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Latest Decisions by The Competition Commission

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Latest Decisions by The Competition Commission

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2nd September 2021

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/ MEDIA STATEMENT / The content on this page is not written by Polity.org.za, but is supplied by third parties. This content does not constitute news reporting by Polity.org.za.

1.1 Dis-Chem Pharmacies Limited (Dis-Chem) / Pure Pharmacy Holdings (Pty) Ltd (PPH)

The Commission has recommended that the Competition Tribunal (Tribunal) approve the proposed transaction whereby Dis-Chem intends to acquire the entire issued share capital of PPH, with conditions.

Dis-Chem was established in 1978. It began its activities as a small pharmacy in Mondeor, South of Johannesburg. Dis-Chem has since grown into a national chain of 193 Dischem pharmacy stores located in the major metropolitan areas and suburbs in South Africa. Through its various subsidiaries, Dis-Chem is active along the pharmaceutical supply chain ranging from wholesale distribution (including logistics) to the operation of retail pharmacies (including as franchisor for pharmacies under The Local Choice brand). Dis-Chem is a wholesale distributor of scheduled and unscheduled pharmaceutical products as well as front shop products. Dis-Chem pharmacy stores are licensed to provide scheduled pharmaceutical products, unscheduled pharmaceutical products, and front shop goods, as well as primary healthcare services through its clinics, which are located in most of its pharmacy stores. Dis-Chem also operates a courier pharmacy service, which dispenses and delivers over-the counter drugs, prescription medicine and front shop items after a customer places an order on its website.

PPH is a healthcare and pharmacy group. PPH was, until recently, active in the wholesale distribution of pharmaceutical scheduled and unscheduled pharmaceutical products as well as front shop products. Through its wholly owned subsidiary, Pure Pharmacy Retail Proprietary Limited (PPR), PPH holds the retail pharmacy licenses for its 50 pharmacy stores branded “Medicare” and is therefore active in the retail of scheduled and unscheduled pharmaceutical products as well as front shop products. These stores are located in Gauteng, Limpopo, Mpumalanga, and the Western Cape. Through its wholly owned subsidiary Kok and Golach (Pty) Ltd (K&G), PPH holds a wholesale license that relates to its now discontinued wholesale distribution activities which were carried out under PPH’s Pharmasave brand (Pharmasave). Nearly all of PPH’s wholesale distribution activities (through Pharmasave) were dedicated to its Medicare pharmacies. In addition, PPH owns and operates a video-telemedicine service called Healthforce which enhances the offering of its primary healthcare facilities (clinics) by allowing nurses to provide better clinical care with the help of a team of remote General Practitioners (GPs) who consult via video teleconference calls.

In its assessment of this merger, the Commission evaluated trends in the development of the retail pharmacy industry over the past five years. The Commission found that in the period 2017 to 2021, the number of Dis-Chem pharmacies increased by 76% whereas those of Clicks increased by 24%. The Commission however noted that the number of independent retail pharmacies reduced over the same period by 7%. The Commission is therefore concerned that the market seems to be evolving towards a larger share of the market occupied by corporate pharmacy groups with a diminishing market share for independently owned retail pharmacies.

The Commission is of the view that the proposed transaction further reduces the number of independent pharmacy groups that play an important role for competition, innovation and economic participation in the retail pharmacy market. The Commission however also notes that, based on the facts of this particular case, the merger will not result in a substantial lessening or prevention of competition.

Nonetheless, as a result of concerns raised by market participants regarding access to Healthforce, PPH’s telemedicine service, the merging parties and the Commission have agreed to conditions which will allow Healthforce to continue to be available to third parties post-merger. The conditions will also ensure that there is interoperability between Healthforce and third-party retail pharmacies.

From a public interest perspective, the Commission notes that the proposed transaction is likely to result in duplications that may affect a certain number of employees. In addition, a limited number of employees may be retrenched for operational reasons. Considering this, the Commission imposed a condition limiting the number of potential retrenchments to a maximum of 37 employees. In addition, the merging parties have undertaken to offer the affected employees first preference for future employment should there be any vacancies within the merged entity in the future for which they qualify.

In addition to the above, Dis-Chem has also agreed to increase its procurement from Small Medium and Micro Enterprises and businesses owned by Historically Disadvantaged Persons by 50% over the next 5 years. The merging parties have also agreed to offer various bursaries and internships over the next 5 years.

