Datatec Limited and Affinity Logic Holdings (Pty) Ltd (73/LM/Oct02) [2002] ZACT 51 (9 September 2002)
- Citation
- [2002] ZACT 51
- Status
- Judgment
- Jurisdiction
- South Africa
- Court
- Competition Tribunal
- Panel
- N. Manoim, D. Lewis, U. Bhoola
- Case number
- 73/LM/Oct02
More details
- Court
- Competition Tribunal
- Panel
- N. Manoim, D. Lewis, U. Bhoola
- Case number
- 73/LM/Oct02
On this page
Professional case brief
Research organized from the available case record
01
Holding and result
The Tribunal found that the acquisition by Datatec Limited of a majority shareholding in Affinity Logic Holdings (Pty) Ltd does not result in any product or geographic overlap between the parties' South African operations. Datatec's subsidiaries and ALH operate in distinct segments, with no horizontal or vertical relationships. ALH does not supply goods or services to the Datatec group, nor does Datatec supply to ALH. The transaction is a result of Wooltru's disposal of its non-core interest in ALH, and the change in control does not affect competition in any relevant market. There are no public interest concerns arising from the merger. Accordingly, the Tribunal approved the transaction unconditionally.
Court disposition
Merger approved unconditionally.
Orders
- The merger between Datatec Limited and Affinity Logic Holdings (Pty) Ltd is approved without conditions.
- A Merger Clearance Certificate is issued in terms of section 16(2)(a) of the Competition Act.
02
Material facts
Parties
Datatec Limited
Applicant Counsel: Edward Nathan Friedland AttorneysAffinity Logic Holdings (Pty) Ltd
RespondentAmounts and remedies
- Datatec's Post Merger Shareholding in ALH (%): 55.21
- Datatec's Pre Merger Shareholding in ALH (%): 47.5
- Wooltru's Pre Merger Shareholding in ALH (%): 35.55
- Wooltru's Post Merger Shareholding in ALH (%): 0
03
Procedural history
Posture
Large Merger Review / Merger Clearance Decision
04
Questions and positions
Legal issues
- 01
Whether the acquisition by Datatec Limited of a majority shareholding in Affinity Logic Holdings (Pty) Ltd will substantially lessen competition in any relevant market.
- 02
Whether there are any public interest concerns that would prevent approval of the merger.
Party arguments
- Applicant
- Datatec Limited argued that the transaction merely increases its shareholding in ALH, resulting in control, but does not create any product or geographic overlap with its existing South African subsidiaries. The businesses of Datatec and ALH are distinct, with Datatec's subsidiaries focused on distribution and integration of networking equipment, while ALH provides outsourced IT services to the retail and consumer goods sector. There are no horizontal or vertical overlaps, and no adverse impact on competition or public interest.
- Respondent
- The Competition Commission concurred that there is no product or geographic overlap between the parties. The relevant market is limited to electronic value added trading systems and IT services, but only ALH is active in this segment. The Commission found no evidence of horizontal or vertical overlaps and recommended unconditional approval of the merger.
05
Court’s reasoning
Legal principles
- 01
Competition Act, No. 89 of 1998, section 16(2)(a)
A merger may only be prohibited if it is likely to substantially prevent or lessen competition, unless public interest concerns justify prohibition.
- 02
Competition Act, No. 89 of 1998
The assessment of a merger requires consideration of both competition effects and public interest factors.
06
Ratio, limits and disposition
Ratio decidendi
The Tribunal found that the acquisition by Datatec Limited of a majority shareholding in Affinity Logic Holdings (Pty) Ltd does not result in any product or geographic overlap between the parties' South African operations. Datatec's subsidiaries and ALH operate in distinct segments, with no horizontal or vertical relationships. ALH does not supply goods or services to the Datatec group, nor does Datatec supply to ALH. The transaction is a result of Wooltru's disposal of its non-core interest in ALH, and the change in control does not affect competition in any relevant market. There are no public interest concerns arising from the merger. Accordingly, the Tribunal approved the transaction unconditionally.
Obiter and limits
- The Tribunal noted that more than 96% of Datatec's revenue is generated outside South Africa, further reducing any potential local competitive impact.
- The Commission did not identify any product or geographic overlap, and the parties' activities remain distinct post-merger.
Court disposition
Merger approved unconditionally.
- The merger between Datatec Limited and Affinity Logic Holdings (Pty) Ltd is approved without conditions.
- A Merger Clearance Certificate is issued in terms of section 16(2)(a) of the Competition Act.
