Unitrans Automotive (Pty) Ltd v Reeds Motor Group (Pty) Ltd (86/LM/Sep12) [2012] ZACT 89 (29 October 2012)
- Citation
- [2012] ZACT 89
- Status
- Judgment
- Jurisdiction
- South Africa
- Court
- Competition Tribunal
- Panel
- Andreas Wessels, Takalani Madima, Medi Mokuena
- Case number
- 86/LM/Sep12
More details
- Court
- Competition Tribunal
- Panel
- Andreas Wessels, Takalani Madima, Medi Mokuena
- Case number
- 86/LM/Sep12
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 Unitrans Automotive and the Reeds Motor Group entities would not substantially prevent or lessen competition in any relevant market. The merged entity's market share would remain below 20% in the Western Cape, and sufficient competition would persist in both the broader and narrower geographic areas. The Tribunal also accepted the parties' submissions and the Commission's findings that no public interest concerns, such as job losses or retrenchments, would arise from the transaction. Accordingly, the merger was approved unconditionally.
Court disposition
Merger approved unconditionally.
Orders
- The proposed merger between Unitrans Automotive (Pty) Ltd and Reeds Motor Group (Pty) Ltd and Reeds Motors Tableview (Pty) Ltd is approved without conditions.
02
Material facts
Parties
Unitrans Automotive (Pty) Ltd
Applicant Counsel: Andile NikaniReeds Motor Group (Pty) Ltd
RespondentReeds Motors Tableview (Pty) Ltd
RespondentAmounts and remedies
- Post Merger Market Share (western Cape): 20
03
Procedural history
Posture
Merger Application / 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 any public interest concerns, including job losses or retrenchments.
Party arguments
- Applicant
- Unitrans Automotive argued that the acquisition would complement its business model and strategy, increasing its presence in the Western Cape. The transaction was motivated by the target firms' shareholders wishing to realise their investments, with the major shareholder nearing retirement and seeking to exit the market. The merging parties submitted that sufficient competition exists in the relevant geographic and product markets, and that no job losses or retrenchments would result from the merger.
- Respondent
- The Competition Commission assessed the merger and found that the merged entity would have a post-merger market share below 20% in the Western Cape across all relevant vehicle categories. The Commission concluded that sufficient competition would remain in both the broader Western Cape and the narrower Cape Town/Bellville area. No public interest concerns, such as job losses, were identified.
05
Court’s reasoning
Legal principles
- 01
Section 12A, 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 can show that technological, efficiency or other pro-competitive gains outweigh the anti-competitive effects.
- 02
Section 12A(3), Competition Act 89 of 1998
The Tribunal must consider public interest factors, including the effect of the merger on employment.
06
Ratio, limits and disposition
Ratio decidendi
The Tribunal found that the proposed merger between Unitrans Automotive and the Reeds Motor Group entities would not substantially prevent or lessen competition in any relevant market. The merged entity's market share would remain below 20% in the Western Cape, and sufficient competition would persist in both the broader and narrower geographic areas. The Tribunal also accepted the parties' submissions and the Commission's findings that no public interest concerns, such as job losses or retrenchments, would arise from the transaction. Accordingly, the merger was approved unconditionally.
Obiter and limits
- The Tribunal noted that the precise definition of the relevant product and geographic markets was not necessary for the determination of this case, as the outcome would remain unchanged.
- The Tribunal acknowledged the merging parties' commitment to black economic empowerment in the retention of shares by the current shareholder of RM Tableview.
Court disposition
Merger approved unconditionally.
- The proposed merger between Unitrans Automotive (Pty) Ltd and Reeds Motor Group (Pty) Ltd and Reeds Motors Tableview (Pty) Ltd is approved without conditions.
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 OF SOUTH AFRICA
Case No: 86/LM/Sep12
015636
In the matter between:
Unitrans Automotive (Pty) Ltd .........................................................Acquiring Firm
And
Reeds Motor Group (Pty) Ltd
Reeds Motors Tableview (Pty) Ltd .................................................................Target Firms
Panel : Andreas Wessels (Presiding Member) Takalani Madima (Tribunal Member) Medi Mokuena (Tribunal Member)
Heard on : 17 October 2012
Order issued on : 17 October 2012
Reasons issued on : 29 October 2012
Reasons for Decision
Approval
On 17 October 2012 the Competition Tribunal (“Tribunal”) approved the merger between Unitrans Automotive (Pty) Ltd (“Unitrans”), the primary acquiring firm, and Reeds Motor Group (Pty) Ltd (“RMG”) and Reeds Motors Tableview (Pty) Ltd (“RM Tableview”), the primary target firms.
The reasons for approving the proposed transaction follow below.
