Vukile Property Fund Limited and Others v Protea Glen Shopping Centre (Pty) Limited (LM10APR16) [2016] ZACT 60 (17 September 2016)
- Citation
- [2016] ZACT 60
- Status
- Judgment
- Jurisdiction
- South Africa
- Court
- Competition Tribunal
- Panel
- Norman Manoim, Medi Mokuena, Andiswa Ndoni
- Case number
- LM010Apr16
More details
- Court
- Competition Tribunal
- Panel
- Norman Manoim, Medi Mokuena, Andiswa Ndoni
- Case number
- LM010Apr16
On this page
Professional case brief
Research organized from the available case record
01
Holding and result
The Tribunal found that the proposed transaction would not substantially prevent or lessen competition in the market for rentable retail space within a 15km radius of the Protea Glen Shopping Centre, as the merged entity would hold a modest market share and remain constrained by other competitors. The Tribunal concurred with the Commission's assessment that the co-ownership agreement could create a risk of anti-competitive information exchange between the acquiring firms, who compete outside the target property. To address this, the Tribunal approved the transaction subject to conditions designed to prevent the sharing of competitively sensitive information. No public interest concerns, including employment effects, were identified.
Court disposition
The proposed merger is approved subject to conditions preventing anti-competitive information exchange.
Orders
- The merger between Vukile Property Fund Limited, Diecel Trade & Invest (Pty) Ltd, and Protea Glen Shopping Centre (Pty) Limited is approved subject to the conditions set out in Annexure 'A'.
02
Material facts
Parties
Vukile Property Fund Limited
Applicant Counsel: Andries Le GrangeDiecel Trade & Invest (Pty) Ltd
Applicant Counsel: Andries Le GrangeProtea Glen Shopping Centre (Pty) Limited
RespondentAmounts and remedies
- Combined Post Merger Market Share: 7.2
- Market Share Accretion: 4.1
03
Procedural history
Posture
Merger Application / Approval With Conditions
04
Questions and positions
Legal issues
- 01
Whether the proposed acquisition of joint control over Protea Glen Shopping Centre will substantially prevent or lessen competition in the relevant market.
- 02
Whether the transaction raises any public interest concerns, including employment effects.
- 03
Whether the co-ownership agreement creates a risk of anti-competitive information exchange between the acquiring firms.
Party arguments
- Applicant
- The acquiring firms argued that the transaction involves Vukile acquiring a 60% undivided share and Diecel Trade & Invest acquiring a 40% undivided share in the Protea Glen Shopping Centre, resulting in joint control. They submitted that the transaction would not negatively affect competition or employment, and that the co-ownership agreement would not facilitate anti-competitive information exchange.
- Respondent
- The Competition Commission argued that while there is a horizontal overlap in the provision of rentable retail space within a 15km radius, the merged entity's combined market share would be 7.2% with an accretion of 4.1%, and it would continue to face competition from other shopping centres. The Commission raised concerns about potential information exchange due to the co-ownership agreement but recommended approval subject to conditions preventing such exchange.
05
Court’s reasoning
Legal principles
- 01
Competition Act, No. 89 of 1998
A merger may not be approved if it is likely to substantially prevent or lessen competition in any relevant market unless conditions are imposed to address concerns.
- 02
Competition Tribunal Guidelines on Merger Assessment
Where merging parties compete outside the target property, co-ownership agreements must not facilitate the sharing of competitively sensitive information.
06
Ratio, limits and disposition
Ratio decidendi
The Tribunal found that the proposed transaction would not substantially prevent or lessen competition in the market for rentable retail space within a 15km radius of the Protea Glen Shopping Centre, as the merged entity would hold a modest market share and remain constrained by other competitors. The Tribunal concurred with the Commission's assessment that the co-ownership agreement could create a risk of anti-competitive information exchange between the acquiring firms, who compete outside the target property. To address this, the Tribunal approved the transaction subject to conditions designed to prevent the sharing of competitively sensitive information. No public interest concerns, including employment effects, were identified.
Obiter and limits
- The Tribunal noted that the merging parties confirmed no negative effect on employment would result from the transaction.
- No other public interest concerns were raised by the transaction.
Court disposition
The proposed merger is approved subject to conditions preventing anti-competitive information exchange.
- The merger between Vukile Property Fund Limited, Diecel Trade & Invest (Pty) Ltd, and Protea Glen Shopping Centre (Pty) Limited is approved subject to the conditions set out in Annexure 'A'.
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: LM010Apr16
In the matter between:
VUKILE PROPERTY FUND LIMITED & DICEL TRADE Primary Acquiring Firm
& INVEST (PTY) LTD
and
PROTEA GLEN SHOPPING CENTRE (PTY)
LIMITED
Primary Target Firm
Panel
: Norman Manoim (Presiding Member)
: Medi Mokuena (Tribunal Member)
: Andiswa Ndoni (Tribunal Member)
Heard on
: 20 July 2016
Order Issued on
: 20 July 2016
Reasons Issued on
: 17 August 2016
Reasons for Decision
Approval
[1] On 20 July 2016, the Competition Tribunal ("Tribunal") approved the proposed transaction with conditions between Vukile
Property Fund Limited & Diecel Trade & Invest (Pty) Ltd and Protea Glen Shopping Centre (Pty) Ltd.