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
REPUBLIC
OF SOUTH AFRICA
Case No: 73/LM/Oct02
In the large merger between:
Datatec Limited
and
Affinity Logic Holdings (Pty) Ltd
Reasons for Decision
_____________
APPROVAL
On 4 December 2002 the Competition Tribunal issued a Merger Clearance Certificate approving the merger between Datatec Limited and Affinity Logic Holdings (Pty) Ltd in terms of section 16(2)(a). The reasons for the approval of the merger appear below.
The Parties
The acquiring firm is Datatec Limited (âDatatecâ), a JSE listed company. It is an international networking and IT services company with activities in North and South America, Africa, Asia and Europe. More than 96% of the revenue of Datatec is generated outside of South Africa.
Its subsidiaries are Westcon, Logical, Mason, Westcon AME, Affinity Logic (ALH) and RangeGate. Only Westcon AME, RangeGate and ALH have operations in South Africa.
3. The target firm is Affinity Logic Holdings (Pty) (âALHâ). The shareholding of ALH is set out in the diagram below.1
The Merger Transaction
4. The transaction comprises a disposal of a 7.79% interest in ALH by Wooltru, the leading retail and wholesale group, to Datatec which will increase Datatecâs shareholding in ALH from 47.5% to 55.21%, thus giving it a majority shareholding in the company. This transaction occurs as a result of the disposal by Wooltru of its shares in ALH to the other shareholders of AHL, as part of Wooltruâs unbundling. Wooltru is disposing of its stake because ALH is a non-core part of its business. The pre and post merger shareholdings are reflected below:
Pre-merger and Post-merger shareholdings in Affinity:-
Wooltru
Massmart
Employees Share Trust
Datatec
Marich Trust
Affinity Management
35.55%
9.9%
5.17%
47.5%
2.37%
1.96%
0%
11.85%
6.02%
55.21%
2.76%
24.16%
Affinity Logic Holdings (ALH)
The Relevant Market
6. Datatecâs core activity is networking and integrating of IT systems. The extent of these activities are distributed amongst its various subsidiaries:
Westcon
Datatec has a 92.5% shareholding in Westcon. This is a global distributor of advanced networking and connectivity products and services, such as video-conferencing, virtual private networks, e-business, wireless connectivity, network security and convergence technology products.
Logical
A wholly owned subsidiary, Logical is an international professional services and IT network integration company. It provides expertise in next-generation technologies, such as IP telephony.
Mason
Datatec has a 75% shareholding in this company, which is a strategic telecommunications consultancy.
Westcon AME (Africa Middle East) (operates in South Africa)
Distributor of networking equipment, cabling products and security data and voice communications products. It distributes products to resellers of networking technology in the security, wireless and voice-over-IP markets.
RangeGate (operates in South Africa)
RangeGate is 76% owned by Datatec. A pioneer of mobile computing, it is a mobile technology system integration company which sells mobile solutions into specific market sectors such as retail, manufacturing, transport and logistics.
7. ALHâs business activities are focused in the retail and consumer goods industries and involve providing outsourced services for the delivery of IT infrastructure and application solutions to retail and consumer goods sector. This includes networks, desktop support, network design and implementation consulting. It provides services to major clients such as Dimension Data, Makro and Lever Ponds.
8. The Commission did not identify a product or geographical overlap. The parties referred to the relevant market as that for the supply of electronic value added trading systems and rendering of IT services. However, this is probably only the affected market, insofar as there is no product overlap.
Impact on competition
9. This transaction involves an increase of shareholding by Datatec in ALH. Its acquisition of additional shares means that it will now control the company. There is no product overlap in respect of the Datatec subsidiaries carrying on business in South Africa and ALH. Westcon AME and ALH are distinguished insofar as the former distribute networking equipment and security products to resellers, whereas the latter provides outsourced services to end-users. ALH does not supply goods or services to the Datatec group or vice versa. There are therefore no horizontal or vertical overlaps as far as the South African businesses are concerned.
Conclusion
We conclude that the merger will not lead to a substantial lessening of competition. The Tribunal therefore approves the transaction unconditionally. There are no public interest concerns which would alter this conclusion.
_____ 9 December 2002
N. Manoim Date
Concurring: D.Lewis, U. Bhoola
For the merging parties: Edward Nathan Friedland Attorneys
For the Commission: M. Sebothoma, I. Dhladhla, Competition Commission
1 AHL controls Affinity Logic Management Services (Pty) Ltd, Affinity Logic (Pty) Ltd, Destiny Electronic Commerce (Pty) Ltd, Quickcut Pre Press Network, Instant Xposure (Pty) Ltd.
Case-aware research
Ask AI about this case
The judgment and available research above are public. New questions open in a separate private conversation grounded in this case.