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COMPETITION TRIBUNAL OF SOUTH AFRICA

 

Case No: LM275Feb18

 

In the matter between:

 

Datacentrix Holdings Limited                                                                   Primary Acquiring Firm

 

And

 

DG Store (SA) (Pty) Ltd                                                                             Primary Target Firm

Panel                                : AW Wessels (Presiding Member)

                 : Medi Mokuena (Tribunal Member)

                 : Andiswa Ndoni (Tribunal Member)

Heard on                          : 1 March 2018

Order Issued on               : 1 March 2018 Reasons

Issued on                         : 23 March 2018

REASONS FOR DECISION

 

Approval

[1]          On 1 March 2018, the Competition Tribunal ("Tribunal") unconditionally approved the proposed transaction involving Datacentrix Holdings Limited ("Datacentrix") and DG Store (SA) (Pty) Ltd ("DG Store"), hereinafter collectively referred to as "the merging parties".

[2]          The reasons for approval of the proposed transaction follow.

 

Primary Acquiring Firm

[3]          The primary acquiring firm is Datacentrix, a public company incorporated in accordance with the laws of South Africa. Datacentrix is a wholly-owned subsidiary of OCT Holdings (Pty) Ltd ("OCT"). Alviva Holdings Limited ("Alviva") holds a majority controlling interest in DCT. No single shareholder exercises control over Alviva. Datacentrix controls a number of entities in South Africa.

[4]          Datacentrix and its subsidiaries operate inter alia as a technology reseller and ICT (information and communication technologies) systems integrator, including the provision of IT infrastructure, services and business solutions.

 

Primary Target Firm

[5]          The primary target firm is OG Store, a private company incorporated in accordance with the laws of South Africa. At the time of the merger filing DG Store did not control any firm. However, it is a condition precedent to the proposed transaction that DG Store will acquire Digital Generation Consulting (Pty) Ltd ("DG Consulting") and Digital Generation Education (Pty) Ltd ("DG Education").

[6]          DG   Store   operates   as   an  ICT   systems   integrator,   providing  inter alia infrastructure and business solutions.

 

Proposed transaction

[7]          Datacentrix intends to acquire 70% of the issued share capital in OG Store and will therefore control DG Store post-merger.

[8]          The activities of the merging parties overlap in the provision of IT systems integration.

[9]          The Competition Commission ("Commission") however defined the relevant product market as the broad market for the provision of all IT products and services. In support of this the Commission indicated that suppliers within the broad IT market generally are not limited to a single category of IT service and tend to supply a range of IT solutions. However, no further details were provided of the firms that the Commission spoke to or what products and services they offer. We find that there is a lack of evidence in this case to support the very broad product market delineation as contended for by the Commission.

[10]      We shall focus our horizontal competition assessment on the area of overlap between the activities of the merging parties, i.e. the provision of IT systems integration products and services. The merging parties will have a post-merger estimated national market share of below 10% in this relevant product market. Furthermore, a number of other firms are active in this market, including Telkom/BCX, Altron/Bytes, EOH and Dimension Data, that can exercise a competitive constraint against the merging parties. Customers also confirmed that they have a number of alternative providers of these services.

[11]       Furthermore, the Commission identified a vertical relationship between the merging parties since Datacentrix supplies hardware and software to DG Store. The Commission however found that post-merger foreclosure as a result of the proposed transaction is unlikely given that there are a number of alternative customers and suppliers of hardware and software products. We concur with this finding.

[12]       We conclude that the proposed transaction is unlikely to substantially prevent or lessen competition in the national market for the provision of IT systems integration and furthermore does not raise any foreclosure concerns.

[13]      The merging parties confirmed that the proposed transaction will not have any negative impact on employment.[1]

[14]       The proposed transaction raises no other public interest concerns.

 

Conclusion

[15]       In light of the above, we conclude that the proposed transaction is unlikely to prevent or lessen competition in any relevant market. In addition, no public interest concerns arise from the proposed transaction. Accordingly, we approve the proposed transaction unconditionally.

 

 

Mr Andreas Wessels

Mrs Medi Mokuena and Ms Andiswa Ndoni concurring

 

  23 March 2018

 

Tribunal Researcher:                Hlumelo Vazi

For the Merging Parties:          H  Muller  of Tugendhaft Wapnick Banchetti and

Partners

For the Commission:               R Molotsi

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