Parties to transaction
The primary acquiring firm is Unitrans, a company incorporated in accordance with the company laws of the Republic of South Africa. Unitrans is a wholly-owned subsidiary of the JD Group Limited.
Of relevance to the competition assessment of this transaction is that Unitrans sells new and pre-owned light commercial and passenger vehicles, parts and accessories and further provides related aftermarket services. It represents a number of international motoring brands such as Toyota/Lexus, General Motors South Africa (“GMSA”), Volkswagen, Audi, Nissan, Renault, Mercedes-Benz, BMW and MAN. It services its customers from a network of 81 dealerships located throughout South Africa. With regards to the geographic area of overlap with the target firms, Unitrans operates seven dealerships in the Western Cape.
The primary target firms are RMG and RM Tableview. Both these firms are private companies incorporated in accordance with the company laws of the Republic of South Africa. RMG is ultimately controlled by Zizap Investments (Pty) Ltd (“Zizap”), which holds 80% of the shares therein. RMG has the following interests: (i) RM Tableview (70%); (ii) Reeds Car Rental (Pty) Ltd (100%); and (iii) Reeds Contract Car Rental (Pty) Ltd (70%).
The target firms sell new and pre-owned light commercial and passenger vehicles, parts, accessories and provide aftermarket services within the GMSA stable, which includes Opel and Chevrolet passenger cars, Opel half ton bakkies, Isuzu LDV’s and Isuzu trucks. RMG also sells a selection of used and demonstration vehicles. It operates three full dealerships (inclusive of workshops) and one boutique dealership that does not have a workshop. These dealerships are located in the Western Cape, namely Reeds N1 City, Tygervalley, Reeds Cape Town and Reeds Tableview (trading as Isuzu Truck Centre).
Proposed transaction and rationale
According to the merging parties the proposed transaction envisages the acquisition of (i) a business which includes motor vehicle
dealerships that include workshops, and a boutique vehicle dealership, conducted by RMG and its subsidiaries, Reeds Car Rental
(Pty) Ltd and Reeds Contract Car Rental (Pty) Ltd (also see paragraph 5 above); and (ii) 70%1 of the total issued shares in RM Tableview.
According to Unitrans the proposed acquisition will compliment the Unitrans’ business model and strategy and afford it more of a presence in the Western Cape.
From the target firms’ perspective, the main motivation for the transaction is to enable the shareholders of Zizap to realise their investments in the businesses. In addition, the major shareholder of Zizap is nearing retirement and therefore wishes to exit the vehicle dealership market.
Relevant markets and impact on competition
There is a horizontal overlap in the activities of the merging parties in respect of the sale of new and pre-owned light commercial and passenger vehicles, as well as the sale of spare parts and the provision of maintenance and repair services. Geographically these activities overlap in the broader Western Cape area and, more specifically, in the Cape Town/Bellville area. There is, however, no need for us in this case to take a definitive view on the exact parameters of the relevant product and geographic markets since this does not alter our ultimate conclusion with regards to the competitive effect of this transaction.
According to the Commission’s assessment the merged entity will have a post-merger market share of below 20% in the Western Cape in respect of each of the following markets: the sale of (i) new light commercial vehicles; (ii) new small passenger cars; (iii) new medium passenger cars; (iv) new multipurpose passenger vehicles; and (v) new sport utility cars.
Furthermore, the Tribunal at the hearing requested the merging parties to submit a list of motor vehicle dealerships in the (narrower) Cape Town/Bellville geographic area. The merging parties subsequently submitted this information2 and we were satisfied that the merged entity, from a narrow geographic market perspective, faces sufficient competition post-merger.
With regards to the sale of pre-owned vehicles and after sale service, the Commission found that no likely competition concerns arise as a result of the proposed transaction given the existence of sufficient competition to the merged entity. We have no reason to doubt this finding.
We therefore conclude that that the proposed transaction is unlikely to substantially prevent or lessen competition in any relevant market.
Public interest
The merging parties confirmed that there will be no job losses or retrenchments as a result of the proposed transaction.3 No other public interest issues arise as a result of this transaction.
CONCLUSION
We approve the proposed merger unconditionally.
____ 29 October 2012
Andreas Wessels DATE
Takalani Madima and Medi Mokuena concurring
Tribunal researcher: Caroline Sserufusa
For the merging parties: Andile Nikani of Fluxmans Attorneys
For the Commission: Zanele Hadebe
1According to the merging parties the balance of the shares in RM Tableview will be retained by the current shareholder, Melanie Jacobs, in keeping with the firm’s black economic empowerment strategy.
2See the merging parties’ additional submission dated 17 October 2012 following the Tribunal’s request.
3See merger record pages 7, 36 and 62.
5
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