Edgars Consolidated Stores Limited and Elixir Marketing (Pty) Ltd (70/LM/Sep02) [2002] ZACT 62 (8 November 2002)
- Citation
- [2002] ZACT 62
- Status
- Judgment
- Jurisdiction
- South Africa
- Court
- Competition Tribunal
- Panel
- N. Manoim, D. Lewis, U. Bhoola
- Case number
- 70/LM/Sep02
More details
- Court
- Competition Tribunal
- Panel
- N. Manoim, D. Lewis, U. Bhoola
- Case number
- 70/LM/Sep02
On this page
Professional case brief
Research organized from the available case record
01
Holding and result
The Tribunal found that although Edcon and Super Mart sell similar products, significant differences exist in their customer profiles, store formats, and pricing, indicating that they do not compete in the same relevant product markets. The geographic market was determined to be national, with prices set on a national basis. Edcon is vertically integrated into manufacturing, but Super Mart is not, and there is no overlap in upstream purchasing. The entry of new competitors demonstrates low barriers to entry. The Tribunal concluded that the merger would not substantially lessen or prevent competition, nor did it raise any substantial public interest concerns. Accordingly, the merger was approved without conditions.
Court disposition
Merger approved without conditions.
Orders
- The merger between Edgars Consolidated Stores Limited and Elixir Marketing (Pty) Ltd is approved without conditions.
- A Merger Clearance Certificate is issued.
02
Material facts
Parties
Edgars Consolidated Stores Limited
Applicant Counsel: Werksmans AttorneysElixir Marketing (Pty) Ltd
Respondent03
Procedural history
Posture
Large Merger / Merger Approval
04
Questions and positions
Legal issues
- 01
Does the merger between Edgars Consolidated Stores Limited and Elixir Marketing (Pty) Ltd substantially lessen or prevent competition in any relevant market?
- 02
Are there any substantial public interest grounds that would prevent approval of the merger?
Party arguments
- Applicant
- Edcon argued that the acquisition of Elixir Marketing (Super Mart) would allow it to expand into product categories attracting increased consumer spending due to changing needs. Edcon asserted that the merger would not result in re-branding of Super Mart stores and that the parties do not compete in the same relevant product markets, given differences in customer profiles, store formats, and pricing. Edcon also stated that barriers to entry are low, as evidenced by new competitors entering the market.
- Respondent
- Elixir Marketing (Super Mart) maintained that it does not perceive Edcon as a competitor, instead competing with Shoprite's non-food divisions and large retail stores such as Game. Super Mart highlighted differences in product offerings, pricing, and customer base, and confirmed that it does not purchase stock from Edcon's upstream manufacturing business.
05
Court’s reasoning
Legal principles
- 01
Competition Act, 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 Commission Guidelines
The relevant market is determined by considering product substitutability, customer profiles, store formats, and pricing differences.
06
Ratio, limits and disposition
Ratio decidendi
The Tribunal found that although Edcon and Super Mart sell similar products, significant differences exist in their customer profiles, store formats, and pricing, indicating that they do not compete in the same relevant product markets. The geographic market was determined to be national, with prices set on a national basis. Edcon is vertically integrated into manufacturing, but Super Mart is not, and there is no overlap in upstream purchasing. The entry of new competitors demonstrates low barriers to entry. The Tribunal concluded that the merger would not substantially lessen or prevent competition, nor did it raise any substantial public interest concerns. Accordingly, the merger was approved without conditions.
Obiter and limits
- Super Mart competes with Shoprite's non-food divisions and large retail stores such as Game, not with Edcon.
- The entry of Fashaf/Vetsacor into direct competition with Super Mart in Johannesburg indicates low barriers to entry.
Court disposition
Merger approved without conditions.
- The merger between Edgars Consolidated Stores Limited and Elixir Marketing (Pty) Ltd is approved without conditions.
- A Merger Clearance Certificate is issued.