1.2 Altron TMT SA Group (Proprietary) Limited (Altron TMT) / Law Trusted Third Party Services Proprietary Ltd (LawTrust)

The Commission has recommended that the Tribunal approve the proposed transaction whereby Altron TMT intends to acquire LawTrust, with conditions.

Altron TMT is ultimately controlled by Allied Electronics Corporation Limited (Altron), a firm listed on the JSE. Altron, as well as all the firms they directly and indirectly control are referred to as the Altron Group or the Acquiring Firm.

The Acquiring Group is invested in telecommunications, multi-media, and information technology. Altron Group has several strategic partnerships with leading international technology companies which gives it access to leading technology capabilities and products from across the world. Relevant for purposes of this current transaction are the Acquiring Group’s information technology (“IT”) security services. The Acquiring Group provides IT security services through the following divisions, Cybertech, Altron Systems Integration and Altron Security.

Cybertech provides the following products and services: Managed security services, Advisory services, Cryptographic services, Network monitoring service, Secure gateway management, Database activity monitoring, Secure hosting services, Certificate management and automation and distribution of hardware security modules.

Altron Systems Integration is an end-to-end Information and Communication Technology (“ICT”) service provider of consulting, implementation, and outsourcing services to key industries such as Financial Services, Telecommunications, Media & Entertainment, Public Sector, Retail, Mining & Manufacturing, Travel & Transport, and Energy & Utilities. It also provides end-to-end biometric identity and access management hardware, software, and consulting solutions. Altron Systems Integration provides several biometric devices and tokens such as fingerprint scanners, iris binocular and monocular, cameras for face verification, mobile biometric enrolment and verification devices, smart cards and smart card readers, card printers, secure document verification devices, electronic signature pads, and the design and manufacture of mobile enrolment kits. Altron Systems Integration also provides several biometric solutions to its customers.

Altron Security (formally Ubusha Technologies Proprietary Limited) is an identity security specialist which delivers holistic security solutions to leading mid-tier and enterprise companies. Altron Security Services focuses on identity management, identity governance solutions and consulting. Altron Security's services are divided into three main categories, Digital Transformation Solutions, Zero Trust Security Solutions and Data Protection.

LawTrust is a specialist cyber security solutions provider that focuses on establishing positive identity, ensuring authenticity, and protecting privacy. LawTrust's solutions include SSL certificates and certificate management systems, FIDO certified strong authentication, digital signature and approval solutions, managed Public Key Infrastructure (“PKI”), encryption solutions for database and cloud systems, biometric enrolment and matching systems and insider threat prevention with the electronic DNA platform.

The Commission investigation focused on vertical concerns raised by several third parties. In this regard, the Commission found that LawTrust operates in an upstream market for the supply of PKI and digital certificates. The downstream market is comprised of companies supplying signature solutions to end customers. The Commission is of the view that the merged entity will not have the ability to foreclose its downstream rivals from accessing PKI and (standard) digital certificates, however where Advanced Electronic Signature certificates are concerned, the merged entity does have the ability to foreclose its downstream rivals, given that LawTrust effectively has monopoly position in Advanced Electronic Signature certificates in South Africa. The Commission also found from strategy documents that the merged entity does have the incentives to foreclose rivals.

Ultimately, foreclosing downstream competitors from accessing Advanced Electronic Signature certificates will likely have a detrimental effect on the downstream market for supplying digital signature solutions. Much of the business in this market is tender-based. The Commission notes that such foreclosure may prevent downstream rivals from competing effectively for tenders from customers requiring both Advanced Electronic Signatures and ordinary digital signatures in a single tender. However, the Commission notes that the foreclosure may be temporary, as the South African Accreditation Authority (SAAA) intends to accredit another certificate authority who can provide Advanced Electronic Signature certificates in the near future.

There were also potential information exchange concerns arising from the joint venture, eDNA, in which LawTrust and Datacentrix are involved.

