The acquiring firm
[9]
Imperial Group is involved in the transportation, warehousing and logistics services markets in
Southern Africa, Europe and United Kingdom. Imperial’s only relevant subsidiary in this transaction is Imperial Auto.
[10]
Imperial Auto sells non-branded motor vehicle spare parts and accessories. These include alternators, coils, hooters, distributors, ignition cables among others.
[11]
Imperial Auto also sells non-branded engine parts which include engine bearings, engine gaskets, engine
valves, oil pumps, pistons and rings, ring gears, flywheels, sleeve kits, timing belts, timing gears, timing chains, timing tensioners,
among others.
[12]
Imperial is also involved in the sale of spare parts for original equipment manufacturers (“OEM’s).
Apart from Imperial Auto, the other divisions of Imperial and the dealerships of Imperial are only involved in OEM’s parts
and are not involved in non-branded parts.
The target firm
[13]
Alert procures, markets and distributes, for the aftermarket, an extensive range of quality internal combustion
engine components for motor vehicles. Alert also sells non-branded motor spare parts which include timing components, filters, clutches,
and lubricants, among others.
[14]
The parties submitted that Alert only concentrates on non-branded engine spare parts and does not deal in
general motor spare parts.
The product market
[15]
There is product overlap in the activities of the merging parties in the sale of non-branded motor vehicle
spare parts and engine parts but as shall be seen below the product overlap is small and does not raise competition concerns. The
Commission submitted that original/branded spare parts do not fall in the same market as generic/non-branded spare parts. In this
regard the Commission relied on the case of Midas Group (Pty) Ltd and General Motors South Africa (Pty) Ltd.In that case the Tribunal concluded that branded and non-branded spare parts are not in the same market. The parties submitted that
original parts are more expensive and target the higher income market as compared to non-branded spare parts which are cheaper and
target the lower income market. The parties further submitted that original/branded spare parts cannot be substituted for generic/non-branded
spare parts as they cater for a different customer base.
[16]
Based on the submissions above, the Commission concluded that the relevant product market is the market for
the distribution of non-branded motor vehicle spare parts.
[17]
At the hearing the parties submitted that there is no supply side substitutability between the distribution
of non-branded engine parts and the distribution of non-branded general spare parts since the former requires a lot more skill not
readily available to a distributor of the latter. However, for the purposes of this transaction the parties accepted the Commission’s definition and analysed the market as a
consolidated market for non-branded general spare parts and non-branded engine parts.
Relevant geographic market
[18]
The Commission defined the geographic market as national because the merging parties and their competitors
have outlets in major cities throughout South Africa.
[19]
It is not necessary for us to make a finding on the relevant product market because on either version competition
does not appear to be compromised by the merger. We accept the definition of the geographic market as national. We will follow the
parties and utilise the consolidated market definition favoured by the Commission.
Effect on competition
[20]
The merging parties and the Commission provided the following market share figures.
Competitor |
Market share (%)
|
[21]
Pre-merger, Imperial has a market share of 1.85% and Alert has a market share of 5.99%. The merged entity
will have a market share of 7.84% in the national market for non-branded motor vehicle spare parts. This market share is small and
does not raise competition concerns in the relevant market. Moreover, the merged entity will continue to face competition from players
such as Midas Group which has a market share of 24.07%, Supergroup with a market share of 18.52%, Gaydon’s with a market share
of 4.44% and Engine Parts with a market share of 4.44%.
Public Interest issues
[22]
There are no public interest issues.
Conclusion
[23]
We conclude that the merger will not lead to a substantial lessening or prevention of competition. Nor are
there public interest issues raised by this transaction. The merger was accordingly approved without conditions.
_______________
30 August 2006
D H Lewis
Date
Presiding Member
Concurring: Y Carrim and M Mokuena
Tribunal Researcher
:
R Kariga
For the merging parties :
Safeera Mayet, TWB Attorneys
For the Commission
:
Edwina Ramohlola and Makgale Mohlala,
Mergers and Acquisitions
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