COMPETITION TRIBUNAL OF SOUTH AFRICA
Case No: LM175Jan23
In the matter between:
Santam Limited Acquiring Firm
and
The MTN Portfolio Comprising the Device Insurance
Policies Marketed and Distributed by Mobile
Telephone Networks (Pty) Ltd and Underwritten by
Guardrisk Insurance Company Ltd
Target Firm
Approval
[1] On 13 March 2023, the Competition Tribunal (“Tribunal”) unconditionally
approved the large merger in terms of which Santam Limited (“Santam”) intends
to acquire the device insurance policies marketed and distributed by Mobile
Telephone Networks Proprietary Limited (“MTN SA”) and currently underwritten
by Guardrisk Insurance Company Limited (“Guardrisk”) through a cell structure,
together with certain assets and liabilities pertaining to such policies (“the MTN
Portfolio”). Upon implementation of the proposed transaction, Santam will
become the underwriter of, and will thus acquire sole control over, the MTN
Portfolio.
Panel : Jerome Wilson (Presiding Member)
: Tregenna Fiona (Tribunal Panel Member)
: Liberty Mncube (Tribunal Panel Member)
Heard on : 13 March 2023
Order issued on : 13 March 2023
Reasons issued on : 24 April 2023
REASONS FOR DECISION
Parties to the transaction and their activities
Primary acquiring firm
[2] The primary acquiring firm is Santam, a company incorporated in terms of the
laws of South Africa.
[3] Santam is controlled by Sanlam Limited (“Sanlam”). Sanlam is a public company
listed on the Johannesburg Stock Exchange and is not controlled, directly or
indirectly, by any one firm.
[4] Sanlam and all its subsidiaries, including Santam, will collectively be referred to
as the “Acquiring Group”.
[5] Santam is a short-term (non-life) insurer, which is licensed in terms of the
Insurance Act, 18 of 2017 ("Insurance Act"), to provide policy benefits under
short-term / non-life policies for all classes of business (corporate, commercial,
niche and specialist markets as well as personal lines) in South Africa.
Primary target firm
[6] The primary target firm is the MTN Portfolio.
[7] The MTN Portfolio is currently underwritten by Guardrisk in a cell structure.
Guardrisk is a wholly owned subsidiary of Momentum Metropolitan Holdings
Limited (“MMI”). MMI is a public company listed on the Johannesburg Stock
Exchange and is not controlled, directly or indirectly, by any one firm.
[8] The MTN Portfolio comprises the insurance policies marketed and distributed by
MTN SA to its clients in respect of devices such as cellphones, laptops, tablets
and wearable devices. The insurance products include: i) all risk cover for loss,
theft and any damage; ii) cover for theft and loss only; iii) liquid or accidental
damage only; and iv) cover for the repair of the insured device.
Proposed transaction and rationale
Transaction
[9] The proposed transaction essentially comprises the transfer of the device
insurance policies comprising the MTN Portfolio from Guardrisk to Santam, in
terms of a regulatory portfolio transfer process as prescribed in the Insurance
Act, subject to approval of the Prudential Authority. Upon approval of the
regulatory portfolio transfer, Santam will underwrite MTN SA’s device insurance
regulatory portfolio transfer, Santam will underwrite MTN SA’s device insurance
policies and become the new underwriter of the MTN Portfolio.
Rationale
[10]
Relevant market and impact on competition
[11] The Competition Commission (“the Commission”) considered the activities of
the merging parties and found that the proposed transaction will result in a
horizontal overlap in the supply of short-term/ non-life insurance products. In
particular, the Acquiring Group is a provider of non-life/ short-term insurance
products, whilst the MTN Portfolio offers device insurance policies for
cellphones, laptops, tablets and wearable devices.
Relevant product market
[12] In identifying the relevant product market, the Commission had regard to the
decision of the Tribunal in Swanvest 120 (Pty) Ltd/ lndwe Broker Holdings
Limited,1 in which the Tribunal held that a market for the “provision of short-term
insurance” may be too broad, and that the market should be subdivided further
into the markets for the provision of personal, commercial, and corporate cover.
[13] The Commission also considered the Tribunal’s decisions in Momentum
Metropolitan Investments (Pty) Ltd/ The Short-term Insurance Business of
Alexander Forbes Limited2 and Swanvest 120 Proprietary Limited/ RMB-SI
Investments Proprietary Limited 3, where the Tribunal referred to a “ broad
short-term insurance market” and to “narrow short-term markets for (i) property
insurance, (ii) transport insurance, (iii) motor insurance, (iv) accident and health
insurance (v) guarantee insurance, (vi) liability insurance, (vii) engineering
insurance, and (viii) miscellaneous insurance.”
[14] The Commission considered that, in the present transaction, the MTN Portfolio
consists only of device insurance policies for cellphones, laptops, tablets and
wearable devices, which fall under (movable) property insurance; whereas
1 Swanvest 120 (Pty) Ltd / Indwe Broker [2010] ZACT (LM058Sep10).
2 Momentum Metropolitan / Alexander Forbes [2019] ZACT (LM109Sep19).
3 Swanvest 120 / RMB SI Investment [2016] ZACT (LM146Oct16).
Santam offers different types of short-term insurance, including property
insurance.