In order to address the vertical concerns arising from the proposed merger, the merging parties have accepted conditions to ensure supply of Advanced Electronic Certificates to anyone requiring such access in South Africa, as well as a pricing condition. The pricing condition effectively requires LawTrust to revert back to LawTrust’s Advanced Electronic Signature certificates prices which were applicable in 2019 (being a time at which they faced competition in the privision of Advanced Electronic Signature certificates) and to limit the price increases to a yearly increase linked to the Consumer Price Index. LawTrust is required to publish these prices on its website. These supply and pricing conditions will terminate after 3 years or the successful accreditation of another party for Advanced Electronic Signature certificates, whichever occurs first.

To address the potential coordinated effects concerns arising from Altron Group and DataCentrix jointly controlling eDNA, the parties have accepted a condition not to appoint directors to the joint venture who are involved in the operations of Altron Group business; and to provide non-disclosure undertakings preventing the sharing of competitively sensitive information between the joint venture and Altron Group.

There are no public interest concerns arising from the merger.

1.3 Growthpoint Properties Limited (Growthpoint) / Joburg Stay Proprietary Limited (Joburg Stay)

The Commission has recommended that the Tribunal approve the proposed transaction whereby Growthpoint intends to acquire Joburg Stay from Feenstra Group Proprietary Limited (Feenstra Group), without conditions.

Most of Growthpoint's properties are located in Gauteng, the Western Cape, KwaZulu-Natal and the Eastern Cape provinces. Growthpoint does not hold any student accommodation properties in its current portfolio. Growthpoint also operates a funds management business.

Joburg Stay currently owns an undivided share in the following student accommodation properties together with the rental enterprises conducted thereon: Kingsway Place; The Richmond; and Richmond Central.

The Commission found that the proposed transaction is unlikely to result in a substantial prevention or lessening of competition in any relevant market. The Commission further found that the proposed transaction does not raise any public interest concerns.

1.4 LeapServe Renewable Investments (Pty) Ltd (LeapServe) / Solar Saver SA (Pty) Ltd (Solar Saver)

The Commission has unconditionally approved the proposed merger whereby LeapServe intends to acquire Solar Saver, without conditions.

LeapServe has been incorporated by the Acquiring Group for the purposes of investing in the renewable energy sector, in which it is a new entrant. The Acquiring Group’s activities include the provision of facilities management services.

Solar Saver’s business activities include the installation, financing and management of solar photovoltaic systems with a generating capacity not exceeding 10-megawatts. These services are supplied to commercial and industrial customers in South Africa.

The Commission found that the proposed transaction is unlikely to result in a substantial prevention or lessening of competition in any relevant market or raise any public interest concerns.

1.5 AL-KO Vehicle Technology Group GmbH (AL-KO) / Brink International B.V. (Brink)

The Commission has unconditionally approved the proposed merger whereby AL-KO intends to acquire Brink.

AL-KO will ultimately be controlled by Brookfield Asset Management Inc. (“Brookfield”). Brookfield is an asset management company that owns and operates assets through the firms it controls in South Africa. The activities of the firms controlled by Brookfield in South Africa include renewable power, infrastructure private equity and public securities.

Brink is controlled by Coöperatief H2 Equity Partners Fund IV Holding W.A. (“H2 Equity Partners Fund IV”), a corporate with statutory liability incorporated under the laws of the Netherlands with its registered seat in Amsterdam, the Netherlands. None of the other firms that H2 Equity Partners Fund IV controls have any activities in South Africa. Brink’s operations in South Africa are conducted through a joint venture, Brink Towing Systems (Pty) Ltd (“BTS”).

Brink and its subsidiaries are active in the field of developing, manufacturing and selling a wide range of fixed, detachable and retractable towbar systems; bike carrier solutions and related wiring kits for towing and carrying solutions. BTS supplies flange ball bearing detachable towbars, wiring kits for towing and carrying solutions and other components.

The Commission found that the proposed transaction is unlikely to result in a substantial prevention or lessening of competition in any relevant markets. The Commission further found that the proposed transaction does not raise any public interest concerns.

1.6 SK Capital Investment V, Ltd (SKCI V) / The Pigment business of Clariant AG and Heubach Group

The Commission has unconditionally approved the proposed merger whereby SKCI V intends to acquire the pigment business of Clariant AG and Heubach Group (collectively, the “Target Businesses”).

SKCP is a private investment firm focused on specialty materials, chemicals and pharmaceuticals sectors. Affiliates of SKCP control numerous firms worldwide and in South Africa. The relevant firms for purposes of the proposed transaction in South Africa are Venator Africa (a subsidiary of Venator) and Archroma.

