Accelerate Property Fund Ltd v 15 Letting Enterprises being sold by Fourways Precinct (Pty) Ltd (16170) [2013] ZACT 28; [2013] 2 CPLR 519 (CT) (17 April 2013)
- Citation
- [2013] ZACT 28
- Status
- Judgment
- Jurisdiction
- South Africa
- Court
- Competition Tribunal
- Panel
- Andreas Wessels, Medi Mokuena, Mondo Mazwai
- Case number
- 016170
More details
- Court
- Competition Tribunal
- Panel
- Andreas Wessels, Medi Mokuena, Mondo Mazwai
- Case number
- 016170
On this page
Professional case brief
Research organized from the available case record
01
Holding and result
The Tribunal found that the proposed merger did not raise competition concerns in the relevant property markets, as there was no significant overlap and sufficient competing shopping centres existed within the affected area. However, the Tribunal agreed with the Commission that exclusivity clauses in certain lease agreements could impede small businesses from accessing retail space, raising a public interest concern under section 12A(3)(c) of the Competition Act. The Tribunal imposed conditions requiring Accelerate to negotiate in good faith with the relevant tenants to remove the exclusivity clauses within specified periods, rather than waiting for distant renewal dates. The merger was approved subject to these conditions, which were deemed necessary to promote competition and public interest.
Court disposition
Conditional approval of the merger subject to public interest conditions.
Orders
- Accelerate Property Fund Limited must negotiate in good faith with the relevant tenants to remove exclusivity clauses in lease agreements for the Fourways Mall Shopping Centre, Cedar Square, and Buzz Shopping Centre within specified periods from the Tribunal's approval date.
- The merger is approved subject to the conditions set out in Annexure A.
02
Material facts
Parties
Accelerate Property Fund Limited
Applicant Counsel: Glyn Marais Inc.15 Letting Enterprises being sold by Fourways Precinct (Pty) Ltd
Respondent03
Procedural history
Posture
Merger Control / Conditional Approval
04
Questions and positions
Legal issues
- 01
Does the proposed merger raise competition concerns in the relevant property markets?
- 02
Do exclusivity clauses in lease agreements raise public interest concerns under section 12A(3)(c) of the Competition Act?
- 03
Are conditions warranted to address the effect of exclusivity clauses on small business access to retail space?
Party arguments
- Applicant
- Accelerate Property Fund Limited argued that the acquisition of the 15 letting enterprises would not result in any substantial lessening of competition, as there was no significant geographic overlap in the relevant markets. The applicant further contended that the transaction would not adversely affect employment and that the exclusivity clauses in certain lease agreements could be addressed through negotiation and undertakings to remove them within specified periods.
- Respondent
- The Competition Commission submitted that, while no competition concerns arose from the merger itself, certain exclusivity clauses in lease agreements could prevent small businesses from accessing retail space in the affected shopping centres. The Commission recommended that conditions be imposed to ensure the removal of these clauses at renewal dates or within specified periods, thereby addressing public interest concerns under the Act.
05
Court’s reasoning
Legal principles
- 01
Competition Act No. 89 of 1998, section 12A(3)(c)
A merger may be approved subject to conditions that address public interest concerns, including the impact on small businesses' ability to compete.
- 02
Competition Act No. 89 of 1998
Exclusivity clauses in lease agreements that restrict access to retail space may be contrary to public interest and warrant conditional approval of a merger.
06
Ratio, limits and disposition
Ratio decidendi
The Tribunal found that the proposed merger did not raise competition concerns in the relevant property markets, as there was no significant overlap and sufficient competing shopping centres existed within the affected area. However, the Tribunal agreed with the Commission that exclusivity clauses in certain lease agreements could impede small businesses from accessing retail space, raising a public interest concern under section 12A(3)(c) of the Competition Act. The Tribunal imposed conditions requiring Accelerate to negotiate in good faith with the relevant tenants to remove the exclusivity clauses within specified periods, rather than waiting for distant renewal dates. The merger was approved subject to these conditions, which were deemed necessary to promote competition and public interest.
Obiter and limits
- The Tribunal noted that the merging parties confirmed there would be no adverse effect on employment as a result of the transaction.
- Apart from the exclusivity clauses, no other public interest concerns were identified in relation to the proposed merger.
- The Tribunal highlighted the importance of addressing public interest concerns promptly, rather than deferring action to distant future dates.
Court disposition
Conditional approval of the merger subject to public interest conditions.
- Accelerate Property Fund Limited must negotiate in good faith with the relevant tenants to remove exclusivity clauses in lease agreements for the Fourways Mall Shopping Centre, Cedar Square, and Buzz Shopping Centre within specified periods from the Tribunal's approval date.
- The merger is approved subject to the conditions set out in Annexure A.
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: 016170
In the merger between:
ACCELERATE PROPERTY FUND LIMITED PRIMARY ..................ACQUIRING
FIRM
and
15
LETTING ENTERPRISES BEING SOLD
BY FOURWAYS PRECINCT (PTY) LTD PRIMARY .........................................TARGET
FIRMS
Panel : Andreas Wessels (Presiding Member) Medi Mokuena (Tribunal Member)
Mondo Mazwai (Tribunal Member)
Heard on : 13 March 2013
Order issued on : 19 March 2013
Reasons issued on : 17 April 2013
Decision
Conditional Approval
On 19 March 2013, the Competition Tribunal (“Tribunal”), in terms of section 16(2)(b) of the Competition Act of 19981, conditionally approved the acquisition by Accelerate Property Fund Limited of 15 letting enterprises being sold by Fourways Precinct (Pty) Ltd.
