ABSA Bank Ltd v Private Label Store Card Portfolio of EDCON (Pty) Ltd (70/LM/Jun12) [2013] ZACT 2; [2013] 1 CPLR 176 (CT) (23 January 2013)
- Citation
- [2013] ZACT 2
- Status
- Judgment
- Jurisdiction
- South Africa
- Court
- Competition Tribunal
- Panel
- N Manoim, A Wessels, M Mokuena
- Case number
- 70/LM/Jun12
More details
- Court
- Competition Tribunal
- Panel
- N Manoim, A Wessels, M Mokuena
- Case number
- 70/LM/Jun12
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 result in ABSA acquiring the Private Label Store Card Portfolio of Edcon and entering into a strategic relationship for the provision of unsecured credit. While the merger would not result in significant unilateral effects due to the presence of other competitors, the Tribunal concurred with the Commission that ABSA's post-merger stake in both Edcon's portfolio and Woolworths Financial Services created a risk of anti-competitive information exchange between Edcon and Woolworths. To address this, the Tribunal imposed behavioural conditions requiring ABSA to ring fence competitively sensitive information and prevent its sharing between the two competitors. The Tribunal was satisfied that these conditions were necessary and proportionate to address the identified competition concerns. No public interest issues, including job losses, were raised by the merger.
Court disposition
Conditional approval of the merger subject to behavioural and monitoring conditions.
Orders
- The merger is approved subject to the conditions set out in Annexure A, including ring fencing of competitively sensitive information between Edcon and Woolworths via ABSA.
- ABSA must implement and maintain behavioural remedies to prevent the sharing of pricing, margin, cost, client, and marketing information between Edcon and Woolworths.
- Monitoring conditions are imposed to ensure compliance with the behavioural remedies.
02
Material facts
Parties
ABSA Bank Limited
Applicant Counsel: Mark GriffithsPrivate Label Store Card Portfolio of Edcon (Pty) Ltd
Respondent Counsel: Ahmore Burger-Smidt of Werksmans AttorneysAmounts and remedies
- Post Merger National Market Share (2011/2012): 25
03
Procedural history
Posture
Large Merger Review / Conditional Approval
04
Questions and positions
Legal issues
- 01
Whether the proposed acquisition of Edcon's Private Label Store Card Portfolio by ABSA raises competition concerns in the market for unsecured credit.
- 02
Whether the transaction creates a platform for collusion or information exchange between competitors Edcon and Woolworths via ABSA.
- 03
Whether the imposed behavioural conditions adequately address the risk of anti-competitive information exchange.
Party arguments
- Applicant
- ABSA argued that the acquisition would allow it to enter into a strategic relationship with Edcon for the provision of unsecured credit products, with no adverse effect on competition. ABSA committed to ring fencing competitively sensitive information between Edcon and Woolworths to prevent anti-competitive information exchange. The merger would not result in job losses or other public interest concerns.
- Respondent
- Edcon submitted that the sale of the portfolio was motivated by the desire to realise a return from the asset. Edcon agreed to the behavioural conditions proposed by the Commission to prevent the sharing of competitively sensitive information and confirmed that the merger would not negatively impact employment or other public interests.
05
Court’s reasoning
Legal principles
- 01
Competition Act No. 89 of 1998, as amended
A merger may be approved subject to conditions that address competition concerns, including behavioural remedies to prevent anti-competitive information exchange.
- 02
Commission findings and Tribunal concurrence
Structural links between competitors via a common shareholder may facilitate coordination and information exchange, which can substantially prevent or lessen competition.