Through Venator Africa, Venator supplies titanium dioxide, functional additives and colour pigments products in South Africa. Archroma is a manufacturer of dyes, pigment preparations, emulsions and surface-active chemicals used in the textile, paper, coatings, construction and adhesive industries. In 2020, Archroma supplied small quantities of pigment preparations in South Africa, as well as dyes.

Neptune, one of the Target Businesses, is a pigments business that mainly supplies organic pigments, pigment preparations, and dyes. In some countries Neptune also re-sells limited amounts of inorganic pigments, which it does not produce itself but sources on the open market. Neptune’s products are used in a number of areas including packaging, electronics, consumer goods, textiles, transportation, building and construction, and agriculture. In South Africa, Neptune, through Clariant Southern Africa, manufactures pigment preparations and sells organic pigments, pigment preparations and dyes.

The Heubach Group, the other Target Business, is a manufacturer of corrosion protection pigments as well as organic and inorganic colour pigments, hybrid pigments and pigment preparations for use in the paint, plastics, ink, and building industries, as well as for other applications. The Heubach Group, a family-owned business, is headquartered in Austria and has production facilities in Germany, the United States of America and India. In South Africa, the Heubach Group is mainly active through an independent third-party local distributor, Protea Chemicals Proprietary Limited, a subsidiary of Omnia Proprietary Limited.

1.7 Afrimat Manganese (Pty) Ltd (Afrimat Manganese) / Certain assets, including a manganese mining right, immovable property, equipment, applications, records, and contracts in respect of the Gravenhage manganese project of the Thabazimbi Joint Venture (“TJV”) (“the Target Assets”)

The Commission has unconditionally approved the proposed merger whereby Afrimat Manganese intends to acquire the Target Assets from TJV. Afrimat Manganese is wholly owned by Afrimat Bulk Commodities (Pty) Ltd (“Afrimat Bulk Commodities”), which is in turn wholly owned by Afrimat Limited (“Afrimat”), a public company listed on the Johannesburg Stock Exchange. Afrimat is not controlled by any single shareholder.

Afrimat and all the firms it controls directly or indirectly are collectively referred to as the “Acquiring Group” and/or the “Afrimat Group”.

The Acquiring Group is involved in the following activities: Bulk Commodities which includes (i) the supply of iron ore in Kuruman, Northern Cape; (ii) Industrial minerals, which involves the supply of dolomite, metallurgical dolomite; metallurgical calcite, animal hygiene lime, agricultural lime, silica and burnt lime and other limestone products to various users of industrial minerals; (iii) Construction material which involves the supply of Bricks and blocks, other precast products, ready mix cement; aggregates including clinker; and (iv) Contracting services, including a full package of drilling and blasting solutions for the construction and the mining industries. Almost all of the drilling and blasting services provided by the Acquiring Group’s contracting services division are provided internally, in respect of the Afrimat Group’s own mining activities.

The Target Assets comprise of a manganese mining right, immovable property, mining equipment, applications, records and contracts.

1.8 Sisonke Health Medical Scheme (SHMS) / Lonmin Medical Scheme (LMS)

The Commission has unconditionally approved the proposed merger whereby SHMS intends to acquire LMS.

SHMS operates as a restricted membership medical scheme for employees and former employees of Sibanye-Stillwater and Gold Fields.

LMS operates as a restricted membership medical scheme for employees and former employees of Lonmin Plc.

1.9 Morpho Investment Company One (Pty) Ltd (Morpho 1) Morpho Investment Company Two (Pty) Ltd (Morpho 2) / AFISWITCH (Pty) Ltd (Afiswitch)

The Commission has unconditionally approved the proposed merger whereby Morpho 1 and Morpho 2 intend to acquire Afiswitch.

Morpho 1 is controlled by IDEMIA Holdings South Africa (Pty) Ltd (IDEMIA SA). IDEMIA SA is controlled by IDEMIA Identity & Security France SAS (IDEMIA France), a company incorporated in France. Morpho 2 is jointly controlled by IDEMIA SA and Morpho Black Owners Trust (“Morpho Trust”). Morpho 1, Morpho 2, IDEMIA SA, IDEMIA France, Morpho Trust, and all the firms that they control shall be referred to as the Acquiring Group.

