Who owns jd group

The JD Group has, in fact, provided detailed evidence suggesting that revenues earned from promotions and other discounted sales account for a relatively insignificant proportion of total revenues.

On the face of it, maintaining rigid national control of prices does not make commercial sense. It means effectively that the national chains are prepared to forego sales to the regional independents in order to maintain centralized national control over pricing and other key competitive variables. Surely it would be preferable to impose turnover or profit targets on local managers and allow them to compete on terms dictated by their local competition? After all, as already discussed, the ability of the consumers to physically purchase product outside of limited geographic boundaries is circumscribed by the nature of the product.

On the other hand, we have presented with persuasive commercial reasons for maintaining national control over or, at least, strict national co-ordination of these key competitive variables. Maintaining the integrity of the brand is one reason advanced by the parties; massive economies of scale in national advertising is another.

David Sussman acknowledged that the national group gave up sales to local independents as a result of its insistence on maintaining a national competitive strategy. He noted that, in the absence of national controls, store managers and sales staff, who, he noted, were not entrepreneurs, would be tempted to secure each and every sale to the detriment of the interests of the overall business.

It is also possible — and this will be elaborated below — that this centralized strategy may simply reflect the market power of the national chains. In other words, despite the nature of the product, the market may be truly national and dominance by national brands over local markets ensures that the advantages of eliminating all local competition are outweighed by the costs of compromising the other advantages of a national approach to competition.

Certainly the European Commission is comfortable with finding a national market in circumstances broadly similar to the case in point. It continued:. In a situation where several retail chains operate networks of stores on a national scale, the important parameters of competition are determined on a national scale.

Therefore, from the viewpoint of the catchment area, what may be a local or regional market has to be aggregated to a national market in these circumstances.

On the evidence before us, we conclude that the parties to this transaction do, indeed, set prices and key trading conditions nationally. The Executive Chairman of JD has specifically conceded that the group loses sales to local independents in order to maintain national control over its competitive strategies. While the parties have acknowledged that regional and branch managers have a certain discretion with respect to pricing, deviations from national prices have to be sanctioned at the national level and we have been presented with evidence that establishes that this only occurs in exceptional instances.

In short, the parties acknowledge that they do not set prices and trading conditions in response to competition from local independents but only in response to other national players.

The local independents do not then comprise part of the relevant national market. The likely impact on competition in the relevant market. There are a number of widely accepted empirical indicators of market power. The most common among these is the Herfindahl-Hirschman index and the four-firm concentration ratios. Both are naturally heavily conditioned by the quality of the data used to calculate them and, above all, by the parameters of the relevant market.

The parties have presented us with two sets of HHI measures, the one based on the total furniture and household appliance credit market, the second based on the LSM income group market see tables 1 and 2 below that, on their data, indicate relatively low levels of concentration and little change in concentration as a result of the merger. A major difficulty in agreeing upon sales figures is that the bases for calculating these figures differ as between the various groups with some reflecting turnover values based on cash price sales while others include finance and insurance charges in their turnover.

There are a number of telling errors in the basic data used. For example, the Lewis figures are from their Annual Report while the others are all drawn from the Annual Reports.

Given that the figure for the independents is a residual calculated as the difference between the official figure for total sales and those attributed to the groups cited in the table, the effect of this correction is to increase sales attributable to independents by a further R million. However, the HHI calculation in Table 1 is most severely distorted by a serious methodological error: The parties cannot, on the one hand, insist that prices and key purchase conditions are set nationally with minimal discretion given to the local managers, and, yet, on the other hand, insist that for HHI purposes the turnover attributable to the independents be included in the size of the market.

Setting price nationally implies, per definition, and this is borne out by statements cited above, that the parties do not respond to local competition, that, in other words, it is not relevant in their market. It also has the potential of spilling over into a price war between the national chains. Stripping the independents out of the data used for calculating the HHI data raises it significantly.

