld in respect
of the motor retail sector;
1.1.19. “Tribunal” means the Competition Tribunal of South Africa.
NON-CONFIDENTIAL
2. CONDITIONS
2.1. The Seller and the Acquiring Firm shall ensure that the Merged Entity continues to participate
in the Barloworld Supplier Development Programme for a period of 2 (two) years following
the Implementation Date;
2.2. During the period mentioned in item no. 2.1. above, the Merged Entity shall develop its own
Supplier Development Programme which will replace the Target Firm’s participation in the
Barloworld’s Supplier Development Programme.
2.3. In furtherance of condition 2.2 above, the Merged Entity shall contribute a minimum of
[Confidential]% of its profit after taxation to the Supplier De velopment Programme 1 and
subject to the following, that:
2.3.1. If the Supplier Development Programme spend exceeds [Confidential]% of net
profit after taxation for a financial year, then the amount by which the contribution
exceeds [Confidential]% shall be carried forward;
2.3.2. If the Supplier Development Programme spend falls short of [Confidential]% of
net profit after taxation in a financial year, the shortfall shall be made up for in the
following year;
2.3.3. The [Confidential]% of net profit after taxation Supplier Development Programme
spend is aligned to the annual financial reporting period, is calculated at the annual
financial reporting period and shall be based on the annual financial statements for
that period; and
2.3.4. Over the 10-year duration of the condition, the [Confidential]% of net profit after
taxation Supplier Development Programme spend commitment shall be fulfilled in
line with the principles set out in 2.3.1 – 2.3.3.
1 Annexure A - Supplier Development Programme submitted by the Merging Parties on 29 March 2021 .
NON-CONFIDENTIAL
3. DURATION
3.1. These conditions will remain in place for a period of 10 years following the Implementation
Date. This will encompass the period of two years for condition 2.1 and a further period of 8
years for conditions 2.2 and 2.3.
4. MONITORING OF COMPLIANCE WITH THE CONDITIONS
4.1. The Merged Entity shall inform the Commission in writing of the Implementation Date within
5 (five) Days of it becoming effective.
4.2. The Seller and the Acquiring Firm shall circulate a copy of the Conditions to the Beneficiaries
within 5 Days of the Approval Date.
4.3. As proof of compliance thereof, the Seller and the Acquiring Firm shall within 10 Days of
circulating the Conditions, provide the Commission with an affidavit by a director employed
by each of the Seller and the Acquiring Firm attesting to the circulation of the Conditions and
attach a copy of the notice sent.
4.4. The Merged Entity shall submit a detailed written report within 5 Days after the anniversary
of the Implementation Date and for a period of 10 years, to the Commission and the DTIC,
confirming compliance with clause 2 of the Conditions. The report must be accompanied by
an affidavit which must be deposed to by a Director and/or Chief Executive Officer of the
Merged Entity attesting to the contents of the report.
4.5. Any of the Beneficiaries who believe that the Seller and the Acquiring Firm have not complied
with or have acted in breach of the Conditions may approach the Commission.
4.6. In the event that the Commission discovers that there has been an apparent breach of these
Conditions, this shall be dealt with in terms of Rule 37 of the Rules for the Conduct of
Proceedings in the Competition Tribunal read together with Rule 39 of the Rules for the
Conduct of Proceedings in the Competition Commission.
NON-CONFIDENTIAL
5. VARIATION
5.1. The Merged Entity and the Seller or the Commission may at any time, and on good cause
shown, apply to the Tribunal for the Conditions to be waived, relaxed, modified and/or
substituted.
6. GENERAL
6.1. All correspondence in relation to these Conditions must be submitted to the following e-mail
address: mergerconditions@compcom.co.za and ministry@thedtic.gov.za