Case Law[2024] ZACC 3South Africa
Coca-Cola Beverages Africa (Pty) Ltd v Competition Commission and Another (CCT 192/22) [2024] ZACC 3; 2024 (6) BCLR 771 (CC); [2024] 7 BLLR 665 (CC); (2024) 45 ILJ 1507 (CC); 2024 (4) SA 391 (CC) (17 April 2024)
Constitutional Court of South Africa
17 April 2024
Headnotes
Summary: Competition Act 89 of 1998 — Rules for the Conduct of Proceedings in the Competition Commission — standard of review in special statutory review under rule 39(2)(b)
Judgment
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## Coca-Cola Beverages Africa (Pty) Ltd v Competition Commission and Another (CCT 192/22) [2024] ZACC 3; 2024 (6) BCLR 771 (CC); [2024] 7 BLLR 665 (CC); (2024) 45 ILJ 1507 (CC); 2024 (4) SA 391 (CC) (17 April 2024)
Coca-Cola Beverages Africa (Pty) Ltd v Competition Commission and Another (CCT 192/22) [2024] ZACC 3; 2024 (6) BCLR 771 (CC); [2024] 7 BLLR 665 (CC); (2024) 45 ILJ 1507 (CC); 2024 (4) SA 391 (CC) (17 April 2024)
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sino date 17 April 2024
FLYNOTES:
COMPETITION – Merger –
Retrenchments
–
Correct
test for determining causal link between merger and retrenchments
– Merger approval conditions prohibiting retrenchments
as
result of merger – Coca-Cola’s reasons being to reduce
costs to address impact of sugar tax and adverse macroeconomic
circumstances – Tribunal declared Coca-Cola had
substantially complied with pertinent condition –
Competition
Appeal Court overturned decision of Tribunal –
Mischaracterised nature of appeal and applied wrong tests in
respect
of both review and causation – No basis in law or
fact for overturning judgment of Tribunal – Commission Rule
39(2)(b) –
Competition Act 89 of 1998
,
s 27(1)(c).
CONSTITUTIONAL
COURT OF SOUTH AFRICA
Case CCT 192/22
In
the matter between:
COCA-COLA
BEVERAGES AFRICA (PTY) LIMITED
Applicant
and
COMPETITION
COMMISSION
First Respondent
FOOD
AND ALLIED WORKERS UNION
Second Respondent
Neutral
citation:
Coca-Cola Beverages Africa
(Pty) Ltd v Competition Commission and Another
[2024] ZACC 3
Coram:
Zondo CJ,
Chaskalson AJ, Dodson AJ, Kollapen J,
Mathopo J, Mhlantla J, Rogers J, Schippers AJ and
Tshiqi J
Judgments:
Dodson AJ (unanimous)
Heard
on:
14 November 2023
Decided
on:
17 April 2024
Summary:
Competition Act 89 of 1998
— Rules for the Conduct of
Proceedings
in the Competition Commission
—
standard of review in special statutory review under
rule 39(2)(b)
Competition
Law — causation — merger approval conditions prohibiting
retrenchments as a result of merger — correct
test for
determining causal link between merger and retrenchments
Competition
Law — power of Competition Appeal Court to interfere with
decision of the Competition Tribunal
ORDER
On
appeal from the Competition Appeal Court:
1.
Leave to appeal is granted.
2.
The appeal is upheld.
3.
The order of the Competition
Appeal Court is set aside and replaced
with the following order:
“
(a)
The appeal is dismissed.
(b)
Each party must bear its own costs.”
4.
Each party must bear its
own costs in this Court.
JUDGMENT
DODSON AJ
(Zondo CJ, Chaskalson AJ, Kollapen J, Mathopo J,
Mhlantla J, Rogers J, Schippers AJ
and Tshiqi J
concurring):
Introduction
[1]
South Africa faces
one of the highest unemployment rates in the world, particularly
amongst the younger members of society.
[1]
This was no doubt taken
into account by Parliament in formulating
section 12A
of the
Competition Act (Act
).
[2]
The section requires
that, when deciding whether a merger is in the public interest, its
effect on employment must be taken into
account.
