(c)
the shares in Comshipco Schiffahrtsagentur GmbH (“Compshipco”) from Weesperkarspel Exploitatiemaatskappij B.V. Haarlem.
The three target firms referred to above are all involved in operations relating to the transportation of cargo worldwide. The operations
of IVS and Compshipco relate to dry-bulk cargo and entail chartering vessels and finding cargo to be carried by these vessels, or
alternatively contracting for the transportation of cargo and then finding a vessel to carry the cargo.
IVS Australia is a marketing agent for IVS and Comshipco.
The acquiring firm (Quadrant) also provides services relating to the worldwide transportation of cargoes, but its operations exclude
dry-bulk cargo.
3.
Evaluating the merger
In assessing a merger in terms of section 16 of the Competition Act, the Tribunal must consider –
(a)
whether or not the merger is likely to substantially prevent or lessen competition; and
(b)
whether the merger can or cannot be justified on substantial public interest grounds by considering the effect of the merger on each
of the following: a particular industrial sector or region; employment; the ability of small businesses or firms controlled by historically
disadvantaged persons, to become competitive; and the ability of national industries to compete in international markets.
To answer the question whether the merger is likely to substantially prevent or lessen competition, the Tribunal must, in terms of
Section 16(2), assess the strength of competition in the relevant market and the probability that the firms in the market after the merger will behave competitively or co-operatively.
The Relevant Market
As the acquiring firm, Quadrant, is not at all involved in dry-bulk cargo transportation, there is no direct product overlap between
it and the target firms. There are, however, two subsidiaries within the Grincor Group, of which Quadrant is a part, which do participate
in the dry-bulk cargo market. They are Unicorn Lines (Pty) Ltd (the Unicorn Tankers Division) and Griffin Shipping Holdings Ltd.
The former charters dry bulk vessels to transport salt from Walvis Bay to Durban, while the latter owns two dry-bulk vessels, which
it tramps on the world market.
Taking this indirect overlap as the starting point in defining the relevant product market in this case, it appears that the relevant
product market is the provision of transportation services in respect of dry-bulk cargo. The target firms and, indirectly and to
a limited extent, the acquiring firm participate in this market by mixing and matching chartered dry-bulk vessel capacities and cargo,
which they contract to transport for third parties. The market for the service that they provide appears to be highly ‘contestable’
and susceptible to supply-side substitution; not only can vessel owners themselves contract with third parties directly, but capacity
is easily transferred into this market by firms operating in other markets. For instance, firms that provide similar services in
respect of other types of cargo could easily switch to dry-bulk cargo.
However, the main source of substitution in respect of this service is geographical. Firms providing services on particular routes
can easily, and without significant delay, switch to other routes. We, therefore, conclude that the relevant geographic market is
very wide – it is probably a world-wide market.
Impact on competition
Given our conclusion regarding the ambit of the relevant geographic market, the impact of this merger on competition is miniscule.
The merged entity a tiny player in this large geographic market and barriers to entry into the market are rather low. We accordingly
found that the merged firm would not have any market power and would therefore not be in a position to behave anti-competitively.
Public interest considerations
None of the public interest considerations listed in section 16(3) appear to be relevant to this merger.
___________________________
________________
D.H. Lewis
Date
Presiding Member
Concurring: D.R. Terblanche and N.M. Manoim
SAFLII:
|
Terms of Use
|
Feedback
URL: http://www.saflii.org/za/cases/ZACT/1999/3.html
.RTF of original document