The Primary Acquiring Firm
7. Massmart is a high volume, low margin retailer of food, liquor, general merchandise, tobacco products and, to a limited extent, cellular products.
8. Masstores consists of the Massdicounters and the Masswarehouse divisions of Massmart – being the divisions within which the Massmart Group
conducts its business.
9. Massdicounters comprises a chain of retail discount stores trading under the “Game” and “Dion” retail brands, which offers a wide range of general merchandise, non-perishable groceries and cellular products to the value-seeking end-consumer.
10. Masswarehouse comprises the following 3 business entities:
♣
Makro – a chain of large wholesale outlets selling a range of food, liquor, tobacco products & general merchandise to commercially affiliated
resellers and upper-income end-consumers;
♣
Builders Warehouse – a chain of warehouse outlets that sells building materials supplies, hardware & related products; and
♣
Tile Warehouse – a chain of warehouse outlets selling ceramic & other tiles and related products. The latter 2 warehouses operate through various
stores located in various localised geographic regions within the Gauteng & the North West provinces.
11. According to the parties, the divisions within the Massmart Group that are involved in the sale of pre-paid and contract airtime
products, mobile telephone handsets & accessories are as follows:
The Masswarehouse Division is involved in the wholesale of pre-paid airtime products, the retail of pre-paid airtime products and
contract airtime products. This division also sells mobile telephone handsets and accessories on both wholesale and retail bases;
Each of the Masscash Division and the Masstrade Division engages in the wholesale of pre-paid airtime products, mobile telephone handsets
and accessories; and
The Massdiscounters Division partakes in the retail of pre-paid airtime products and contract airtime products, and also sells mobile
telephone handsets and accessories on a retail basis.
The Primary Target Firm
12. The business of Cell-Shack is mainly the wholesale of pre-paid and contract airtime products and cellular telephones as well as the accessories.
The relevant product market
13. It is unquestionable that an overlap exists between the activities of the merging parties insofar as it relates to the wholesale
and retail of pre-paid and contract airtime, cellular telephones and accessories.
14. According to the parties, the products sold/provided by the Massmart group of companies, which overlap with those sold/provided
by Cell-Shack, are limited to –
θ
Pre-paid airtime, which embraces starter packs (comprising a sim card, network connection & airtime minutes); and airtime recharge
vouchers;
θ
Contract airtime products, which comprise various categories of airtime contracts;
θ
Various brands & models of cellular telephones;
θ
Accessories, which include car kits, cell pouches, antennas, batteries, car chargers, desk top chargers, replacement chargers and
walk & talk bits; and
θ
Value added services such as contract upgrades.
The relevant geographic market
15. The merged entity’s operations are rendered on a national basis, throughout South
Africa. The Commission pointed out that both parties are active either through their stores (i.e., the acquiring firm) or have distribution
network (i.e., the target firm) nationally. We have also been told that the 2 firms adopt a national pricing policy. In light of
this, the Commission and the parties defined the geographic market as a national one.
We do not have a concern with the parties’ and the Commission’s view in this regard.
Competition Evaluation
16. The merger filing reflected that the merging parties would have a combined post-merger market shares of 11% in the sale of pre-paid
and contract airtime as well as cellular phones and accessories. The table of market share figures provided by the parties revealed
that Massmart enjoys 9%; Cellular Price Buster (5%); the Pre-Paid Company (5%); Crown Cellular (5%); Future Cell 5%; Cell-Shack 2%; and Others 69%. These figures assume that there is a single relevant market comprised of both retail and wholesale sales. Whether or not they should
be considered as separate markets is not a question we have to determine. At the hearing, Mr Richard Millson testified that assuming
there is a separate wholesale market for the above products, then the parties would have a combined post-merger market share of 8%. If this is a true reflection of the post-merger market shares, they are relatively small. The Commission contended that the estimated
market share is below the Commission’s benchmark of 15%, and therefore unlikely to raise competition concerns. The Commission
intimated that the 3 major network providers (i.e., MTN, Vodacom and Cell-C) also sell these products to resellers and individuals
in competition with Massmart Group and Cell-Shack. It is the Commission’s view that these big three pose a competitive constrain
to the merging parties.
17. We are satisfied that the merger does not raise any significant potential vertical concerns that would lessen or prevent competition
in the relevant market substantially.
Conclusion
18. The merger raises no public interest concerns militating against the approval of the transaction. Accordingly, the merger is approved
unconditionally.
_______________ 18 March 2005
Norman Manoim Date
Concurring: Yasmin Carrim and Lawrence Reyburn
For the merging parties : Lee Mendelsohn & Mark Garden (Edward Nathan
Corporate Law Advisors)
For the Commission : Magale Mohlala (Mergers & Acquisitions
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