Synergy Income Fund Ltd v Certain letting enterprises owned by SA Corporate Real Estate Fund (103/LM/Nov11) [2012] ZACT 39; [2012] 2 CPLR 548 (CT) (16 May 2012)

Synergy Income Fund Ltd v Certain letting enterprises owned by SA Corporate Real Estate Fund (103/LM/Nov11) [2012] ZACT 39; [2012] 2 CPLR 548 (CT) (16 May 2012)

The Tribunal found that there was no horizontal overlap between Synergy and the target properties, as Synergy did not own shopping centres in the same or adjacent nodes. However, vertical concerns arose due to Spar's 20% shareholding in the Fund Manager and the existence of exclusive lease agreements with Spar franchisees, which could foreclose small competitors from retail space and harm public interest. The Tribunal concluded that the conditions proposed by the Commission and accepted by the merging parties—namely, Spar's divestiture from the Fund Manager and the negotiation to remove exclusivity clauses—were adequate and proportional to address these concerns. The merger was therefore...

Citation
[2012] ZACT 39
Parties
Applicant: Synergy Income Fund Ltd; Respondent: SA Corporate Real Estate Fund
Court
Competition Tribunal
Jurisdiction
South Africa
Judgment Date
16 May 2012
Case Number
103/LM/Nov11
Procedural Posture
Merger Application / Conditional Approval
Outcome
The merger is conditionally approved subject to the imposed conditions.
Judges
Andreas Wessels, Medi Mokuena, Taki Madima
Legal Topics
Merger Control, Exclusive Lease Agreements, Public Interest, Foreclosure, Small Business Protection
Competition Law Commercial and Corporate Merger Control Exclusive Lease Agreements Public Interest Foreclosure Small Business Protection

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Parties

Synergy Income Fund Ltd

Applicant

SA Corporate Real Estate Fund

Respondent

Procedural Posture

Merger Application / Conditional Approval

Legal Issues

  1. 1 Does the proposed acquisition raise competition concerns from a horizontal or vertical perspective?
  2. 2 Do exclusive lease agreements between Spar franchisees and landlords foreclose competitors and raise public interest concerns?
  3. 3 Are the conditions imposed by the Tribunal sufficient to address competition and public interest concerns?

Ratio Decidendi

The Tribunal found that there was no horizontal overlap between Synergy and the target properties, as Synergy did not own shopping centres in the same or adjacent nodes. However, vertical concerns arose due to Spar's 20% shareholding in the Fund Manager and the existence of exclusive lease agreements with Spar franchisees, which could foreclose small competitors from retail space and harm public interest. The Tribunal concluded that the conditions proposed by the Commission and accepted by the merging parties—namely, Spar's divestiture from the Fund Manager and the negotiation to remove exclusivity clauses—were adequate and proportional to address these concerns. The merger was therefore...

Court Disposition

The merger is conditionally approved subject to the imposed conditions.

Orders

  • Synergy shall procure that Spar Group Ltd disposes of its 20% shareholding in Capital Land Asset Management (Pty) Ltd, the Fund Manager.
  • Synergy shall negotiate in utmost good faith with Spar and its relevant franchisees to remove exclusivity clauses from lease agreements at the renewal of leases in the relevant shopping centres.