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: 70/LM/Sep02
In the large merger between:
Edgars Consolidated Stores Limited
and
Elixir Marketing (Pty) Ltd
_______________
Reasons
Approval
The Competition Tribunal issued a Merger Clearance Certificate on 16 October 2002 approving the merger without conditions. The reasons are set out below.
The merger
The Transaction
Edgars Consolidated Stores (âEdconâ) is purchasing the entire issued share capital in Elixir Marketing (Pty) Ltd.
The parties to the transaction
The primary acquiring firm is Edcon, a public company listed in the JSE. Edcon is not controlled by any firm.
The primary target firm is Elixir Marketing (Pty) Ltd, which trades as Super Mart. There are currently 7 stores situated in Johannesburg, Pretoria, Germiston, Rustenburg, Witbank, Klerksdorp and Vereeniging. Through a joint venture with Laurel Gold, of which Super Mart owns 50.1%, it also offers a full range of clothing.
Rationale for the transaction
According to Edcon it is interested in expanding its existing clothing, footwear and accessories business into product categories that are attracting a greater proportion of consumersâ spend due to the changing needs of South African buyers Edcon will not re-brand the Super Mart Stores.
Evaluating the merger
Relevant market
Edcon trades predominantly in the retailing of clothing, foorwear and accessories throughout South Africa and in neighboring countries. Edconâs major retail formats are Edgars, Jet, Sales House, Red Square, Cuthberts, Smileyâs Wearhouse and ABC, which target the lower-middle to upper-middle income groups.
Super Mart stores are large discount departmental stores aimed at the middle to lower income groups. It sells electrical appliances and sound equipment, house and kitchenware, DIY products, flooring, blankets and linen, jewelry, beauty products and cosmetics, music and video, schoolwear, stationery, toys and luggage. It also offers a full range of clothing for men, ladies, kiddies and infants.
Both Edcon and Super Mart sell the same kind of products, however, the customer profile, the different store formats and the large difference in prices charged for the various product groups indicate that they do not compete in the same relevant product markets, for example:
Apparel
Super Martâs clothes are on average 20% less than that of Edcon and less contemporary.
Schoolwear
Edcon only stocks standard schoolwear whereas Super Mart also stocks a small amount of âunique schoolwearâ. Edconâs schoolwear offerings are priced, on average, between 15% - 60% higher than those sold by Super Mart.
Cosmetics
Edcon stocks âprestigeâ and âfast-movingâ products and its prices are between 96% for hair care, 317% for fragrances and 288% for skincare products, higher than those of Super Mart.
Textiles
Edconâs textile products that overlap with Super Martâs top twenty sellers are approximately 32% more expensive, with bedroom products 119% and bathroom products 255% more expensive.
Stationery
Edgars sells a small amount of greeting cards while Super Mart sells school exercise books, rulers and pens.
Music
One of Super Martâs main products is music tapes and CDâs, which represents 16% of its turnover. Edcon is currently still experimenting with this product and only sells music in four Edgars and eighteen Jet stores.
Moreover, Super Mart indicated to us that it competes with Shopriteâs non-food divisions as well as large retail stores such as Game. It has never perceived Edcon as a competitor. Edcon, inter alia, competes with stores such as Truworths, Foschini and Woolworths.
Prices are set on a national basis and we, therefore, agree with the Commission that the geographic market is national.
Effect on competition
Although Edcon is vertically integrated into the upstream manufacturing market, Super Mart is not, nor does it purchase any of the trading stock from Edconâs upstream manufacturing business.
According to the parties a new competitor, Fashaf/Vetsacor, has recently entered in direct competition with Super Mart in Johannesburg, indicating that barriers to entry into this market are low.
In light of the above we find that competition will not be substantially lessened or prevented as a result of the merger.
Public interest
The transaction does not raise any other substantial public interest grounds.
8 November 2002
N. Manoim Date
Concurring: D. Lewis, U. Bhoola
For the merging parties: Werksmans Attorneys For the Competition Commission: A Coetzee, Legal Services Division
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