Main Street 87 (Pty) Ltd / Tosaco Commercial Services (Pty) Ltd and Total South Africa (Pty) Ltd / Total Petroleum Renaissance (Pty) Ltd (18/LM/Apr03) [2003] ZACT 26 (15 May 2003)
- Citation
- [2003] ZACT 26
- Status
- Judgment
- Jurisdiction
- South Africa
- Court
- Competition Tribunal
- Panel
- N. Manoim, D Lewis, L. Reyburn
- Case number
- 18/LM/Apr03
More details
- Court
- Competition Tribunal
- Panel
- N. Manoim, D Lewis, L. Reyburn
- Case number
- 18/LM/Apr03
On this page
Professional case brief
Research organized from the available case record
01
Holding and result
The Tribunal found that there is no horizontal overlap between the merging parties, as Tosaco and Main Street 87 are special purpose vehicles with no prior market activity. The vertical relationship through Fuelogic does not result in market foreclosure, given the presence of multiple competitors and the independent operation of Fuelogic and Imperial Group. The transaction fulfils the empowerment requirements set out in the industry charter. The Tribunal agreed with the Commission that the merger would not substantially prevent or lessen competition in either the upstream or downstream markets. Furthermore, the transaction does not raise any significant public interest concerns, as it will not result in job losses or negatively affect other public interest factors. Accordingly, the merger was approved without conditions.
Court disposition
Merger approved without conditions.
Orders
- The merger between Main Street 87 (Pty) Ltd, Tosaco Commercial Services (Pty) Ltd, Total South Africa (Pty) Ltd, and Total Petroleum Renaissance (Pty) Ltd is approved without conditions.
- A Merger Clearance Certificate is issued.
02
Material facts
Parties
Main Street 87 (Pty) Ltd
ApplicantTosaco Commercial Services (Pty) Ltd
ApplicantTotal South Africa (Pty) Ltd
RespondentTotal Petroleum Renaissance (Pty) Ltd
RespondentAmounts and remedies
- Fuelogic Market Share Western Cape: ZAR 3
- Fuelogic Market Share Eastern Cape: ZAR 6
- Fuelogic Market Share Kwazulu Natal: ZAR 2
- Fuelogic Market Share Mpumalanga: ZAR 20
- Fuelogic Market Share Free State: ZAR 12
- Fuelogic Market Share Northwest: ZAR 10
- Fuelogic Market Share Limpopo: ZAR 4
- Total South Africa Share of Fuelogic Operations (pre Shell Contract): ZAR 92
- Sasol Share of Fuelogic Operations (pre Shell Contract): ZAR 8
- Total South Africa Share of Fuelogic Operations (post Shell Contract): ZAR 69
- Shell Share of Fuelogic Operations (post Shell Contract): ZAR 25
- Sasol Share of Fuelogic Operations (post Shell Contract): ZAR 6
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 the relevant markets.
- 02
Whether the transaction raises any significant public interest concerns under the Competition Act.
- 03
Whether the empowerment requirements under the industry charter are fulfilled by the transaction.
Party arguments
- Applicant
- The applicants submitted that the transaction is structured to fulfil the empowerment requirements under the Charter for the South African Petroleum and Liquid Fuels Industry. They argued that there is no horizontal overlap as Tosaco and Main Street 87 are special purpose vehicles with no prior market activity. Regarding vertical relationships, they contended that Fuelogic, associated with Tosaco, operates independently and competes directly with Imperial Group and other logistics providers. The applicants maintained that the transaction would not result in market foreclosure or negatively impact competition, and that no job losses or adverse public interest effects would arise.
- Respondent
- The respondents, including Total South Africa, concurred with the applicants' submissions, emphasizing that the transaction would not alter control in a manner that raises competition concerns. They highlighted that Total South Africa outsources transportation to various market players, ensuring continued competition. The respondents also confirmed that the transaction is in line with the industry's empowerment objectives and would not negatively affect employment or other public interest factors.
05
Court’s reasoning
Legal principles
- 01
Competition Act, 89 of 1998
A merger may not be approved if it is likely to substantially prevent or lessen competition unless the parties can show technological, efficiency, or other pro-competitive gains outweigh the anti-competitive effects.
- 02
Charter for the South African Petroleum and Liquid Fuels Industry
Empowerment transactions in the petroleum and liquid fuels industry must comply with the Charter for Empowering Historically Disadvantaged South Africans.
06
Ratio, limits and disposition
Ratio decidendi
The Tribunal found that there is no horizontal overlap between the merging parties, as Tosaco and Main Street 87 are special purpose vehicles with no prior market activity. The vertical relationship through Fuelogic does not result in market foreclosure, given the presence of multiple competitors and the independent operation of Fuelogic and Imperial Group. The transaction fulfils the empowerment requirements set out in the industry charter. The Tribunal agreed with the Commission that the merger would not substantially prevent or lessen competition in either the upstream or downstream markets. Furthermore, the transaction does not raise any significant public interest concerns, as it will not result in job losses or negatively affect other public interest factors. Accordingly, the merger was approved without conditions.
Obiter and limits
- The Tribunal noted that the petroleum supply chain consists of distinct upstream and downstream markets, and that vertical integration alone does not necessarily raise competition concerns where sufficient competitors exist.
- It was observed that the transaction serves as a model for empowerment compliance within the petroleum industry, aligning with national policy objectives.
Court disposition
Merger approved without conditions.
- The merger between Main Street 87 (Pty) Ltd, Tosaco Commercial Services (Pty) Ltd, Total South Africa (Pty) Ltd, and Total Petroleum Renaissance (Pty) Ltd is approved without conditions.
