Summary of Judgment

1. Introduction

These proceedings concerned an application for approval of a large merger before the Competition Tribunal of South Africa under case number LM062Aug23. The matter was decided by a panel comprising Professor Liberty Mncube (Presiding Member), Professor Thando Vilakazi (Tribunal Member), and Adv Geoff Budlender SC (Tribunal Member).

The primary acquiring firm was Super Group Holdings Proprietary Limited (“Super Group Holdings”), controlled by Super Group Limited (“Super Group”), a company listed on the Johannesburg Stock Exchange (JSE). The primary target firm was Right Side Up Proprietary Limited (“RSU”), jointly controlled pre-merger by two individuals referred to in the reasons as X and Y.

The Tribunal issued its order on 1 November 2023, approving the merger without conditions, and later issued reasons on 28 November 2023. The Competition Commission (“Commission”) had conducted the investigative assessment typically undertaken in merger proceedings and placed its competitive and public interest assessment before the Tribunal.

The general subject matter of the dispute was whether Super Group Holdings’ proposed acquisition of 60% of the issued share capital of RSU would be likely to substantially prevent or lessen competition in any relevant market, and whether it raised any public interest concerns, particularly in relation to employment and the spread of ownership (including empowerment considerations).

2. Material Facts

Super Group operated as a supply chain and logistics services business, including supply chain management and fleet-related services. Its operations were organised across divisions that included supply chain services (transportation, distribution, warehousing), fleet solutions (leasing, rental, and fleet management), and vehicle dealerships (including branded passenger and commercial dealerships and related services).

RSU provided distribution solutions and operated in two segments material to the assessment. The first was economy break-bulk distribution, involving freight of goods from customer warehouses to customers such as dealerships and other recipients (including hospitals, clinics, mines, media outlets, and home deliveries). The second was retail break-bulk distribution, involving delivery of goods from distribution centres to predominantly chain stores.

The Tribunal treated as relevant the fact that the proposed transaction created a horizontal overlap because both merging parties supplied services in transport and logistics, specifically with respect to economy break-bulk distribution and retail break-bulk distribution.

In terms of the transaction structure, Super Group Holdings proposed to acquire 60% of RSU’s issued share capital. Post-merger, RSU would be controlled by Super Group. The shareholdings of X and Y would be reduced to below 30% and below 20% respectively, with RSU’s existing shareholders collectively retaining a minority 40% stake.

The commercial rationale advanced was that Super Group sought to enhance its presence in the overall logistics market and to grow its break-bulk distribution offering, particularly from a retail perspective. RSU sought to become part of a larger firm to strengthen its market presence nationally and internationally, and the ultimate shareholders of RSU sought improved BEE credentials in line with the Broad-Based Black Economic Empowerment Act 53 of 2003.

On the competitive facts, the Commission assessed three national markets: a broad market for inland road transportation and distribution services, and narrower markets for economy break-bulk distribution services and retail break-bulk distribution services. The Tribunal recorded that it received no evidence suggesting that the relevant product markets should be defined differently, and therefore followed the Commission’s market assessment.

The Tribunal accepted the Commission’s evidence on market structure and shares, including that the merged entity’s shares in the narrower break-bulk markets would be below 2%, with only minimal accretions. The Tribunal also recorded that no third party raised concerns in relation to the transaction.

On public interest facts, the merging parties stated the transaction would not result in retrenchments, as there were no plans for retrenchments. During its investigation, the Commission engaged with SATAWU (representing employees of the acquiring firm) and NTM (representing employees of the target firm), and the Tribunal noted that these unions and their members did not raise concerns.

On ownership and empowerment-related facts, RSU did not have shares held by historically disadvantaged persons (HDPs) or workers. However, because of Super Group’s shareholding, RSU’s BBBEE rating level would increase. The Tribunal further recorded that although Super Group employees benefitted from an employee share ownership programme (ESOP), RSU’s employees would not be considered for participation in the existing Super Group ESOP, because (as stated by the merging parties) inclusion would add a significant financial burden to the transaction.

3. Legal Issues

The central legal questions were whether the proposed merger was likely to substantially prevent or lessen competition in any relevant market and, if not, whether the merger nonetheless raised public interest concerns requiring conditions or prohibition.

