Mr Price Group And K2018509367

The judgment

The court's own file

COMPETITION TRIBUNAL OF SOUTH AFRICA Case No.: LM014Apr21 In the matter between: Mr Price Group Ltd Primary Acquiring Firm And K2018509367 (South Africa) (Pty) Ltd (“Yuppiechef”) Primary Target Firm E Daniels (Presiding Member) Y Carrim (Tribunal Member) Panel: A Ndoni (Tribunal Member) Heard on: 19 July 2021 Order Issued on: 19 July 2021 ORDER Further to the recommendation of the Competition Commission in terms of section 14A(1)(b) of the Competition Act, 1998 (“the Act”) the Competition Tribunal orders that– 1. the merger between the abovementioned parties be approved in terms of section 16(2)(a) of the Act; and 2. a Merger Clearance Certificate be issued in terms of Competition Tribunal Rule 35(5)(a). 19 July 2021 Presiding Member Mr Enver Daniels Date Concurring: Ms Yasmin Carrim and Ms Andiswa Ndoni Date: 19 July 2021 To : Bowmans Attorneys Case Number: LM014Apr21 Mr Price Group Ltd And K2018509367 (South Africa) (Pty) Ltd (“Yuppiechef”) You applied to the Competition Commission on 16 April 2021 for merger approval in accordance with Chapter 3 of the Competition Act. Your merger was referred to the Competition Tribunal in terms of section 14A of the Act, or was the subject of a Request for consideration by the Tribunal in terms of section 16(1) of the Act. After reviewing all relevant information, and the recommendation or decision of the Competition Commission, the Competition Tribunal approves the merger in terms of section 16(2) of the Act, for the reasons set out in the Reasons for Decision. This approval is subject to: x no conditions. the conditions listed on the attached sheet. The Competition Tribunal has the authority in terms of section 16(3) of the Competition Act to revoke this approval if a) it was granted on the basis of incorrect information for which a party to the merger was responsible. b) the approval was obtained by deceit. c)a firm concerned has breached an obligation attached to this approval. The Registrar, Competition Tribunal Notice CT 10 About this Notice This form is prescribed by the Minister of Trade and Industry in terms of section 27 (2) of the Competition Act 1998 (Act No. 89 of 1998). Contacting the Tribunal The Competition Tribunal Private Bag X24 Sunnyside Pretoria 0132 Republic of South Africa tel: 27 12 394 3300 fax: 27 12 394 0169 e-mail: ctsa@comptrib.co.za Merger Clearance Certificate This notice is issued in terms of section 16 of the Competition Act. You may appeal against this decision to the Competition Appeal Court within 20 business days. 1 COMPETITION TRIBUNAL OF SOUTH AFRICA Case no: LM014Apr21 Mr Price Group Limited (Primary Acquiring Firm) and K2018509367 (South Africa) Proprietary Limited (Primary Target Firm) REASONS FOR DECISION

[1]On 19 July 2021, the Competition Tribunal unconditionally approved a large merger between Mr Price Group Limited and K2018509367

[2]Mr Price Group will acquire 100% of the issued shares of Yuppiechef, such that Mr Price Group will wholly control Yuppiechef, post-merger.

[3]Mr Price Group is listed on the JSE and is not controlled by any single shareholder or firm, but controls several entities across Southern Africa. It operates through various brands in South Africa. 1

[4]Yuppiechef is controlled by multiple shareholders and controls Yuppiechef Holdings Holdings in turn controls the following firms in South Africa: Edison Stone (Pty) Ltd (Edison Stone), Yuppiechef Digital (Pty) Ltd (Yuppiechef Digital), and Yuppiechef Online (Pty) Ltd (Yuppiechef Online). 2

[5]The stores, which are complimented by active social media engagement and marketing through platforms such as Instagram, Facebook and YouTube, so that customers can purchase products online for delivery or collection throughout South Africa.

[6]Yuppiechef is a South African retailer, focused on the supply of kitchen and homeware, furniture, and appliances, mainly via its website (online sales). Yuppiechef operates division, which develops, and imports branded goods, primarily kitchenware, for wholesale distribution to retail customers in South Africa. Its focus is on the middle-to-upper income customers who value quality and detail.

[7]In its competition assessment, the Competition Commission identified a horizontal overlap, in that the merging parties are both active in the retail of homeware and related products in South Africa, as well as a vertical overlap as Yuppiechef, though Edison Stone, is a wholesaler of homeware product while Mr Price Group, through Mr Price Home is active as a retailer of homeware products. 1 These brands are Mr Price, Miladys, Mr Price Sports, Mr Price Home, and Sheet Street. 2 Yuppiechef and all of . 2

[8]In its horizontal assessment, the Commission did not conclude on definitive product and geographic markets. The Commission, nonetheless, assessed the competitive effects of the proposed transaction in the following markets: 8.1. The broad national market for the retail of homeware, furniture and appliances; 8.2. The national downstream market for the retail of homeware products; 8.3. The national upstream market for the wholesale of homeware products; 8.4. The national market for the retail of furniture; and 8.5. The national market for the retail of appliances.

