Tribunal okays Dis-Chem, Minlou merger
DIS-CHEM Pharmacies yesterday received the competition authorities’ approval to expand its wholesale business.
The group may now proceed with its deal to become a joint owner of Minlou Holdings.
The Competition Tribunal yesterday unconditionally approved the transaction, despite initially proposing a condition to address concerns raised by a customer of one of the wholesaler businesses that the transaction could raise the barriers to entry and decrease competition in the retail pharmaceutical market.
Dis-Chem is involved in the retail pharmaceutical industry, and supplies only its own pharmacies from its warehouses in Gauteng and the Western Cape.
Minlou is involved in the pharmacy and wholesale businesses.
Die Wiekus Pharmacy expressed concern that Dis-Chem might take over the Leading Pharmacy franchise, making it difficult for new pharmacies to enter the market, and that it might lessen competition in the pharmacy market.
Tribunal member Anton Roskam suggested a condition that would prevent Dis-Chem from assuming control over the Leading Pharmacy group.
Anthony Norton, representing the merging parties, said a condition could be imposed only if the tribunal was convinced that it would address the substantial lessening of competition which had been identified on the evidence in the merger record. “Our submission is that there is no evidence that warrant such a condition,” he said.
The transaction gives Dis-Chem and Minlou joint control over CJ Pharmaceutical Enterprises, CJ Pharmaceutical Marketing, Leading Pharmacy, Evening Star, CF Weber & Associates and the Pharmacy Development Academy.
Dis-Chem owns and operates 60 pharmaceutical retail stores. The Minlou wholesale assets sell and distribute scheduled and unscheduled pharmaceutical products to about 400 pharmacies, including some Dis-Chem stores. The Leading Pharmacy trademark comprises about 20 pharmacies. The pharmacies are excluded from the joint control transaction.
The commission recommended an unconditional approval of the transaction. During its investigation it found an overlap in the two groups’ retailing activities in three towns — Polokwane, Boksburg and Benoni.
The competition commission however found that the merging parties — even if they considered their combined market power in the areas — would face competition from various other retailers.