Competition Commission rejects merger of container depots

The plans of United Container Depots (UCD), a subsidiary of industrial logistics operator Grindrod, to acquire Kings Rest Container Park (KRCP) have been thrown in disarray after the Competition Commission recommended that the proposed merger be blocked.

The commission on Tuesday said it was uncomfortable about the proposed merger as the two companies are the exclusive providers of reefer services in Johannesburg and are the leading firms among four companies offering these services in Durban’s open market.

The commission said that while there were numerous smaller players offering storage and related services, UCD and KRCP hold a dominant position in the sector in both cities. 

The commission also determined that the proposed merger would eliminate a major competitor in the market for empty container storage services in Durban. As a result, there would be fewer operators of empty container storage depots offering a comprehensive range of services in the Durban market.  

“As a result, the commission is of the view that significant harm to competition is likely to arise after the merger as the customers of the merging parties will have fewer options with a full-service offering and sufficient capacity in the Durban market,” the commission said in a statement. 

UCD provides a range of container services, including storage, handling, repair, maintenance, transport and cleaning of both refrigerated containers (reefer services) and ordinary (non-refrigerated) containers. It also provides sales, leasing and conversion of containers. Its depots are in Cape Town, Durban and Johannesburg.

KRCP services include storage, handling, cleaning and repair of both standard and refrigerated containers. It is also involved to a limited extent in the sale, leasing and conversion of containers. KRCP operates two depots in Durban (at Bayhead and Clairwood Park) and one in Johannesburg (City Deep).

The commission expressed concern that the transaction would affect prices and costs within the logistics value chain. This is particularly alarming for shipping liners, which benefit from the competition between UCD and KRCP.

“Should the merged entity increase prices post-merger, shipping lines are likely to pass down costs to their customers by also increasing prices,” the commission said. “This may have a negative ripple effect on the logistics value chain upon which a significant amount of economic activity depends, especially given the limited empty container depot capacity in the market. This view has been confirmed by market participants.”

According to the commission, the two companies failed to provide sufficient evidence of merger-specific technological advancements, efficiencies or other pro-competitive benefits that would outweigh the anticipated loss of competition resulting from the proposed transaction. Additionally, they did not present significant public interest commitments that would mitigate the competition concerns.

After the commission’s recommendation, the Competition Tribunal will set the matter down for hearing and make a final decision on the proposed merger.

majavun@businesslive.co.za