Shoprite Checkers (Pty) Ltd v Main Street 1883 (Pty) (LM151Dec21) [2022] ZACT 13 (15 March 2022)
- Citation
- [2022] ZACT 13
- Status
- Order
- Jurisdiction
- South Africa
- Court
- Competition Tribunal
- Panel
- Enver Daniels, lmraan Valodia, Liberty Mncube
- Case number
- LM151Dec21
More details
- Court
- Competition Tribunal
- Panel
- Enver Daniels, lmraan Valodia, Liberty Mncube
- Case number
- LM151Dec21
On this page
Professional case brief
Research organized from the available case record
01
Holding and result
The Tribunal found that the proposed merger between Shoprite Checkers and Main Street 1883 would not substantially prevent or lessen competition in any relevant market. The vertical overlap between Shoprite's online shopping platform and Main Street's on-demand delivery services is pre-existing, and alternative suppliers are available to competitors. The merger will not result in input or customer foreclosure, as competitors can procure on-demand delivery services from other providers. No third parties raised concerns. The merging parties provided an unequivocal undertaking that no employees would be retrenched, and the historically disadvantaged person shareholding in Main Street would not be diluted. The Tribunal concluded that the merger does not raise public interest concerns and unconditionally approved the transaction.
Court disposition
Merger unconditionally approved.
Orders
- The large merger between Shoprite Checkers (Pty) Ltd and Main Street 1883 (Pty) Ltd is unconditionally approved.
- No conditions are imposed on the approval of the merger.
02
Material facts
Parties
Shoprite Checkers (Pty) Ltd
Applicant Counsel: Werner Rysbergen of DLA Piper AttorneysMain Street 1883 (Pty) Ltd
Respondent Counsel: Burton Phillips, Shawn van der Meulen, Tenisha Burslem-Rotheroe of Webber WenzelAmounts and remedies
- HDP Shareholding in Shoprite Holdings: ZAR 13.45
- HDP Shareholding in Main Street 1883: ZAR 13.65
03
Procedural history
Posture
Large Merger / Merger Approval
04
Questions and positions
Legal issues
- 01
Whether the proposed merger will substantially prevent or lessen competition in any relevant market.
- 02
Whether the merger raises public interest concerns, including employment and spread of ownership.
- 03
Whether the merger will result in input or customer foreclosure in the market for on-demand delivery services.
Party arguments
- Applicant
- The merging parties argued that the transaction would not negatively affect competition, as the vertical overlap between Shoprite's online shopping platform and Main Street's on-demand delivery services already exists. They asserted that alternative suppliers of on-demand delivery services are active in South Africa, and that the merger would not result in foreclosure or access to competitors' sensitive information. They provided an unequivocal undertaking that no employees would be retrenched and that the historically disadvantaged person shareholding in Main Street would not be diluted.
- Respondent
- The Competition Commission found that the vertical overlap is pre-existing and that alternative suppliers of on-demand delivery services are available to retail grocery competitors. The Commission concluded that the merger is unlikely to result in input or customer foreclosure, as the Acquiring Group will continue to procure services from Main Street and competitors have access to other suppliers. No third parties raised concerns, and the merger is unlikely to substantially prevent or lessen competition or raise public interest concerns.
05
Court’s reasoning
Legal principles
- 01
Section 12A(1) of the Competition Act, 89 of 1998
A merger may not be approved if it is likely to substantially prevent or lessen competition in any relevant market, unless the parties show technological, efficiency or other pro-competitive gains outweigh the anti-competitive effects.
- 02
Section 12A(3) of the Competition Act, 89 of 1998
The Tribunal must consider public interest factors, including the effect on employment and the spread of ownership, when assessing a merger.
06
Ratio, limits and disposition
Ratio decidendi
The Tribunal found that the proposed merger between Shoprite Checkers and Main Street 1883 would not substantially prevent or lessen competition in any relevant market. The vertical overlap between Shoprite's online shopping platform and Main Street's on-demand delivery services is pre-existing, and alternative suppliers are available to competitors. The merger will not result in input or customer foreclosure, as competitors can procure on-demand delivery services from other providers. No third parties raised concerns. The merging parties provided an unequivocal undertaking that no employees would be retrenched, and the historically disadvantaged person shareholding in Main Street would not be diluted. The Tribunal concluded that the merger does not raise public interest concerns and unconditionally approved the transaction.
Obiter and limits
- The Tribunal noted the importance of promoting a greater spread of ownership by historically disadvantaged persons and workers, as required by section 12A(3)(e) of the Competition Act.
- The Tribunal observed that the presence of alternative suppliers of on-demand delivery services in South Africa mitigates any potential foreclosure concerns.
Court disposition
Merger unconditionally approved.
- The large merger between Shoprite Checkers (Pty) Ltd and Main Street 1883 (Pty) Ltd is unconditionally approved.
- No conditions are imposed on the approval of the merger.
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
Order
COMPETITION
TRIBUNAL OF SOUTH AFRICA
Case no: LM151Dec21
In the large merger between:
Shoprite Checkers (Pty) Ltd (Primary Acquiring Firm)
And
Main Street 1883 (Pty) (Primary Target Firm)
Heard on: 15 March 2022
Order Issued on: 15 March 2022
REASONS
FOR DECISION
1. On 15 March 2022, the Competition Tribunal unconditionally approved
the large merger between Shoprite Checkers (Pty) Ltd ("Shoprite") and Main Street 1883 (Pty) Ltd ("Main Street").