06
Ratio, limits and disposition
Ratio decidendi
The Tribunal found that the proposed transaction would result in ABSA acquiring the Private Label Store Card Portfolio of Edcon and entering into a strategic relationship for the provision of unsecured credit. While the merger would not result in significant unilateral effects due to the presence of other competitors, the Tribunal concurred with the Commission that ABSA's post-merger stake in both Edcon's portfolio and Woolworths Financial Services created a risk of anti-competitive information exchange between Edcon and Woolworths. To address this, the Tribunal imposed behavioural conditions requiring ABSA to ring fence competitively sensitive information and prevent its sharing between the two competitors. The Tribunal was satisfied that these conditions were necessary and proportionate to address the identified competition concerns. No public interest issues, including job losses, were raised by the merger.
Obiter and limits
- The Tribunal noted that the merging parties' commitment to ring fencing information was confirmed at the hearing and that monitoring conditions were imposed to ensure compliance.
- The Tribunal observed that the merger raised no public interest concerns beyond the competition issues addressed by the conditions.
Court disposition
Conditional approval of the merger subject to behavioural and monitoring conditions.
- The merger is approved subject to the conditions set out in Annexure A, including ring fencing of competitively sensitive information between Edcon and Woolworths via ABSA.
- ABSA must implement and maintain behavioural remedies to prevent the sharing of pricing, margin, cost, client, and marketing information between Edcon and Woolworths.
- Monitoring conditions are imposed to ensure compliance with the behavioural remedies.
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: 70/LM/Jun12
In the matter between:
ABSA
BANK LIMITED .........................................................................Acquiring Firm
And
THE
PRIVATE LABEL STORE CARD
PORTFOLIO OF EDCON (PTY) LTD ......................................................Target Firm
Panel : N Manoim (Presiding Member) A Wessels (Tribunal Member) M Mokuena (Tribunal Member)
Heard on : 20 September 2012
Order issued on : 20 September 2012
Reasons issued on : 23 January 2013
Reasons for Decision
Conditional approval
The Competition Tribunal (“Tribunal”) on 20 September 2012, in terms of section 16(2)(b) of the Competition Act of 19981, conditionally approved the large merger involving Absa Bank Limited and the Private Label Store Card Portfolio of Edcon (Pty) Ltd.
Parties and their activities
The primary acquiring firm is Absa Bank Limited (“Absa”), a company incorporated in terms of the laws of the Republic of South Africa. Absa is a wholly owned subsidiary of Absa Group Limited (“Absa Group”), a public company listed on the Johannesburg Securities Exchange (“JSE”). Absa Group controls various subsidiaries in the banking, financial services and other sectors.2
Absa Group operates within the broader financial services industry, and its core activities extend across a range of financial services provided to retail and corporate clients, through personal, commercial and wholesale banking, to insurance. Of specific
relevance to the competition assessment of this transaction is that Absa provides its clients with personal loans, overdraft facilities and credit cards. ABSA Group furthermore has a joint venture with Woolworths (Pty) Ltd (“Woolworths”). This joint venture, Woolworths Financial Services (Pty) Ltd (“WFS”), offers customers the following types of unsecured credit products: (i) private label store cards, which can be used at any Woolworths store and at selected Engen Food Stops; (ii) personal loans; and (iii) credit cards. Absa has a 50% share in WFS.3
The primary target firm is the Private Label Store Card Portfolio of Edcon (Pty) Ltd. Edcon (Pty) Ltd (“Edcon”) is a wholly owned subsidiary of Edgars Consolidated Stores Limited and is indirectly held by Edcon Holdings (Pty) Ltd. The above-mentioned store card portfolio forms part of Edcon’s unincorporated Credit and Financial Services Division.
Edcon offers qualifying customers private label store cards through which they can purchase clothing, footwear, mobile phones, cosmetics, home ware, stationary and books on credit primarily at any of Edcon’s retail stores (such as Edgars, Jet, Boardmans and CNA) in South Africa. The store card portfolio complements Edcon’s retail franchise through the issuing of private label store cards to qualifying customers on two options, namely (i) six months interest free; and (ii) twelve months interest bearing. Edcon further currently has acceptance relationships for its private label store cards with several third-party merchants such as Greyhound, Citiliner, Medicross and Primecure.