In particular, as elaborated above, we have concluded that the appliance discounters are not part of the relevant market. As already discussed the parties argue strongly for a single mass market. However, this calculation suffers from the same methodological flaw as the single mass market HHI reflected in Table 1. Second, is the surprising inclusion of the Lewis turnover in this data set. In evidence submitted by the parties themselves they have not seen fit to include Lewis in the LSM rather placing them in the next market segment.

Note Mr. Based upon this critique of the HHI calculations submitted by the parties, we have reworked the HHI for the relevant market, as defined in section 4. Table 3: HHI based on turnover of furniture and appliance shops directed at credit sales in LSM excluding independents:. A post-merger HHI above is generally considered to be highly concentrated.

Mergers that produce an increase of more than 50 points as in the above calculation clearly raise significant competitive concerns. However, it followed a different approach by calculating concentration based on the number of stores of each of the participants in the various local geographic markets excluding the independents. Another method used to calculate concentration is the four firm concentration ratio, CR4 test.

It measures the portion of the market accounted for by a given number of leading firms, in this case the four leading firms. If we take the market shares of the top four companies in the LSM as calculated in table 3 above the four top firms concentration figure would be as follows:.

Table 4: 4-firm concentration ratio. Source: Own calculation. In summary, we have used various methods and information to calculate concentration in the relevant market and have found shortcomings and flaws in each of the methods used. In the premises, given the widely disparate HHI calculations, we are not willing to place complete reliance on any of these measures. Nor do we believe that the HHI, even when a relatively straightforward calculation, should, on its own, constitute the basis for deciding on the outcome of a merger investigation.

The HHIs are indicative statistical measures; they are not determinant. They must always be bolstered a deeper, qualitative enquiry in order to arrive at a realistic assessment of the impact of the transaction on competition in the relevant market.

Several factors serve to reinforce these statistical indications that the transaction has the potential to impact adversely upon competition:. The first concerns our difficulty in identifying the very basis of competition between the national chains in the relevant market. We have perused the reams of advertising material submitted by the parties. It is unusually difficult to compare cash prices and this because the various participants in the relevant market appear to make a determined effort to bedevil any attempt to compare cash prices at one store with those offered by it various competitors.

For example while the specifications of many of the brands on offer are identical the various stores appear to be at pains to ensure that they do not offer the same branded products as those offered by their competitors - television sets are a good example here. Or alternately the precise specifications of the advertised products are shrouded in names that disguise more than they reveal — lounge suites are a good example of this practice.

As noted above, the manufacturers produce in-house brands for the large chains and this also bedevils inter-store price comparison. If price comparison has eluded the resources of a competition authority, we can only conclude that the average LSM customer is in an even more disadvantageous position in choosing from among the apparently vast array of options on offer.

On the other hand credit terms and conditions appear identical across the various LSM chains. This is to be expected given the level of statutory regulation of credit terms and conditions to which we have already alluded. However, it appears that an area of considerable competition centers upon the relative ease of access to credit available through the various competing groups of stores. This factor, above all, appears to act as the principle instrument for attracting custom in the LSM category.

However, easy access to credit is clearly a drawcard that has to be managed with consummate care — several major chains have already fallen prey to the dangers of a poorly managed debtors book.

Secondly, and this has a strong relationship to the use of credit facilities in this segment of the retail furniture trade, there is the question of brand loyalty.

Brand loyalty here refers to the observed tendency of customers to remain with a single chain or, at least, within a single group of chains. The parties have questioned the extent of brand loyalty but this is at odds with other assessments of customer behaviour in this sector, many of which specifically refer to evidence of strong brand loyalty.

We should underline that the loyalty described above is not to be taken for granted in most merger transactions — on the contrary competition regulators are generally able to assume that a combined entity will lose a certain proportion of its combined customer base to existing competitors.

In this case, however, the likelihood is that the merged entity will not only retain the combined LSM customer base but will also simultaneously increase the customer base for its higher segment brands. Information submitted by the parties establishes that the introduction of new national store brands is, by and large, the effective prerogative of the existing national chains.

The economies derived from membership of a large, established group are clearly considerable and relate, most obviously, to IT costs, advertising, supplier discounts and warehousing expenses. The ease with which the established groups are able to open new stores within an established brand must act as a significant deterrent to would be new entrants who, on the evidence presented, would have every reason to expect that any lucrative market will soon attract one of the established brands.