[15] In the circumstances, the Commission did not conclude on the exact scope of
the product market but assessed the proposed transaction in the broad market
for the provision of short-term (non-life) insurance.
Geographic market
[16] As regards the relevant geographic market, the Commission noted that the
market for insurance products, whether broadly or narrowly defined, has
previously been considered by the Tribunal to be national in scope.4
[17] However, for purposes of the present transaction, the Commission submitted
that the exact scope of the geographic market can be left open, as the proposed
transaction will not lead to competition concerns irrespective of the geographic
scope of the market.
[18] Accordingly, the Commission, while not concluding on the relevant market,
assessed the effect of the proposed merger in the broad market for the provision
of short-term insurance in South Africa.
[19] The Tribunal agrees that it is not necessary to conclude on the definition of the
relevant product and geographic market in this case as the proposed merger
does not raise competition concerns irrespective of the exact scope of the
relevant market.
Competition analysis
[20] In calculating market shares in the broad short-term insurance market, the
Commission used 2022 data obtained from the Prudential Authority.
[21] Based on this data, the Commission found that the merged entity will have a
post-merger market share of approximately with an accretion of less than
The Commission also found that the merged entity will continue to face
constraints from various other significant players such as Guardrisk, Hollard
Insurance, Old Mutual, OUTsurance and others.
[22] The Commission accordingly concluded that the proposed merger is unlikely to
substantially prevent or lessen competition in the market as the merging parties
substantially prevent or lessen competition in the market as the merging parties
4 Swanvest 120 (Pty) Ltd/ lndwe Broker Holdings Limited [2010] ZACT (LM058Sep10); Sanlam Limited/
Emerald Insurance Company Limited [2009] ZACT (M025Aug09); Hollard Insurance Company Ltd/
Etana Insurance Company Ltd (017442).
do not have market power and the market share accretion caused by the merger
will be low.
[23] Having regard to the above, the Tribunal agrees with the Commission’s
assessment that the proposed transaction is unlikely to substantially prevent or
lessen competition in the broad short-term insurance market.
Public interest
Effect on employment
[24] The merging parties submitted that the proposed transaction will not give rise to
any job losses (including forced retrenchments and redundancies) in South
Africa.
[25] The merging parties indicated in this regard that the MTN Portfolio is comprised
of assets and, as such, has no employees.
[26] The Commission contacted the trade union that represents the employees of
Santam, namely SASBO, which expressed a concern that the statement in the
merger filing that the merger would not give rise to any retrenchments excluded
“retrenchments lawfully effected for operational requirements unrelated to the
proposed transaction”. SASBO stated that, although they did not have any
objection to the proposed merger and understood that the merger parties had
undertaken not to effect any forced merger-specific retrenchments, this
exclusion was ambiguous and confusing because labour would not be able to
determine whether or not a retrenchment was merger-specific or for operational
reasons.
[27] In response to SASBO’s concerns, the merging parties indicated that any
employees would be free to engage the Commission if they were concerned that
any retrenchments were merger-specific, and that the rights of all employees
would be safeguarded in terms of the Competition Act and the Labour Relations
Act, No. 66 of 1995.
[28] The Commission noted that merging parties’ undertaking that the proposed
transaction will not result in any job losses or retrenchments, and also that the
merger will not result in any duplication of roles as the MTN Portfolio does not
have any employees. The Commission also noted that the caveat on merger-
have any employees. The Commission also noted that the caveat on merger-
specific retrenchments that formed the basis of SASBO’s concern is generally
contained as a standard clause in any employment conditions imposed by the
competition authorities; and that SASBO did not express any objection to the
proposed merger itself.
[29] Given the above, the Commission concluded that the proposed transaction is
unlikely to have a negative impact on employment, and that no change to the
exclusion referred to by SASBO was warranted in the circumstances of this
case. The Tribunal agrees with this conclusion.
Effect on the spread of ownership
[30] The Commission engaged the merging parties on the question whether the
proposed transaction promotes a greater spread of ownership, in particular, by
increasing the levels of ownership by historically disadvantaged persons
(“HDPs”) and workers in firms in the market, within the meaning of section
12A(3)(e) of the Competition Act.
[31] The merging parties submitted that the Acquiring Group has a Level 1 B-BBEE
rating and the Commission found that approximately 43% of the shares in the
Acquiring Group are held by HDPs.
[32] As regards the target firm, the Commission found that approximately 37% of the
shares in MMI (the current ultimate controller of the MTN Portfolio) are held by
HDPs.
[33] Based on the above, the Commission concluded that the proposed transaction
will promote a greater spread of ownership within the meaning of section
12A(3)(e) of the Competition Act.
[34] The Commission also found that the proposed transaction does not raise any
other public interest concerns.
[35] We agree with the Commission’s conclusion that the proposed transaction does
not raise any public interest concerns.
Conclusion
[36] Considering the above, the Tribunal concludes that the proposed transaction is
unlikely to substantially prevent or lessen competition or to give rise to any
negative public interest effects. Accordingly, we approve the proposed
transaction unconditionally.
24 April 2023
Adv. Jerome Wilson SC Date
Concurring: Prof. Liberty Mncube and Prof. Imraan Valodia
Tribunal case manager : Baneng Naape
For the merging parties : Natalia Lopes of Edward Nathan Sonnenbergs
Inc.
For the Commission : Zintle Siyo and Themba Mahlangu