- A Merger Clearance Certificate is issued.
Source and reliance status
Competition Tribunal
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Judgment reading view
Judgment text
The complete available source text.
Competition Tribunal
Judgment
COMPETITION TRIBUNAL
REPUBLIC OF SOUTH AFRICA
Case No.: 18/LM/Apr03
In the large merger between:
Main Street 87 (Pty) Ltd
Tosaco Commercial Services (Pty) Ltd
and
Total South Africa (Pty) Ltd
Total Petroleum Renaissance (Pty) Ltd
_______________
Reasons for decision
Approval
The Competition Tribunal issued a Merger Clearance Certificate on 30 April 2003 approving the merger without conditions. The reasons are set out below.
The merger transaction
The transaction comprises three stages:
the buyback of shares in Total South Africa (Pty) Ltd (âTotal South Africaâ) from Old Mutual Nominees (Pty) Ltd, which holds 8% and Industrial Partnership Investments Ltd, which holds 34.34%1, the acquisition by Tosaco (Pty) Ltd2 (âTosacoâ), a black empowerment consortium, of 25% of the issued share capital of Total South Africa through its wholly owned subsidiary Main Street 87 (Pty) Ltd, and
the sale by Total Petroleum Renaissance (Pty) Ltd (âTotal Renaissanceâ), of its entire business to Tosaco Commercial Services (Pty) Ltd (âTosaco Servicesâ).
The second leg of the transaction, the acquisition of 25% in Total South Africa by Tosaco, constitutes an acquisition of joint control over Total South Africa through a shareholderâs agreement with significant minority protection rights.
Post the merger Total South Africaâs shareholders will consist of TotalFinaElf holding 50.1%, Remgro holding 24.9% and Tosaco holding 24.9% through its wholly owned subsidiary Main Street 87 (Pty) Ltd.
Reasons for the transaction
Total South Africa is a signatory to âThe Charter for the South African Petroleum and Liquid Fuels Industry on Empowering Historically Disadvantaged South Africans in the Petroleum and Liquid Fuels Industryâ, in which the Fuel Companies undertake to place 25% of the ownership in the Petroleum and Liquid Fuels Industry in the hands of empowerment entities. With this transaction Total South Africa fulfils its empowerment requirements.
Relevant Market
The petroleum supply chain can be divided into upstream and downstream activities. The upstream activities consist of oil exploration, extraction and transportation. The downstream activities consist of refining, marketing and distribution.
For purposes of this transaction three separate markets are identified in the vertical supply chain:
The upstream market is the national market for the manufacture and supply of petroleum products such as diesel, petrol, greases, brake fluids and lubricants. Total South Africa is active in this market. Tosaco will acquire 25% in Total South Africa.
The first downstream market is the market for the marketing and selling of petroleum products. Total Renaissance, a wholly owned subsidiary of Tosaco Services, is active in this market. The geographic market is national. The second downstream market is the regional market for the distribution of the petroleum products to the retail customers. Fuelogic, a cargo transporter, is active in this market.
Effect on Competition
Horizontal relationship
Tosaco is a special purpose vehicle created for the purpose of acquiring 25% of the issued share capital in Total South Africa through its subsidiary Main Street 87. Both Tosaco and Main Steet are special purpose vehicles that have never been active in the market.
There is thus no horizontal overlap in the activities of the merging parties.
Vertical relationship
There is an existing vertical relationship between Calulo, one of the shareholders in Tosaco, through its 50% interest in Fuelogic, a joint venture with Imperial Group.
Fuelogic is a logistics company that distributes petroleum and petroleum products nationwide. Fuelogic owns 80 road tankers, which distributes fuel through 16 depots that operate in Western Cape (where it enjoys a market share of 3%), Eastern Cape (market share 6%), Kwazulu Natal (market share 2%), Mpumalanga (market share 20%), Free State (market share 12%), Northwest (market share 10%) and Limpopo (market share 4%).
Total South Africa currently takes up approximately 92% of Fuelogicâs operations and Sasol takes up the remaining 8%. Due to a new contract that Shell awarded to Fuelogic its customer mix will change to Total South Africa representing 69% of its business, Shell 25% and Sasol 6%.
The parties also aver that Fuelogic and Imperial compete directly in the market place and their brands are independent. They tender seperately and in some cases may be awarded different portions of the same geographic clusters. Other competitors in this industry that services Total South Africa and its competitors3 are Unitrans, Freight Dynamics, Cargo Carriers, Bulk Trans, Tanker Services (Imperial), Lobtrans and various small operators.
Total South Africa also outsources some of its road transportation activities to other players in the market such as Unitrans, Bulktrans, Arrow Bulk and Nonke Petroleum.
From the above it is evident that market foreclosure is unlikely to take place in either the upstream or downstream markets and we, therefore, agree with the Commission that the transactions will not substantially prevent or lessen competition.
Public Interest
The transaction will not result in any job loses or have any negative effect on the remaining public interest factors.
____ 15 May 2003
N. Manoim Date
Concurring: D Lewis and L. Reyburn
1 This part of the transaction is not a merger transaction in terms of the Competition Act because there is no change in control at this stage. TotalFinaElf Group will remain in contol of Total South Africa.
2 Tosacoâs Control Pool will consist of Total South Africa (Pty) Ltd 20,2%, Calulo Investment (Pty) Ltd 17.0%, South Base Investments Holdings (Pty) Ltd 15%, Capital Oil Investments Holdings (Pty) Ltd and the Development Trust 10%. The Control Pool will collectively control Tosaco and Main Street.
3 Engen, Casltex, BP, Sasol and Shell
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