The issues were primarily concerned with the application of law to fact. This included applying the competition assessment framework to the market definitions and market share evidence (including the presence of competitors and the degree of accretion) and applying the public interest framework to employment effects and ownership/spread-of-ownership considerations. To the extent the Tribunal assessed whether concerns were raised by third parties or unions, this entailed an evaluative assessment based on the record before it, rather than the resolution of contested factual disputes.

4. Court’s Reasoning

In addressing the competition assessment, the Tribunal proceeded from the premise that the merger resulted in a horizontal overlap because both firms supplied distribution services. It then adopted the Commission’s delineation of the relevant markets, recording that it had received no evidence justifying a departure from the Commission’s product market framing. The assessment therefore proceeded on the basis of one broad national market (inland road transportation and distribution) and two narrower national markets (economy break-bulk and retail break-bulk distribution).

For the broad national market, the Tribunal’s reasoning focused on the continued presence of multiple competitors and the fact that the merged firm would operate in a market characterised by several logistics players and differing fleet and load types. The Tribunal identified several competitors and concluded that the market context supported a finding that the transaction was unlikely to substantially prevent or lessen competition in that market.

For the economy break-bulk distribution market, the Tribunal relied on the post-merger market share evidence, recording that the merged entity would account for less than 2% of the market with an accretion of less than 1%. It also noted that the merged entity would face significant competition from other market participants. The Tribunal treated the low combined share and minimal accretion, together with the competitive constraints from other firms, as supporting the conclusion that the merger was unlikely to substantially prevent or lessen competition in that segment.

For the retail break-bulk distribution market, the Tribunal applied similar reasoning. It recorded that the merged entity would have less than 2% market share with an accretion of [0–2]%, and that it would face competition from a range of competitors. On this basis it concluded that the transaction was unlikely to substantially prevent or lessen competition in that market as well.

The Tribunal also took into account the absence of third-party concerns raised to the Tribunal, treating this as consistent with the conclusion that the merger did not raise competition issues in the markets in which the parties operated.

On public interest, the Tribunal considered employment effects and ownership/spread-of-ownership considerations. In relation to employment, the Tribunal accepted the merging parties’ position that no retrenchments were planned and recorded that the unions engaged by the Commission had not raised concerns. This supported the Tribunal’s conclusion that the merger did not raise employment-related public interest concerns.

Regarding the spread of ownership and empowerment considerations, the Tribunal recorded that RSU had no HDP- or worker-held shares pre-merger, but that RSU’s BBBEE rating would increase due to Super Group’s shareholding. The Tribunal also noted that RSU employees would not participate in Super Group’s existing ESOP due to the asserted financial burden, but accepted the merging parties’ indication that the BBBEE rating would nonetheless improve. The Tribunal ultimately found that the merger did not raise negative public interest concerns overall.

Synthesising the competition and public interest assessments, the Tribunal concluded that the merger was unlikely to lessen or prevent competition in any relevant market and did not raise public interest concerns warranting intervention.

5. Outcome and Relief

The Tribunal approved the large merger unconditionally. No merger-specific conditions were imposed. The reasons do not record any costs order.

Cases Cited

No case authorities were cited in the reasons.

Legislation Cited

Broad-Based Black Economic Empowerment Act 53 of 2003.

Rules of Court Cited

No rules of court were cited in the reasons.

Held

The Tribunal held that the proposed acquisition by Super Group Holdings of 60% of RSU was unlikely to substantially prevent or lessen competition in any relevant national market considered (including inland road transportation and distribution, economy break-bulk distribution, and retail break-bulk distribution). It further held that the merger raised no negative public interest concerns, including in relation to employment and the spread of ownership, and accordingly approved the merger without conditions.

LEGAL PRINCIPLES

The Tribunal applied the principle that a horizontal merger must be assessed by identifying relevant product and geographic markets and evaluating whether the transaction is likely to result in a substantial prevention or lessening of competition, including by considering post-merger market shares, accretions, and the extent of competitive constraint from existing rivals.

The Tribunal applied the principle that even where competition concerns are not established, a merger must still be evaluated against public interest considerations, including effects on employment and the spread of ownership (including empowerment-related outcomes). On the facts placed before it, the Tribunal treated the absence of planned retrenchments, the lack of union objections, and an indicated improvement in BBBEE rating as supporting a conclusion that the merger did not raise adverse public interest effects requiring conditions.