Absa Bank Limited v Custody, trustee and derivatives clearing business of Societe Generale S.A Johannesburg branch and global custody services performed via foreign sub-custodians (LM021May19) [2019] ZACT 32 (28 June 2019)
- Citation
- [2019] ZACT 32
- Status
- Judgment
- Jurisdiction
- South Africa
- Court
- Competition Tribunal
- Panel
- Norman Manoim, Mondo Mazwai, Medi Mokuena
- Case number
- LM021May19
More details
- Court
- Competition Tribunal
- Panel
- Norman Manoim, Mondo Mazwai, Medi Mokuena
- Case number
- LM021May19
On this page
Professional case brief
Research organized from the available case record
01
Holding and result
The Tribunal found that the proposed transaction would not result in significant market share accretions in the relevant markets for equity, currency, and interest rate derivatives clearing services, nor in the broader market for derivatives clearing services. The merged entity's market shares would remain below thresholds that typically raise competition concerns, and the entity would continue to face competitive constraints from other market participants. Furthermore, the transaction would not negatively affect employment or raise other public interest concerns. Accordingly, the Tribunal concluded that the merger was unlikely to substantially prevent or lessen competition or negatively impact the public interest, and approved the transaction unconditionally.
Court disposition
The proposed transaction is approved unconditionally.
Orders
- The merger between Absa Bank Limited and the custody, trustee and derivatives clearing business of Societe Generale S.A Johannesburg branch and global custody services performed via foreign sub-custodians is approved unconditionally.
02
Material facts
Parties
Absa Bank Limited
Applicant Counsel: A Roets of Nortons Inc and I Dhladhla of Absa Group LimitedCustody, trustee and derivatives clearing business of Societe Generale S.A Johannesburg branch and global custody services performed via foreign sub-custodians
RespondentAmounts and remedies
- Post Merger Market Share (equity Derivatives Clearing Services): ZAR 20
- Post Merger Market Share (currency Derivatives Clearing Services): ZAR 30
- Post Merger Market Share (interest Rate Derivatives Clearing Services): ZAR 15
- Market Share Accretion (broader Derivatives Clearing Services): ZAR 5
03
Procedural history
Posture
Merger Approval / Final Determination
04
Questions and positions
Legal issues
- 01
Whether the proposed merger will substantially prevent or lessen competition in any relevant market.
- 02
Whether the transaction raises any public interest concerns, including effects on employment.
Party arguments
- Applicant
- The applicant argued that the proposed transaction would not result in significant market share accretions and would not negatively affect competition. It was submitted that the merged entity would continue to face competitive constraints from other market participants and that there would be no adverse impact on employment or other public interest factors.
- Respondent
- The respondent, represented by the Competition Commission, contended that the merger would not substantially prevent or lessen competition, as the combined post-merger market shares in the relevant markets would remain low and accretions were de minimis. The Commission further argued that the transaction would not have negative public interest effects, including on employment.
05
Court’s reasoning
Legal principles
- 01
Competition Act, No. 89 of 1998
A merger may only be prohibited if it is likely to substantially prevent or lessen competition in any relevant market.
- 02
Competition Act, No. 89 of 1998
Public interest considerations, including effects on employment, must be assessed in merger proceedings.
06
Ratio, limits and disposition
Ratio decidendi
The Tribunal found that the proposed transaction would not result in significant market share accretions in the relevant markets for equity, currency, and interest rate derivatives clearing services, nor in the broader market for derivatives clearing services. The merged entity's market shares would remain below thresholds that typically raise competition concerns, and the entity would continue to face competitive constraints from other market participants. Furthermore, the transaction would not negatively affect employment or raise other public interest concerns. Accordingly, the Tribunal concluded that the merger was unlikely to substantially prevent or lessen competition or negatively impact the public interest, and approved the transaction unconditionally.
Obiter and limits
- The Tribunal noted that the merging parties confirmed no negative effects on employment would result from the transaction.
- No other public interest concerns were identified in relation to the proposed merger.
Court disposition
The proposed transaction is approved unconditionally.
- The merger between Absa Bank Limited and the custody, trustee and derivatives clearing business of Societe Generale S.A Johannesburg branch and global custody services performed via foreign sub-custodians is approved unconditionally.
Source and reliance status
Competition Tribunal
This page organises the available record for research. Confirm quotations, current status, and subsequent treatment against the official source before relying on the case.
Judgment reading view
Judgment text
The complete available source text.