[9]In these markets, the Commission, found that the merging parties would have low post- merger market shares, and would continue to be constrained by other players in each of the above markets.

[10]In determining closeness of competition between the merging parties, the Commission considered the channel used to sell products by the merging parties, product characteristics and customer focus. In this regard, the Commission found that Mr Price and Yuppiechef are unlikely to be considered close competitors in the relevant markets.

[11]In its vertical assessment, the Commission found that the vertical overlap in the merging parties is unlikely to result in foreclosure.

[12]The Commission, during its investigation, received concerns from two third parties. The first concern was raised by a competitor of Edison Stone, who is also a supplier to Yuppiechef. The concern raised was that Mr Price Group may use their buying power to replicate their brands at a lower price range, thus pricing their brands out of the market. The merging parties submitted, among others, that the concerns raised are not merger-specific as Mr Price Group would have the ability to offer lower-priced brands absent the merger, regardless as to whether or not Edison Stone was part of the Mr Price Group.

[13]The second concern was raised by a customer of Edison Stone, who is also a competitor of Yuppiechef. The concern in this instance was that, combined, the two entities would have dominance across the entire homeware market, thus making it difficult for other retailers to compete as they share amongst other things, expertise, skills and budgets. A further concern was combined with the attraction of the Yuppiechef platform and their combined footprint and market coverage, could result in brands giving them exclusivity, which will impact negatively on the homeware market. Additionally, it was submitted that the combination of the Mr Price Group and Yuppiechef will likely grant them a strong thereby isolating or dominating the supply chain to the detriment of other retailers. In response, the merging parties submitted that Yuppiechef does not have the rights to retail any brands exclusively on an ongoing basis, although it may have the exclusive right to retail certain product ranges (or products within ranges) for a limited period of time. Further, such agreements are typical in respect of imported homeware products globally and are also common in South Africa. Additionally, the merged entity would have a low market share and thus fail to meet the Competition Act . As such, it would have number of rivals it faces, the ability of customers to switch to other stores, and the strong position of global suppliers to negotiate to supply retailers all over the world. 3

[14]The Commission was of the view that the proposed transaction is unlikely to substantially lessen or prevent competition.

[15]the Commission contacted the employee representatives representing the employees of the acquiring group and the target firm, and no concerns were raised.

[16]In assessing whether the merger would have an impact on a particular industrial sector or region, the Commission considered submissions from the Department of Trade The DTIC was of the view that the acquisition, if approved, will result in Mr Price having full access to a successful e-commerce platform that will enhance its e-commerce offering and income. Further, the DTIC submitted that Yuppiechef website has a category of South African produced products offered for sale on their e-commerce platform. In this regard, the DTIC required Yuppiechef to provide them with information on the percentage of sales of locally produced goods that it sold in the last three financial years. Further, the DTIC stated that as contemplated in terms of section 12A(3) of the Competition Act, the merged entity is required to make offers of listing of South African-produced goods that will suit the product mix of the merged entity on its e-commerce platform.

[17]In response, the merging parties submitted that, Yuppiechef does currently offer a range of products that are produced in South Africa as its business is focused on the sale of premium or high-end international brands. The merging parties also submitted that Mr Price is focussed on increasing its local procurement as far as possible. This focus includes its participation in the Retail-Clothing, Textile, Footwear and Leather (R-CTFL) Masterplan Initiative (Masterplan) through its membership of the National Clothing Retail Federation. Its intention is to maintain and, where possible, improve local procurement in line with the Masterplan, which is being implemented across existing Mr Price business. Once Yuppiechef forms part of the Mr Price Group, Group targets,

[18]listing of South African-produced goods that will suit the product mix of the merged entity on its ecommerce platform, the parties explained that neither Yuppiechef nor Mr Price Group Report on Competition in the Digital Markets or an online/ digital intermediary platform. Yuppiechef does not connect buyers and sellers through an online platform (like Takealot), but rather, it operates a website through which it sells the products that it has itself curated and sourced. It assumes the risk by buying products from suppliers, based on its product and pricing strategy, to appeal to its niche target market. Therefore, it would not be appropriate to require the merged entity to make any offers Secondly, the parties submitted that Yuppiechef is focused on sales of premium branded (mainly imported) kitchen and homeware to South African consumers and does not sell any products to customers outside of South Africa. The proposed transaction will accordingly not impact on sales of locally made products to customers in any international markets.

[19]The Commission further found that the proposed transaction will result in the promotion of a greater spread of ownership as envisaged in section 12A(3)(e) of the Competition Act, as pre-merger, Yuppiechef does not have an HDP shareholding. However, Yuppiechef will, post-merger, be wholly controlled by Mr Price Group, whose shares are widely held, including by historically disadvantaged individuals. 4

[20]We concluded that the proposed transaction is unlikely to substantially lessen or prevent competition in any relevant market, or to have a negative impact on the public interest. 19 July 2021 Mr Enver Daniels Date Ms Yasmin Carrim and Ms Andiswa Ndoni concurring Tribunal Case Manager: C Mathonsi For the Merging Parties: H Irvine and K Lloyd of Bowman Gilfillan For the Commission: Z Siyo and M Aphane