Proposed transaction and rationale
In terms of the Asset Acquisition Agreement, Absa will acquire the right title and interest to the accounts and receivables relating to the South African private label store card portfolio of Edcon (hereinafter referred to as “the Portfolio”).
Absa views the proposed transaction as providing it with the opportunity to enter into a strategic relationship with Edcon for the provision of unsecured credit products.
Edcon’s rationale for the proposed transaction is to realise a return from the sale of the Portfolio.
Relevant market and impact on competition
The merging parties submitted that Absa will acquire the Portfolio and enter into a strategic relationship with Edcon for the provision of unsecured credit and other financial services to Edcon customers. They further submitted that Absa Group and Edcon will enter into a Program Agreement in terms of which Edcon will continue to manage and operate the Portfolio on Absa Group’s behalf. Pursuant to the implementation of the proposed transaction, Absa will be responsible for credit, fraud risk management, legal, accounting, compliance and key back office operations, whilst Edcon will be responsible for managing the front office operations, primary customer interaction and certain back office operations pertaining to the Portfolio.
The Commission found that the activities of the merging parties horizontally overlap in respect of the provision of unsecured credit to individuals in South Africa. The Commission further found that the combined post-merger national market share of the merging parties in 2011/2012 in this market will be approximately [20-30]%. Competitors in this market include large players such as African Bank, Standard Bank and FNB, as well as a number of smaller players.
The Commission was not concerned about unilateral effects flowing from the proposed transaction, but was however concerned that the proposed transaction will create a platform for collusion and give rise to the exchange of information between Edcon and Woolworths through Absa. The Commission was of the view that because of Absa’s post-merger stake in both WFS and the Portfolio, Edcon and Woolworths might benefit from each other’s commercial information such as cardholder’s data, marketing plans, financial data, business strategies and other commercial information, to the ultimate detriment of competition. The Commission therefore concluded that the existence of the post-merger structural link between WFS and the Portfolio could lead to coordination between competitors (i.e. Edcon and Woolworths) on inter alia pricing, marketing policies and commercial strategies. This the Commission argued is likely to substantially prevent or lessen competition. We concur with the Commission’s findings.
However, to address the above concerns, the Commission and the merging parties agreed on a set of behavioural conditions. This was confirmed by the representatives of the merging parties at the hearing.4 We have imposed these conditions on the merging parties, which in essence are that:
For as long as Absa controls both the Portfolio and WFS, it shall continue to apply certain ring fencing measures, to ensure that Edcon and Woolworths do not share their respective competitively sensitive information through Absa (see condition 3.1). Competitively sensitive information shall include, but not be limited to, any and all such information relating to:
Pricing – including, but not limited to, pricing of specific products, prices/discounts offered to specific clients and planned price reductions or increases;
Margin information by product or client;
Costs information for particular products;
Information on specific clients and client strategy, including information with respect to the sales volume of clients; and
Marketing strategies.
We have further imposed a number of monitoring conditions relating to the above-mentioned behavioural remedy (see condition 4).
We are satisfied that the imposed conditions are necessary to address the identified competition concern of likely post-merger information exchange between WFS and the Portfolio through Absa, and that these conditions are proportional to and adequately address this concern.
Public interest
The merging parties confirmed that the proposed merger will not give rise to any job losses.5 The proposed merger raises no other public interest issues.
CONCLUSION
We approve the proposed transaction subject to the conditions as per the attached Annexure A.
____ 23 January 2013
DATE
Andreas Wessels
Norman Manoim and Medi Mokuena concurring
Tribunal researcher: Thabo Ngilande
For Absa: Mark Griffiths
For Edcon: Ahmore Burger-Smidt of Werksmans Attorneys
For the Commission: Zanele Hadebe
1Act No. 89 of 1998, as amended.
2See record pages 8 to 10.
3See transcript page 3.
4See transcript page 3.
5See inter alia record pages 14 and 57.
3
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