[2] The reasons for approving the proposed transaction follow.
Parties to proposed transaction
Primary acquiring firm
[3] The primary acquiring firms are Vukile Property Fund Limited ("Vukile") and Diecel Trade & Invest (Ply) Ltd ("DTI").
[4] Vukile is a public company registered in accordance with the laws of the republic of South Africa. Vukile is listed on the Johannesburg
Stock Exchange ("JSE") and is not controlled by any firm.
[5] Vukile is a property owning company whose property portfolio is diversified across sectors of the rental property market, including
office property, retail property, industrial property, as well as land under development and other speciality properties, such as motor related outlets, hotels and leisure properties throughout South Africa.
[6] DTI is a private company incorporated in accordance with the laws of the Republic of South Africa. DTI is a wholly-owned subsidiary of Operation Network Enterprise Property Holdings (Ply) Ltd ("One Property Holdings"), a company registered in terms of the laws of the Republic of South Africa. DTI, ONE Property Holdings and all companies controlled by ONE Property Holdings will collectively be referred to as ONE Property Holdings Group.
[7] One Property Holdings Group holds a diverse portfolio of properties comprising of rentable retail, special retail, industrial and office properties in the Free State, Gauteng and Mpumalanga Provinces.
[8] Vukile and DTI will hereon collectively be referred to as the Acquiring Firms.
[9] Relevant to the analysis of this transaction are the Acquiring Firms' retail properties that are located in the Gauteng Province.
Primary target firm
[10] The primary target firm is Protea Glen Shopping Centre (Ply) Ltd ("PGSC (Ply") Ltd), in respect of a letting enterprise known as Protea Glen Shopping Centre ("the Target Property"). PGSC (Ply) Ltd is a private
company incorporated in accordance with the laws of the Republic of South Africa[1]. The Target Property does not control any firm.
Proposed transaction and rationale
[11] The Acquiring Firms submits that in terms of a series of inter-related transactions, Vukile intends to acquire 60% undivided
share in the Target Property which will give it control and DTI will acquire 40% undivided share in the Target Property and will exercise control by virtue of veto rights over strategic decisions.
[12] Post-transaction, the Acquiring Firms will have joint control over the Target Property.
Impact on competition
[13] The Commission considered the activities of the merging parties and found that there is a horizontal overlap in the provision of rentable space in comparable centres within a 15km radius
[14] The Commission ("Commission") found that the merged entity will have an estimated combined post-merger market share of 7.2% with an accretion of 4.1% in the provision of rentable space in comparative centres within a 15km radius of the Target Property. Furthermore the Commission found that the merged entity will continue to face competition from several retail shopping centres. The Commission submits that the proposed transaction is unlikely to substantially prevent or lessen competition in the market for provision of retail space in comparative centres within a 15km radius of the Target Property as the merged entity will continue to be constrained by other players.
[15] Upon analysis of the proposed transaction, the Commission identified a competition concern relating to potential information exchange of competitively sensitive information arising from Co-Ownership Agreement between the Acquiring Firms in respect of the Target Property. The Commission found that the Acquiring Firms compete with each other in the provision of rentable retail space in the markets outside the Target Property.
[16] The Agreement provides for the creation of a Management Committee which will be responsible for the budget the overall strategy, the monthly management of accounts, marketing activities maintenance agreement and/or lease agreements entered into with entered into with tenants, contractors and suppliers, as well as discussions relating to future improvements, redevelopments or refurbishments of the Target Property.
[17] In order to allay the abovementioned concern the Commission recommended that the proposed transaction to be approved subject to conditions that would prevent sharing of competitively sensitive information.
[18] We concur with the Commission's conclusion.
Public interest
[19] The merging parties confirmed that the proposed transaction will have no negative effect on employment.
[20] The proposed transaction further raises no other public interest concerns.
Conclusion
[21] In light of the above, we conclude that the proposed transaction is unlikely to substantially prevent or lessen competition in any relevant market. In addition, no public interest issues arise from the proposed transaction. Accordingly, we approve the proposed transaction with conditions attached as Annexure "A".
17 August 2016
DATE
_____
Mr. Norman Manoim
Ms Medi Mokuena and Ms Andiswa Ndoni concurring
Tribunal Researcher: Busisiwe Masina
For the merging parties: Andries Le Grange of Cliffe Dekker Hofmeyr Inc.
For the Commission: Maanda Lambani
[1]
PGSC (Ply) Ltd is controlled as to 67% by Masingitha Property Investments Holdings ("Masingitha"). The remaining 33% is held by Gold Bid Properties (Pty) Ltd (Gold Bid Properties).
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