This presentation by South Africa was made during the break-out session “Efficiency Effects & Design of Remedies” held at the 18th meeting of the OECD Global Forum on Competition on 6 December 2019. More papers and presentations on the topic can be found at oe.cd/mcdym.

1. Merger control in
dynamic markets
Submission by the Competition Commission
of South Africa to OECD Global Forum on
Competition
6 December 2019
Makgale Mohlala

2. Outline
Introduction: CCSA’s approach to dynamic merger review
CCSA Case Study 1: MIH (Naspers)/WeBuyCars
CCSA Case Study 2: Bayer/Monsanto
1
2
3

3. 3
Introduction
1
This discussion arises from a recognition of the importance of
dynamic competition in a growing number of economic sectors
There is no set time period. The decision is based on the
characteristics and competitive dynamics in a particular market
a
2
The CCSA usually takes dynamic effects into account when
assessing the level of competition in a market
a Section 12A(2)(e) of the Competition Act specifically mandates
the CCSA to consider the dynamic characteristics of the market
when determining whether a merger will likely result in a
substantial prevention or lessening of competition
3
A key practical question that arises is: what is the relevant
timeframe of merger review? That is, how far ahead should
authorities look to assess the likely effects of a merger?
b Key factors considered in this assessment include growth,
innovation and product differentiation

4. 4
Assessing dynamic effects continued…
4
Typically, the assessment of competitive dynamics looks at the following:
• history of entry and exit,
• levels of barriers and prospects of entry,
• the product and process involved in bringing the product to market,
• creation of new markets,
• market shares (using metrics such as website traffic in online platforms, and
number of wins in bidding markets etc.)
• generating candidate theories of harm, and
• creeping merger effects
In effect, the assessment of dynamics characteristic varies from market to
market and from one merger to another.
5 Some challenges arise in applying these tools in fast-evolving sectors:
• some of the metrics may change within short periods of time,
• continuous innovation means product space changes rapidly and entirely
new markets can be created in short space of time,
• potential competition comes from unexpected places (e.g. competition to
taxi cabs came from platforms, not from other vehicles)
• existing business models are constantly disrupted complicating
assessment

5. 5
Case example 1: MIH/WeBuyCars
Background
• MIH is part of the largest e-commerce business in SA, Naspers
• With purchase of WeBuyCars, MIH intended buying an
effectively new form of business: the guaranteed wholesale
buying of used cars for cash
Acquirer:
Related
Platforms
• Naspers controls several related online platforms in SA:
• Autotrader, the largest online automotive classifieds
advertising portal for new and used cars, and
• OLX, generalist online classified portal, incl. for used cars
Dynamics:
Potential
Entry
• Naspers recently acquired Berlin-based company called Frontier
Car Group (“FCG”) which specialises in guaranteed wholesale
buying and selling of used cars
• FCG operates in several emerging countries such as Mexico,
Pakistan, Nigeria, Indonesia and the UAE
• In other markets, FCG generates leads from cars listed on OLX
and converts these to sales
• FCG does not operate in South Africa but had intentions to enter
and compete head-on against WeBuyCars using the Napsers OLX
platform for lead conversion

6. 6
MIH/We Buy Cars continued
The Target
Firm
• WeBuyCars is the pioneer of the “guaranteed wholesale
purchase of used cars for cash” model in SA
• It advertises its stock on Naspers’ online Autotrader platform,
along with numerous other traditional used car dealers
• WeBuyCars sells its used cars mainly to “traditional” used car
dealers.
Central
debate
• Breadth of the used car market in light of the new business
model by WeBuyCars
• Specifically, do traditional used car dealers sufficiently
constrain the new model of ‘guaranteed wholesale buying of
used cars for cash’ considering convenience, no need to
match a sale etc.
• CCSA found that the new model rendered traditional used car
dealers non-effective competitors on buying side
Recommen-
dation
Prohibition based on removal of effective competitor and
conglomerate effects given complementarity between various
Naspers platforms. Matter still being considered by Tribunal.

7. 7
Second case example: Bayer/Monsanto
• Dynamic considerations often arise in the agricultural sector where firms
invest heavily in new seeds and chemicals to adapt to different climatic
conditions, new crop diseases etc.
• Biotech seeds and agro-chemicals in these markets evolve rapidly, with new
products and processes introduced virtually every season.
• Changes in cultivars and chemicals may become even more rapid with
climate change
• Mergers assesses in SA include Bayer/Monsanto which raised several
competition concerns as well as challenges relating to designing and
coordinating the development of global remedies that address the multi-
jurisdictional concerns
• The merger presented horizontal overlaps in relation to agrochemicals
and genetically modified (GM) cotton seeds where it was virtually a
merger to monopoly
• Parties ultimately ordered to divest the Bayer cotton business
• Globally, the merged entity divested Liberty and Liberty Link trait
businesses including the R&D levels of businesses, in order to eliminate
the source of market power at the highest level of the value chains.

8. Thank You
Email Address:
ccsa@compcom.co.za
Telephone Number:
+27 (012) 394-3200 / 3320
Fax Number :
+27 (012) 394 0166