Store leases, we are told by the parties, are generally of five years duration and so the sunk cost are significant. The parties assert that this entry barrier only pertains to an entrant that wants to run its own debtors book and it notes the availability of credit from other financial institutions, including some dedicated to providing credit to purchasers of furniture.

However, we are persuaded by the evidence gathered by the Commission to the effect that this credit is both limited, a veritable drop in the ocean compared to the parties ability to extend credit, and costly. The remarkably high margins, particularly in the LSM range, are themselves indicative of market power and of high barriers to entry. We accept that the margins reflect the exceptional degree of risk that the participants are willing to assume in this low income, credit-based market.

But they clearly establish that not many others are willing to assume this risk even at margins strikingly higher than those generally available in the retail trade.

Finally, there is no doubt that the transaction results in the removal of an effective competitor. As already noted David Sussman himself has been at pains to acknowledge the strength of Ellerines.

We accordingly find that the transaction is likely to substantially lessen competition in the relevant market. Although different brands, they will be subject to a single controlling mind and to view them as competitors for anti-trust purposes is without precedent and, we respectfully submit, good sense.

We have identified South Africa as the relevant geographic market. The effect of this is to exclude the local independent stores from the relevant market — as already elaborated, the parties themselves aver that they do not respond to competitive initiatives from this quarter.

However, despite the glaring inconsistency in their approach, the parties nevertheless attempt to make much of the alleged competitive presence of the independents. The Commission, for its part, finds local geographic markets but then, also exhibiting a certain inconsistency in its approach, finds that the independents are not a significant source of competition in these markets. Our finding that the relevant market is national relies principally on evidence submitted by the parties.

We accept, as outlined above, that there are rational commercial grounds why large national chains should value centralized, national determination of their key competitive strategies and, conversely, why they should not respond to initiatives from the local independents.

However, if this issue is examined from the perspective of the current competitive strength and future prospects of the independents, then it is not difficult to see why they are all but ignored by the participants in the relevant market — the large national chains — in the preparation of their competitive strategies.

There appear to be two types of independent operators. The first, the vast majority, operate a conventional store format. The second operate a very large super store format.

Some of the independents group two or three stores but most are single store operations. They are owner-managed enterprises. The evidence gathered by the Commission regarding the former grouping of independents is striking. The parties informed the Commission investigators that there were independents in the 99 local markets in which both parties compete.

The parties also referred to Furnex, a company that buys products and obtains financial services on behalf of its members all of whom are independent retailers. We disagree. Indeed each Furnex member controls, on average, a trifling 1,5 stores. The parties made much of the competition from the large format independents. They provided four examples. Although found in very few areas, these are undoubtedly very large stores. The four stores used by the parties are indicative of this.

They are owned by Indian entrepreneurs whom the Group Areas Act confined to particular locales of the large rural towns in which they are all based. These were generally located in proximity to the transport routes from the African townships, precisely the sites now favoured by the parties and the other large national chains in the low income segment of the market. These stores, managed by extremely able entrepreneurs, were prevented by the Group Areas Act and by restrictions on raising capital, from expanding out of their prescribed bases.

Had they not been restricted by apartheid they may well have been in the position occupied today by the parties to this transaction. However, the unfortunate truth is that they remain confined to their original bases, they remain family-owned and managed with all the limitations that implies for rapid expansion, and they now have to contend with added competition from the multi-store chains.

We asked the parties whether any of the stores cited by them as examples of large independent super stores had been in existence for less than 10 years. They have not been. We would indeed be surprised if any had been in existence for less than 20, even 30 years. This confirms that new entry at this scale of operation is not feasible. This, combined with the obstacles in the way of expansion on the part of the existing players, leads us to conclude that they are, at most, significant in a small number of regions and that the extent of competitive pressure from this source is, if anything, likely to decline rapidly.