2. The proposed transaction involves Shoprite's acquisition of [….][1] of the issued share capital in Main Street. Post-merger, Shoprite and the RTT Group (Pty) Ltd ("RTT") will exercise joint control over Main Street.
3. The primary acquiring firm, Shoprite, is controlled by Shoprite Holdings Limited ("Shoprite Holdings"}, a public company listed on the Johannesburg Stock Exchange1. Shoprite controls various firms, including Computicket (Pty) Ltd and Medirite (Pty) Ltd.[2]
4. The Acquiring Group retails and distributes a wide range of fast-moving consumer goods ("FMCGs"), through its various stores and supermarkets located across South Africa.[3] The Acquiring Group's operating divisions include Shoprite, Checkers, Checkers Hyper, Shoprite Usave, and OK Power Express, amongst others. Of relevance to the proposed merger is the Acquiring Group's Checkers division, which offers an e-commerce delivery platform, Checkers Sixty60 ("Sixty60"}, which is available across South Africa.[4]
5. The primary target firm, Main Street is wholly owned by RTT, which is a subsidiary of RTT Holdings (Pty) Ltd ("RTT Holdings").
6. Main Street provides on-demand delivery ("ODD") services[5] (i.e., last mile logistics services) to online shopping platforms such as the Acquiring Group's Sixty60 platform and other merchants.
Main Street only renders ODD services but does not constitute an online shopping platform.
Competition assessment
7. While assessing the merger, the Competition Commission (the "Commission") found that the proposed merger raises a vertical overlap, as the Acquiring Group operates an online shopping platform, while Main Street provides ODD services. However, such vertical overlap is pre-existing as Main Street provides the Acquiring Group with ODD services in South Africa.
8. The Commission did not take a definite view on the relevant product market. However, it assessed the effects of the proposed merger in the following markets:
8.1. The upstream market for the national supply of ODD services; and
8.2. The downstream market for the national procurement of ODD services.
9. In assessing input foreclosure, the Commission found that pre-merger, the Acquiring Group procured ODD services from the Target Firm [….] and this arrangement will continue post-merger. In any event, the Commission's investigation revealed that the Acquiring Group's retail grocery competitors such as Pick 'n Pay, Woolworths and Spar all either render ODD services for their online shopping platforms or outsource same from third parties as there are alternative suppliers of ODD services that are active in South Africa, such as Quench, OneCart, Orderin, Zulzi, and Carter. The Commission was of the view that the [….] contemplated
post-merger to result in foreclosure given the presence of alternatives. Additionally, the […] proposed post-merger is likely to ensure that the Acquiring Group cannot access competitively sensitive information of competitors that may also procure ODD services from the Target Firm.
10. When assessing customer foreclosure, the Commission found that pre-merger, the Acquiring Group procures all of its ODD service requirements for its Sixty60 platform from the Target Firm. Considering the above, the Commission found that the merger is unlikely to change anything as, post-merger, the Acquiring Group will continue to predominately procure ODD services from the Target Firm.
11. No third parties raised concerns with the proposed merger.
12. On the basis of the above, the Commission found that the proposed transaction is unlikely to substantially prevent or lessen competition in any relevant market.
Public interest
Employment
13. Regarding employment, the merger parties have provided an unequivocal undertaking that the proposed transaction will not have a negative effect on employment and, in particular, that no employees will be retrenched because of the proposed transaction.
Spread of Ownership
14. Regarding the spread of ownership, it is noteworthy that the Acquiring Group has an historically disadvantaged person ("HOP") shareholding of 13.45% and Main Street has a HOP shareholding of 13.65%. The proposed merger will not result in the dilution of the HOP shareholding in Main Street as the Acquiring Group is acquiring joint control, which will not affect Main Street's current HOP shareholding.
15. The Commission was of the view that section 12A(3)(e) imposes an obligation on the merging parties to promote a greater spread of ownership, by increasing the levels of ownership by HDPs and workers.[….]
Conclusion
16. For the above reasons, we conclude that the merger is unlikely to result in a substantial prevention or lessening of competition or raise public interest concerns.
Signed by:Enver Daniels
Signed at:2022-03-15 11:40:21 +02:00
Reason:Witnessing Enver Daniels
15 March 2022
Mr Enver Daniels
Professor lmraan Valodia and Professor Liberty Mncube
concurring
Tribunal Case Managers: Leila Raffee and Camilla Mathonsi
For the Merging Parties: Werner Rysbergen of DLA Piper Attorneys
on behalf of Shoprite Checkers; Burton Phillips,
Shawn van der Meulen, Tenisha Burslem-Rotheroe of Webber Wenzel on behalf of Main Street
For the Commission:
Nonhlanhla Msiza and Wiri Gumbie
[1] The shares of Shoprite Holdings are widely held and are not controlled by any firm.
[2] All firms directly and indirectly controlled by Shoprite Holdings are referred to as the "Acquiring Group."
[3] FMCG products include groceries, food, household, health, beauty, lifestyle consumer products, clothing, home ware, textiles, and cellular telephone products
[4] Sixty60 enables customers to order groceries from Checkers stores by downloading the Sixty60 application onto their smartphone.
[5] ODD services refer to the collection of an order placed by a customer on a retailer I merchant's online shopping platform (such
as the Acquiring Group's Sixty60 platform), and the delivery of the customer's order to the customer, within a short duration to time.
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