In the matter between Boundlesstrade 154 Proprietary Limited Primary Acquiring Firm And AA Group Primary Target Firm

India

06.03.2017

MRTP/ Competition Laws

Merger is pro-competitive as it reduces an opportunity for rivals to meet in a joint venture

In facts of present matter, on 22nd February 2017, Competition Tribunal unconditionally approved large merger between Boundlesstrade and the AA Group. Proposed transaction consists of a change from joint control to sole control. Bidvest wishes to exit the joint venture and realise a return on its investment, while Imperial Group wishes to acquire the remaining 50% shareholding in AA Group from Bidvest. Boundlesstrade is an investment holding company incorporated in accordance with the laws of the Republic of South Africa. Boundlesstrade is a wholly owned subsidiary of Imperial Holdings Limited ("Imperial"). Imperial is a public company listed on the Johannesburg Stock Exchange ("JSE") and controls a number of firms ("the Imperial Group") but is not controlled by any firm. AA Group is jointly controlled by Boundlesstrade (and thus Imperial) and Bidvest Group Limited ("Bidvest"), each with a 50% shareholding. Bidvest is a large industrial holding group. Included amongst its subsidiaries and relevant to this transaction is its ownership of the motor dealership group McCarthy Holdings ("McCarthy"). AA Group is principally engaged in the sale of new motor vehicles. One division imports and distributes a Chinese manufactured light passenger vehicle, the Chery. The other division also distributes a Chinese manufactured vehicle, the Foton, a light commercial vehicle. Both businesses also entail the sale of the parts and accessories that relate to these two brands.

Relevant product market is market for sale of new passenger vehicles and new light commercial vehicles within a narrow market of 80km radius in Gauteng province and a broader market of 100km radius for Limpopo, Mpumalanga, Kwa-Zulu Natal and Western Cape. At conclusion of its investigation, Commission found that, proposed transaction presents overlaps in the market for the sale of new passenger vehicles and new light commercial vehicles only within the vehicle import, distribution and dealership division in the abovementioned Provinces. When determining geographic scope of the market, Commission considered the distance between dealerships of the merging parties in Limpopo, Gauteng, Kwa-Zulu Natal, Mpumalanga and Western Cape. Where the dealerships of the merging parties overlap within a radius of 80km (in the narrow market) and 100km (in the broad market) respectively, they would fall within the relevant geographical market. In view of the insignificant accretion of market share in each of the relevant markets, Commission concluded that proposed transaction is unlikely to substantially prevent or lessen competition in identified product markets. Transaction will not lead to an SLC. However, merger leads to the termination of a joint venture between two rival groups in broader market for motor vehicle distribution.

Merger is pro-competitive as it reduces an opportunity for rivals to meet in a joint venture. There is no evidence in the record that such activity took place. The point is that the opportunity is reduced. Emphasis on market share accretion is also not significant in this case as pre-merger the record shows that the Imperial partners in the joint venture were, pre-merger, largely responsible for managing the joint venture including the determination of pricing decisions. Merging parties submit that, proposed transaction will not result in job losses or have any negative effects on employment in South Africa. Given that AA Group will continue to conduct its business as it did pre-merger, Commission is of view that, proposed transaction will not have a negative effect on employment and does not raise any other public interest concerns. Proposed transaction is unlikely to substantially prevent or lessen competition in any relevant market. In addition, no other public interest issues arise from the proposed transaction. Accordingly, proposed transaction approved unconditionally.

Tags : Merger Competition Prevention

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