The reasons for conditionally approving the proposed transaction follow.
Parties to transaction
The primary acquiring firm is Accelerate Property Fund Limited (“Accelerate”), a special purpose vehicle newly established for the purposes of the proposed transaction. Accelerate is to hold a portfolio of properties throughout South Africa and intends to list its shares on the Johannesburg Stock Exchange Limited (the “JSE”). The sole shareholder of Accelerate (as at January 2013) until the listing date is Mr. Michael Nicolas Georgiou.
We note that the Competition Commission (“Commission”) on 12 February 2013 conditionally2 approved two intermediate merger notifications,3 in terms of which Accelerate will acquire a total of 72 properties, consisting of rentable retail, office, industrial and mixed use properties located throughout South Africa. These properties were taken into account as part of Accelerate’s property portfolio in the competition analysis of this transaction.
The primary target properties comprise 15 letting enterprises4 being sold by Fourways Precinct (Pty) Ltd (“Fourways Precinct”). These properties are all located in the Fourways node and comprise nine shopping centres and six office properties classified as rentable B-Grade office space.
Proposed transaction and rationale
Accelerate intends acquiring a property portfolio from Fourways Precinct comprising of 15 letting enterprises.
Accelerate was created to facilitate the acquisition of a number of properties and to list on the JSE to inter alia raise capital to pursue growth and investment opportunities in the future and to enhance the public profile and general public awareness of Accelerate.
Competition assessment
The Commission found no geographic overlap between the activities of the merging parties in any relevant market except for the market for rentable retail space in a convenience centre. One of the shopping centres being acquired by Accelerate is the Buzz Shopping Centre located at Witkoppen, Johannesburg. Accelerate will also own inter alia the Leaping Frog and Waterford Shopping Centre located in respectively Sandton and Fourways. However, the Commission found that there are numerous competing shopping centres within a 5 to 10 km radius from the Buzz Shopping Centre. The Commission was therefore satisfied that no competition concerns will arise as a result of this transaction. We concur with this conclusion.
Public interest
Employment
The merging parties confirmed that the proposed transaction will have no adverse effect on employment.5
Small business
The Commission raised a public interest concern pertaining to the exclusivity clauses contained in the lease agreements of four tenants in certain shopping centres to be acquired by Accelerate in terms of this transaction (namely the Fourways Mall Shopping Centre, Cedar Square and the Buzz Shopping Centre). The Commission was concerned that these exclusivity clauses could have the effect of preventing small businesses, such as butcheries and delicatessen stores, from gaining access to rentable retail space in the respective shopping centres. In order to address this concern, the Commission, based on certain undertakings by the merging parties, recommended that certain conditions should be attached to the approval of this merger. These recommended conditions were aimed at the removal of the respective exclusivity clauses at the renewal dates of each of the lease agreements.
We agree with the Commission’s conclusion that the above-mentioned exclusivity clauses in certain lease agreements each raise a public interest concern in terms of section 12A.(3)(c) of the Act and that conditions are warranted to address such concern.
However, the Tribunal was concerned that certain of these lease agreements were only renewable on a distant future date, i.e. in 20[...] and 20[...]. Given these concerns of the Tribunal, the merging parties consequently in respect of the relevant lease agreements undertook to negotiate with the relevant tenants to have the exclusivity clauses in the lease agreements removed within a specified period of the Tribunal’s approval date of the transaction, i.e. well in advance of the renewal dates contained in the lease agreements.
Based on these revised undertakings by Accelerate, the Tribunal approved the proposed transaction subject to the following conditions:
Accelerate shall negotiate with […] (Pty) Ltd in respect of the current effective lease agreement, in the utmost good faith, to have the exclusivity clauses in the lease agreement in respect of the Fourways Mall Shopping Centre removed at the approaching renewal date (in 20[…]) as contained in the lease agreement.
Accelerate shall negotiate with […] (Pty) Ltd in respect of the current effective lease agreement, in the utmost good faith, to have the exclusivity clauses in the lease agreement in respect of the Cedar Square, removed within [...] of the Tribunal order.
Accelerate shall negotiate with […] (Pty) Ltd in respect of the current effective lease agreement, in the utmost good faith, to have the exclusivity clauses in the lease agreement in respect of the Cedar Square, removed within [...] of the Tribunal order.
Accelerate shall negotiate with […] (Pty) Ltd in respect of the current effective lease agreement, in the utmost good faith, to have the exclusivity clauses in the lease agreement in respect of the Buzz Shopping Centre removed at the approaching renewal date (in 20[…]) as contained in the lease agreement.
In the context of the above-mentioned public interest concern, we have imposed the aforementioned conditions aimed at addressing likely effects on the ability of small businesses to become competitive.
Other public interest issues
Apart from the above-mentioned concern, the proposed merger raises no other public interest concerns.
CONCLUSION
We approve the proposed transaction subject to the conditions set out in the attached “Annexure A”.
______ 17 April 2013
ANDREAS
WESSELS DATE
Medi Mokuena and Mondo Mazwai concurring
Tribunal Researcher: Nicola Ilgner
For the Commission: Dineo Mashego
For the merging parties: Glyn Marais Inc.
1Act No. 89 of 1998, as amended.
2These conditions are similar in nature to those imposed on this transaction and are aimed at addressing a public interest concern.
3See pages 8 and 10 to 13 of the Commission’s report.
4For a list of these properties, see pages 7 to 9 of the merger record.
5See pages 11, 20, 81 and 133 of the record.
5
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