Competition Tribunal
Judgment
COMPETITION TRIBUNAL OF
SOUTH AFRICA
Case No: LM021May19
In the matter between
Absa Bank Limited
Primary Acquiring Firm
And
The custody, trustee and derivatives clearing
Primary Target Firm
business of Societe Generale S.A Johannesburg
branch and global custody services performed
via foreign sub-custodians
Panel : Norman Manoim (Presiding Member)
: Mondo Mazwai (Tribunal Member)
: Medi Mokuena (Tribunal Member)
Heard on: 12 June 2019
Order Issued on: 12 June 2019
Reasons Issued on : 28 June 2019
REASONS FOR DECISION
Approval
[1] On 12 June 2019, the Competition Tribunal ("Tribunal") unconditionally approved the proposed transaction involving Absa Bank Limited ("Absa") and the custody, trustee and derivatives clearing business of Societe Generale S.A ("SocGen")
Johannesburg branch and global custody services performed via foreign sub custodians ("Target Assets"), hereinafter
collectively referred to as merging parties.
[2] The reasons for the approval of the proposed transaction follow.
Parties to the transaction
Primary Acquiring Firm
[3] Absa is a wholly owned subsidiary of Absa Group Ltd ("Absa Group"). The shares in Absa Group are widely dispersed and as
such no single shareholder controls Absa Group. Absa Group and Absa collectively control a number of firms in South Africa.
[4] Absa is listed as a regional African banking and insurance business. It offers a complete range of retail, business, corporate and investment banking products. Absa also provides derivatives clearing and services in relation to its own trading activities.
Primary Target Firm
[5] SocGen is a public company incorporated in accordance with laws of France. SocGen is listed on the Euronext Paris Exchange and is not controlled by any single shareholder. SocGen controls the Target Assets and two firms namely Societe Generale South African
Nominees (Pty) Ltd and Goudstad Nominees (Pty) Ltd, hereinafter collectively referred to as the "Nominee Companies".
[6] In terms of the custody services, the services include safekeeping and securities; settlement; corporate action; withholding tax; reporting and reconciliation; foreign exchange services for major currencies; payment processing and cash account management. In
South Africa, the services are primarily provided to financial institutions.
[7] The trustee business provides trustee services to fund managers and administrators; as well as compliance with investment funds policies. The derivates clearing services involve the clearing of trades in respect of listed derivatives. The Nominee Companies
hold the securities and/or the interest in securities for clients.
Proposed transaction
[8] In terms of the Sale of Business Agreement, Absa will acquire the Target Assets and the Nominee Companies from SocGen. Post-merger, Absa will own and control the Target Assets and Nominee Companies.
Impact on competition
[9] The Competition Commission ("Commission") considered the activities of the merging parties and identified a horizontal
overlap in the national market for the provision of (i) equity derivatives clearing services, (ii) currency derivatives clearing
services and (iii) interest rate derivatives clearing services. The Commission also assessed the broader market for the provision of derivatives clearing services.
[10] In its investigation, the Commission found that the merged entity will have combined post-merger market shares of less than 20%, 30% and 15% in each of the respective relevant markets. In terms of the market share accretions, they are all de minimis.
[11] In the broader market for the provision of derivatives clearing services, the Commission found that the merged entity will have a combined post-merger market share of less than 20%, with an accretion of less than 5%.
[12] The Commission was of the view that the proposed transaction is unlikely to raise competition concerns as the market share accretions are relatively low. Further, the merged entity will continue to face competitive constraints from other market participants such as Standard Bank, RMB Bank and Nedbank.
[13] Given the above, the Commission concluded that the proposed transaction is unlikely to substantially prevent or lessen competition in any relevant market. We see no reason to differ from this conclusion.
Public interest
[14] The merging parties confirmed that the proposed transaction will not have any negative effects on employment in South Africa.
[15] The proposed transaction raises no other public interest concerns.
Conclusion
[16] In light of the above, we conclude that the proposed transaction is unlikely to substantially prevent or lessen competition in any relevant market. In addition, no public interest concerns arise from the proposed transaction. Accordingly, we approve the proposed transaction unconditionally.
______
Mr Norman Manoim
Ms Mondo Mazwai and Mrs Medi Mokuena concurring.
28 June 2019
Date
Tribunal Researcher: Hlumelo Vazi
For the merging parties: A Roets of Nortons Inc and I Dhladhla of Absa Group Limited.
For the Commission N Msiza and M Aphane
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