The Impact of the transaction on the manufacturers of furniture. A constant refrain running through the investigation and evaluation of this transaction concerns its possible impact on relations between, on the one hand, the manufacturers of furniture and, on the other, the retailers. Various concerns have been expressed: more powerful retailers, operating in a less competitive retail market, are better able to squeeze the profit margins of the manufacturers; the preponderance of large national retail outlets with centralized purchasing departments inevitably means that the volumes ordered will exceed the capacities of the smaller manufacturers; the close relationship alleged to exist between the JD Group and the Steinhoff Group, much the largest manufacturer of furniture in South Africa, would further underpin the progressive exclusion of the smaller manufacturers from large parts of the market; the additional purchasing power of the new group combined with its allegedly close relationship with Steinhoff would give JD a competitive edge over other furniture retailers.

A group of small furniture manufacturers submitted a statement of their concerns to the Commission. However, they requested that they not be identified and the Tribunal has accordingly had no regard to their statements. The parties, for their part, have furnished the Tribunal with more than letters from manufacturers expressing support of the transaction.

A Commission investigator has submitted an affidavit in which she attests that certain manufacturers have reported and again declined to be named that they were pressurized by senior representatives of the parties to submit these letters. The parties have denied these allegations. The Tribunal must again decline to accept anonymous submissions, though it records that the alacrity with which the manufacturers responded to the request for support and the near unanimity of the response there was a single detractor suggests that the parties do command a not inconsiderable degree of power vis a vis the manufacturers.

The parties have not identified pro-competitive gains in the relevant market. On the contrary, as already noted, Mr. Sussman has been at pains to distinguish this transaction from previous acquisitions by the JD Group.

In the other transactions JD acquired ailing chains and turned them around. These pecuniary gains have not been claimed in this transaction, where the target company is identified as a well managed, thriving group. These are examined under public interest. In undertaking a merger evaluation we are enjoined by Section 16 3 of the Act to consider specified public interest issues. Where, as in the case, the merger has been found to diminish competition, we enquire whether a positive impact on public interest outweighs the negative impact on competition, thus permitting approval of the merger.

Note that the Act specifies the public interest grounds that the Tribunal may consider these being the impact of the merger on a particular sector or region, on employment, on the ability of small businesses and firms controlled by historically disadvantaged persons to become competitive, and the ability of national industries to compete in international markets. Note too that the mere existence of a public interest ground is not enough in itself.

The Act requires the public interest ground to be substantial. In this merger the merging parties have, whilst not conceding the merger is anticompetitive, raised under the public interest rubric an aspect of the deal affecting their respective financial service arms, which they say, is in the public interest.

They say that with an increased store base of approximately outlets in SA they will be in a better position to do so. They also stated that certain stores could be converted into franchises particularly in the Electrical Express Chain and that this would be beneficial for small business and create employment opportunities. All these objectives are very laudable, but what we have to assess is whether the parties require the merger in order to implement them.

Nothing the parties have told us suggests they cannot implement these strategies without the merger. We turn first to the claims regarding financial services and note at the outset that it is not clear under which of the specified public interest grounds this claim is made.

However, that having been noted, we will nevertheless proceed to examine the substance of the claim. The parties claim that the additional store base will lower the costs of rolling out their financial services arm.

However, both Ellerines and JD have extensive and often overlapping networks of stores. Neither party needs a merger to reduce the costs of rollout. Nor do they require the merger to increase their ability to raise capital. Both have already embarked on expanding into financial services prior to contemplation of the deal and are already operating divisions, have marketing strategies in place and, in the case of Ellerines, have developed a separate brand in Rainbow Loans.

Despite the different experiences of the two companies, we share seamlessly compatible perspectives. VIP Thailand Co. In combination with J. Pools, whose experience in operating a swimming pool business of more than 16, units both in real estate and individual projects, the two entities have been recognized as having an international status.

All Rights Reserved. JD Group. JD Group Overview Update this profile. Founded Employees 24, Latest Deal Type 2ndary - Open. Financing Rounds 5. Investments 3. Ownership Status. Financing Status. Corporate Backed or Acquired. Primary Industry. Home Furnishings.

Other Industries. Household Appliances. Electronics B2C.