Business Venture Investments No. 1473 (Pty) Ltd v McDonald’s (S.A.) (Pty) Ltd (29/LM/Apr11) [2011] ZACT 32 (8 June 2011)
The Tribunal found that there is no horizontal or vertical overlap in the activities of the merging parties, as Shanduka does not operate in the informal eating out sector and McDonald’s operates exclusively in that sector. No products or services offered by the parties are reasonably interchangeable or...
Source-derived case information.
- Citation
- [2011] ZACT 32
- Parties
- Applicant: Business Venture Investments No. 1473 (Pty) Ltd; Respondent: McDonald’s (S.A.) (Pty) Ltd
- Court
- Competition Tribunal
- Jurisdiction
- South Africa
- Case Number
- 29/LM/Apr11
- Procedural Posture
- Merger Control / Tribunal Approval of Proposed Merger
- Outcome
- Merger approved without conditions.
- Judges
- Andreas Wessels, Medi Mokuena, Andiswa Ndoni
- Legal Topics
- Merger Control, Public Interest, Horizontal Overlap, Vertical Relationships
Source-derived case record
Summary, issues, holding and outcome
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Parties
Business Venture Investments No. 1473 (Pty) Ltd
Applicant
McDonald’s (S.A.) (Pty) Ltd
Respondent
Procedural Posture
Merger Control / Tribunal Approval of Proposed Merger
Legal Issues
- 1 Whether the proposed merger between Shanduka Restaurants and McDonald’s (S.A.) raises competition concerns in South Africa.
- 2 Whether there is any horizontal or vertical product/service overlap between the merging parties.
- 3 Whether the merger raises any public interest concerns, including job losses or retrenchments.
Ratio Decidendi
The Tribunal found that there is no horizontal or vertical overlap in the activities of the merging parties, as Shanduka does not operate in the informal eating out sector and McDonald’s operates exclusively in that sector. No products or services offered by the parties are reasonably interchangeable or substitutable. Furthermore, the merger does not raise any public interest concerns, as no job losses or retrenchments are anticipated. Accordingly, the merger does not substantially prevent or lessen competition and is approved without conditions.
Court Disposition
Merger approved without conditions.
Orders
- The proposed merger between Shanduka Restaurants and McDonald’s (S.A.) is approved without conditions.
Full Case Text
Judgment text and source record
39 paragraphs
COMPETITION TRIBUNAL OF SOUTH AFRICA
Case No: 29/LM/Apr11
In the matter between:
Business Venture Investments No. 1473 (Pty) Ltd ….........................Acquiring Firm
And
McDonald’s (S.A.) (Pty) Ltd ….......................................................................Target Firm
Panel : Andreas Wessels (Presiding Member) Medi Mokuena (Tribunal Member)
Andiswa Ndoni (Tribunal Member)
Heard on : 25 May 2011
Order issued on : 26 May 2011
Reasons issued on : 08 June 2011
Reasons for Decision
Approval
On 26 May 2011 the Competition Tribunal (“Tribunal”) approved the proposed transaction involving Business Venture Investments No. 1473 (Pty) Ltd and McDonald’s (S.A.) (Pty) Ltd. The Tribunal’s reasons for approving the transaction are set out below.
Parties to the proposed transaction
The acquiring firm is Business Venture Investments No. 1473 (Pty) Ltd which is to be renamed Shanduka Restaurants Company (Pty) Ltd (“Shanduka Restaurants”), a private company duly incorporated in accordance with the laws of the Republic of South Africa, and controlled by Shanduka Group (Pty) Ltd (“Shanduka”), the parent company of the Shanduka group of companies.1
The target firm is McDonald’s (S.A.) (Pty) Ltd (“McDonald’s”), a private company registered in accordance with the laws of the Republic of South Africa, which is ultimately controlled by the New York Stock Exchange listed McDonald’s Corporation.2
In terms of the proposed transaction, Shanduka Restaurants intends to acquire the entire issued share capital of McDonald’s. The transaction also involves the conclusion of a Master Franchise Agreement between the parties to the merger which will grant Shanduka Restaurants the right to own, operate and license others to operate McDonald’s branded restaurants in South Africa.
Rationale for the proposed transaction
Shanduka Restaurants submitted that the proposed transaction will enable the Shanduka group to broaden its investment portfolio through diversification into a growing market and further raise the group’s global profile.
McDonald’s Corporation stated that it is part of their global strategy to seek operational growth for their operations, through local ownership, in line with its Developmental Licensee model, which has been successfully implemented worldwide. It further held the view that the Shanduka group can drive its business in South Africa, developing and realizing the long term growth potential that exists for the McDonald’s brand in the country.
Activities of the merging parties and product overlap
Shanduka is a private investment holding company with an investment portfolio comprising of investments in the resources, financial services, property, energy, telecommunications, beverages and industrial sectors.
McDonald’s Corporation operates 32 000 restaurants globally in over 117 countries. The target firm, being the South African part of this global restaurant group, is in the fast food industry and operates and franchises McDonald’s branded restaurants in the informal eating out sector. The Shanduka group premerger does not operate in the informal eating out sector.
As is clear from the above description of the merging parties’ activities, they do not sell or provide any products or services in South Africa that can be considered reasonably interchangeable or substitutable. Furthermore, no vertical relationships exist between the merging parties.
Public interest
The merging parties confirmed that no job losses or retrenchments are anticipated as a result of the proposed transaction and no other public interest issues arise from this transaction.
Conclusion
Given that there is no horizontal product/service overlap in the merging parties’ activities and that there are also no vertical relationships between the merging parties, the proposed merger is approved without conditions.
____________________ 08 June 2011
A Wessels Date
M Mokuena and A Ndoni concurring
Tribunal Researcher: Songezo Ralarala
For the merging parties: For the target firm: Tamara Dini and Ineke Bosman from Bowman Gilfillan Attorneys
For the acquiring firm: Mondo Nthla and Lerisha Naidoo from Cliffe Dekker Hofmeyr Attorneys
For the Commission: Zanele Hadebe
1http://www.shanduka.co.za/
2http://www.mcdonalds.co.za/
3