ABSA Group Limited v Woolworths Financial Services (Pty) Ltd (59/LM/MAY08) [2008] ZACT 61 (31 July 2008)
- Citation
- [2008] ZACT 61
- Status
- Judgment
- Jurisdiction
- South Africa
- Court
- Competition Tribunal
- Panel
- D Lewis, Y Carrim, L Reyburn
- Case number
- 59/LM/MAY08
More details
- Court
- Competition Tribunal
- Panel
- D Lewis, Y Carrim, L Reyburn
- Case number
- 59/LM/MAY08
On this page
Professional case brief
Research organized from the available case record
01
Holding and result
The Tribunal found that the merger would not result in a substantial lessening or prevention of competition in any of the relevant markets. The combined market shares in unsecured personal lending, credit cards, personal loans, and short-term insurance segments were not significant enough to raise competition concerns, with market share accretion post-merger being negligible and other credible competitors present. No foreclosure concerns arose from the vertical relationship, as Woolworths FS would continue to source banking services from Standard Bank and other banks. There were no public interest issues identified. Accordingly, the merger was approved without conditions.
Court disposition
Merger approved without conditions.
Orders
- The merger between ABSA Group Limited and Woolworths Financial Services (Pty) Ltd is approved without conditions.
02
Material facts
Parties
ABSA Group Limited
Applicant Counsel: Deneys ReitzWoolworths Financial Services (Pty) Ltd
Respondent Counsel: Deneys ReitzAmounts and remedies
- ABSA Market Share in Unsecured Personal Lending: ZAR 24.7
- Woolworths FS Market Share in Unsecured Personal Lending: ZAR 2
- Combined Post Merger Market Share in Unsecured Personal Lending: ZAR 26.7
- ABSA Market Share in Credit Card Segment: ZAR 25.6
- Woolworths FS Market Share in Credit Card Segment: ZAR 2
- Combined Post Merger Market Share in Credit Card Segment: ZAR 27.6
- Combined Post Merger Market Share in Short Term Insurance Segment: ZAR 3
03
Procedural history
Posture
Merger Control / Merger Approval
04
Questions and positions
Legal issues
- 01
Whether the proposed merger between ABSA Group Limited and Woolworths Financial Services (Pty) Ltd will substantially lessen or prevent competition in the relevant markets.
- 02
Whether any foreclosure concerns arise from the vertical relationship between the merging parties.
- 03
Whether there are any public interest issues associated with the merger.
Party arguments
- Applicant
- ABSA argued that acquiring a majority stake in Woolworths Financial Services would enhance its position in the consumer finance sector. The merger would allow Woolworths FS to become a leading consumer finance operation with a comprehensive financial services offering in South African retail. The parties submitted that market share accretion post-merger would be negligible, with significant competitors remaining in all relevant segments.
- Respondent
- Woolworths FS supported the merger, stating that it would not alter its primary banking relationship with Standard Bank or other banks post-merger. Woolworths FS emphasized that the transaction would not result in foreclosure or anti-competitive effects, as it sources banking services from multiple institutions and intends to maintain these relationships.
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
Vertical relationships between merging parties must be assessed for foreclosure concerns, but such concerns do not arise where the target continues to source services from multiple competitors.
06
Ratio, limits and disposition
Ratio decidendi
The Tribunal found that the merger would not result in a substantial lessening or prevention of competition in any of the relevant markets. The combined market shares in unsecured personal lending, credit cards, personal loans, and short-term insurance segments were not significant enough to raise competition concerns, with market share accretion post-merger being negligible and other credible competitors present. No foreclosure concerns arose from the vertical relationship, as Woolworths FS would continue to source banking services from Standard Bank and other banks. There were no public interest issues identified. Accordingly, the merger was approved without conditions.
Obiter and limits
- The Tribunal noted that the short-term insurance segment is highly competitive, with significant players and retailers such as Edgars, Jet, and Clicks.
- The merging parties did not provide their pre-merger market shares in the short-term insurance segment, but the combined post-merger share was estimated to be less than 3%.
Court disposition
Merger approved without conditions.
- The merger between ABSA Group Limited and Woolworths Financial Services (Pty) Ltd is approved without conditions.
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: 59/LM/MAY08
In the matter between:
ABSA Group Limited Acquiring Firm
and
Woolworths Financial Services (Pty) Ltd Target firms
______________
Panel : D Lewis (Presiding Member), Y Carrim (Tribunal Member), and
L Reyburn (Tribunal Member)
Heard on : 17 July 2008
Order issued on : 17 July 2008
Reasons issued on : 31 July 2008
REASONS
FOR DECISION
Introduction
On 17 July 2008 the Tribunal approved the merger between Absa Group Limited and Woolworths Financial Services (Pty) Ltd.
The Parties
The primary acquiring firm is ABSA Group (âAbsaâ) which controls a number of companies, and which in turn is controlled by Barclays Plc (58.8%). The primary target firm is Woolworths Financial Services (âWoolworths FSâ), a wholly owned subsidiary of Woolworths (Pty) Ltd, which in turn is a wholly owned subsidiary of Woolworths Holdings.
The Transaction and its Rationale
In terms of the proposed transaction, Absa will acquire 50% plus 1 ordinary share stake in Woolworths FS by means of a subscription for shares. Absa considers this deal as an opportunity to increase its presence in the consumer finance sector in South Africa. As far as Woolworths FS is concerned, this transaction will allow it to become a leading consumer finance operation with one of the most comprehensive financial services offerings in South African retail store network.
Relevant Product
There is a horizontal overlap between the merging parties in the provision of unsecured personal lending, including the issuing of credit cards and the granting of personal loans, as well as the facilitation or provision of short term and other insurance related products.
All of these services are provided by the merging parties nationally, on the basis of a national pricing strategy. For this reason, the geographic market is considered to be national in scope.
There is also a vertical relationship between the merging parties in that Absa currently provides some banking services to Woolworths, in the normal course of business and on market related commercial terms.
Competition Evaluation
Horizontal analysis
In the market for unsecured personal lending, Absa has a market share of 24.7%, and Woolworths FS is said to have significantly less than 2% market share pre-merger. The combined post merger market share is less than 26.7%.
In the credit card segment, Absa has 25.6% market share and Woolworths FS has around 2% market share premerger, which results in a combined post merger market share of 27.6%.
The merging parties submit that in the personal loans segment, Absa has less than 24% market share pre-merger, and again Woolworths FS has less than 2% market share.
In the short term insurance segment, the merging partiesâ combined market share post merger is estimated to be less than 3%.1 This is considered to be a highly competitive market with significant other players as well as retailers such as Edgars, Jet
and Clicks.
In all the abovementioned segments, there is a negligible market share accretion of around 2% post merger. In addition, there are other credible players present.
Vertical analysis
We find that no foreclosure concerns arise from the vertical relationship between the merging parties as Woolworths indicated that Standard Bank serves as its primary banker and provides the majority of its banking services needs, and that currently it sources banking services from other banks, such as FNB, Investec and Nedbank. Woolworths further indicated that it has no intention of
changing its relationship with Standard Bank and the other banks post merger.
Conclusion
In light of the above, we find that this merger will not result in a substantial lessening or prevention of competition in any of the relevant markets. Accordingly, we approve the merger without conditions.
There are no public interest issues.
___ 31July 2008
Y Carrim Date
Tribunal Member
D Lewis and L Reyburn concur in the judgment of Y Carrim
For the merging parties : Deneys Reitz
For the Commission : T Masithulela
(Mergers and Acquisitions)
Tribunal Researcher: L Xaba
1 The merging parties did not provide their premerger market shares in this segment.
4
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