The Acquiring Group through IDEMIA SA provides (i) identity-related security services, (ii) biometric identification products and (iii) software to private companies and governments, (iv) SIM Cards, (v) bank cards and (vi) Bank personalization services.

Mobile Operators: In South Africa, IDEMIA SA provides mobile operators (such as MTN South Africa and Vodacom South Africa) with SIM cards for mobile phones and connected devices. IDEMIA SA also provides SIM card personalization services.

Financial Institutions: In terms of financial institutions IDEMIA SA provides bank cards and bank card personalization services.

Public Security & Identity (“PSI”): Acquiring Group provides identity related security (i) hardware, (ii) software and (iii) services to government agencies; and

Biometric Devices and Automated (“BDA”): BDA comprises of the supply of biometrics hardware and software such as access control devices, time & attendance and authentication devices; finger-print access control devices, facial recognition access control devices and biometric tablets.

IDEMIA SA provides identity-related security services and sells facial recognition and other biometric identification products and software to governments (particularly, law enforcement agencies such as the South African Police Services (“SAPS”)) and to a limited extent, private companies. IDEMIA SA provides Automated Biometric Identification System (ABIS) services for the SAPS, for the Department of Home Affairs (DHA) and for Cooperative Governance and Traditional Affairs. IDEMIA SA also provides digital source analysis for law enforcement investigation purposes (such as Augmented Vision), road traffic systems, passenger flow streamlining and border control systems.

Afiswitch is active in the provision of information authentication services, which includes the provision of biometric services on behalf of the SAPS. That is, Afiswitch performs fingerprint clearances against the SAPS fingerprint database of all known convicted and/or case-awaiting trial persons to determine the previous conviction and/or case-awaiting trial status of an applicant in relation to the following: (i) Any pre-employment enquiry; (ii) Corporate enquiry; (iii) Statutory requirement; (iv) Application for a Professional Driving Permit; (v) Registration with the Private Security Industry Regulatory Authority (PSIRA); (vi) Application for visas with VFS Visa Processing SA (Pty) Ltd (VFS); and (vii) Registration with the South African Council for Educators (SACE). To provide these services, Afiswitch uses software applications to integrate a network of electronic fingerprint scanners and flatbed scanners (which capture digital fingerprints) into the SAPS database.

1.10 Isipho Capital Motors (Pty) Ltd t/a Bates Motors (ICM) / Integrated Auto Services (Pty) Ltd t/a Isuzu Truck World (ITW)

The Commission has unconditionally approved the proposed merger whereby ICM intends to acquire ITW.

ICM is controlled by Isipho Capital Holdings (Pty) Ltd (ICH). ICH controls the following firms: (i) Kholeka Engineering (Pty) Ltd; (ii) Smith Capital Equipment (Pty) Ltd; (iii) Mr. Coach (Pty) Ltd; (iv) Anderson and Kerr Engineering (Pty) Ltd; (v) Craw Engineering Supplies (Pty) Ltd; (vi) Martiq 688 (Pty) Ltd; Isipho Capital Fleet (Pty) Ltd; (vii) Isipho Capital Engineering (Pty) Ltd and (viii) Isipho Capital Industries (Pty) Ltd. ICM does not directly or indirectly control any firms. ICH and all its subsidiaries including ICM will collectively be referred to as the “Acquiring Group.”

The Acquiring Group holds a number of investments within the manufacturing, engineering and automotive industries. The only entity within the Acquiring Group that provides activities that are relevant to the proposed transaction is ICM. ICM, trading as Bates Motors, is vehicle dealership involved in the sale of Isuzu light, medium and heavy commercial vehicles as well as Isuzu passenger, Opel passenger and used vehicles. ICM is also involved in the repair and service of these vehicles, as well as providing parts and accessories for such vehicles. The Acquiring Group dealership is based near Shelly Beach on the South Coast of KwaZulu-Natal.

ITW is a truck dealership located in Kempton Park, Johannesburg. ITW is involved in the sale of new and used Isuzu light, medium and heavy commercial vehicles as well as used vehicles (of all makes). Furthermore, ITW is also involved in the repair and service of these vehicles, as well as providing parts and accessories for such vehicles.

Non-Referrals: The Commission has taken a decision to non-refer (not to prosecute) the following cases:

2.1 Dennis H.M Hofstander v Pick n Pay and Nestle SA