Naspers prohibited from buying WeBuyCars

Naspers, the listed multinational internet group, has expressed disappointment in the Competition Tribunal’s decision to prohibit its planned R1.8 billion acquisition of online used car dealer WeBuyCars.

Sjoerd Nikkelen, GM of OLX in Africa, Middle East and Asia, said on Friday that OLX SA will review the options available to it in light of the tribunal’s ruling.

His comments follow the Competition Tribunal on Friday issuing an order prohibiting the proposed transaction involving MIH eCommerce, trading as OLX South Africa, and WeBuyCars.

MIH, which is ultimately controlled by Naspers, proposed acquiring 60% of WeBuyCars.

The tribunal said the reasons for the prohibition of the proposed transaction will be made available in due course.

Nikkelen said it has been a long and challenging journey since OLX made its intention to acquire WeBuyCars known in September 2018.

Naspers/OLX ‘respectfully disagrees’

“We are extremely disappointed with the Competition Tribunal’s ruling and respectfully disagree with their findings.

“We are a long-term investor with an established global and local business track record.

“The transaction would have resulted in a R1.8 billion investment in South Africa, thus making a significant contribution to the economy.

“Our ambition is to offer South Africans the easiest, safest and most transparent way to buy and sell cars. The WeBuyCars team has built an impressive service that aligns well with OLX Group’s strategy,” he said.

The planned investment in WeBuyCars formed part of Naspers’s undertaking to accelerate growth in classifieds, online food delivery and fintech businesses globally.

Faan van der Walt, co-founder and CEO of WeBuyCars, declined to comment on Friday. All he has said is that the company is consulting with its shareholders about the decision and will issue a statement in due course.

The Competition Commission, which investigates and assesses large mergers before referring them to the tribunal for a decision, recommended in May 2019 that the proposed transaction be prohibited because it is likely to substantially prevent or lessen competition.

The matter was subsequently argued before the tribunal in October and November last year.

Other firms in the Naspers group the commission regarded as relevant for purposes of the proposed transaction were The Car Trader, trading as AutoTrader, and Media24.

AutoTrader is a specialised or vertical online advertising portal for the advertising of motor vehicles while Media24 is the South African print media division of Naspers, with interests in various magazines, newspapers and digital platforms in SA.

The commission found that the proposed transaction does not present any competitor or horizontal overlap in SA because Naspers is not active in the buying and selling of cars.

However, the commission found that Naspers, through Frontier Car Group (FCG) had been anticipating entering the South African market for the wholesale and online buying of used cars in competition with WeBuyCars.

It said these entry plans were thwarted directly as a result of the proposed transaction.

Overlap

The commission also noted that there is a vertical or supplier-customer relationship overlap because Naspers owns and operates online classified automotive advertising platforms, such as OLX and AutoTrader, and WeBuyCars uses these platforms to either sell or purchase vehicles.

Given this supplier-customer relationship overlap, the commission considered whether the merger would result in the exclusion of the competitors of WeBuyCars and/or AutoTrader.

The commission concluded that it believed the proposed transaction would result in the removal of Naspers (FCG) as a potential effective competitor to WeBuyCars in the niche segment of wholesale and online buying of used cars using an instant cash model from the public and the consequent selling to dealers and others.

It said this is the market segment that is currently dominated by WeBuyCars, which owns a significant share of this market.

Lessening of competition

In addition, the commission said the proposed merger would likely result in a substantial lessening of competition through exclusion because there are many ways in which Naspers could harness the complementarities between WeBuyCars and AutoTrader and/or OLX, to the exclusion of effective competition against WeBuyCars rivals as well as other online platforms.

The commission said WeBuyCars is a large and dominant wholesale and online buyer of used cars from the public while AutoTrader is the largest online classified platform and generates significant customer traffic, which means it is a key and important online platform for traditional used car dealers seeking to sell their car stock.

The commission, therefore, believes the merged entity would have the ability to leverage its significant AutoTrader position as well as the OLX platform to exclude rivals of WeBuyCars.

In addition, the commission found that WeBuyCars would likely entrench its dominant position in the purchasing of used cars, which will also likely translate into dominance on the sell-side because WeBuyCars will be able to dominate the second-hand cars stock in the market.

The commission believed Naspers’s platforms, OLX and AutoTrader, are also likely to further entrench their respective positions in online advertising.

The commission was concerned that the proposed transaction would result in the foreclosure of other traditional dealers that are rivals of WeBuyCars on the sell side because AutoTrader is a significant platform on which many traditional dealers advertise their cars and it has the ability and incentive to offer preferential treatment towards WeBuyCars.

The commission concluded that overall the proposed transaction is likely to substantially prevent or lessen competition in the relevant markets and result in used car customers paying higher prices in future than they would otherwise pay in a competitive environment.

It further argued that the conditions proposed by the merging parties would not remedy the competition concerns.

Weelee, a recognised participant in the merger proceedings, supported the commission’s recommendation that the proposed transaction should be prohibited.

Weelee started trading in 2017 and acts as an intermediary between private sellers and car dealers by providing a platform on which vehicles are auctioned.

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