[3]
If it is decided to
approve the merger, conditions may be imposed relevant to that
impact. Here, conditions were imposed on
approval of a merger
that restricted post-merger retrenchments. This application for
leave to appeal arises from a complaint
that Coca-Cola Beverages
Africa (Pty) Ltd (CCBA), the applicant, retrenched staff in breach of
those conditions. CCBA seeks
leave to appeal against a judgment
of the Competition Appeal Court. The Competition Appeal Court
overturned a decision of
the Competition Tribunal (Tribunal), finding
that CCBA had substantially complied with the conditions.
[2]
The first respondent, the Competition Commission (Commission),
opposes the application. The second respondent, the Food and
Allied Workers Union (FAWU), lodged the original complaint with the
Commission and participated in the proceedings in the Tribunal,
representing the interests of its affected members. It did not,
however, participate in the proceedings before the Competition
Appeal
Court or in this Court. The application is best understood
against the backdrop of the statutory framework in the
Act, to which
I now turn.
Statutory framework
[3]
Chapter 3 of the
Act regulates mergers.
[4]
Section 12(1)(a)
provides
that “a merger occurs when one or more firms directly or
indirectly acquire or establish direct or indirect control
over the
whole or part of the business of another firm”. Three
categories are recognised: small, intermediate and large
mergers.
[5]
Categorisation is with
reference to combined annual turnover or assets or a combination of
these.
[6]
Here we are concerned
with a large merger. If the Commission receives notice of a
large merger, it must refer the notice and
its recommendation to the
Tribunal for consideration.
[7]
[4]
The Tribunal’s
consideration of the merger is regulated by
section 12A
of the Act.
Its first task is to determine whether the merger is likely to
substantially prevent or lessen competition.
[8]
If this is likely, the
Tribunal must consider (a) whether the merger is likely to result in
a “technological, efficiency or
other pro-competitive gain”
that offsets the anti-competitive impact and (b) whether the merger
can be justified on “substantial
public interest grounds”.
[9]
Despite its determination
on these issues, the Tribunal must consider whether the merger is
justifiable on public interest grounds.
[10]
Criteria for each of
these evaluations are provided.
[11]
In considering
justifiability on public interest grounds in terms of
section
12A(3)(b)
the Tribunal “must consider the effect that the
merger will have on . . . employment” amongst other things.
The
Tribunal must then decide whether the merger is to be approved,
approved conditionally or prohibited.
[12]
In the present matter the
approval was subject to conditions, which are discussed later in the
judgment.
[5]
What if the merger
conditions in respect of a large merger are breached? Upon
application by the Commission, the Tribunal
“may revoke its own
decision to approve or conditionally approve a merger, or, in respect
of a conditional approval, make
any appropriate decision regarding
any condition relating to the merger, including the issues in
section
12A(3)(b)
or (c)”.
[13]
This it may do
where, amongst others, “a firm concerned has breached an
obligation attached to the decision”.
[14]
Alternatively, the
Tribunal may impose an administrative penalty
[15]
“
if the parties to
a merger have . . . proceeded to implement the merger in a manner
contrary to a condition for the approval”.
[16]
The penalties may be
substantial, up to 10% of annual turnover in the preceding financial
year, including exports, for a first offender
and 25% for a repeat
offender.
[17]
Although it is not
necessary to decide here, another sanction might be divestiture.
Where “a merger is implemented
in contravention of Chapter
3”, the Tribunal may either “order a party to the merger
to sell any shares, interest or
other assets it has acquired pursuant
to the merger” or “declare void any provision of an
agreement to which the merger
was subject”.
[18]
[6]
A procedural framework has been established to deal with,
amongst other things, such a breach. The starting point is
section 27
, which provides:
“
27
Functions of Competition Tribunal
(1)
The Competition Tribunal may—
.
. .
(b)
adjudicate on any other matter that
may, in terms of this Act, be
considered by it, and make any order provided for in this Act;
(c)
hear appeals from, or review any decision
of, the Competition
Commission that may in terms of this Act be referred to it; and
(d)
make any ruling or order necessary
or incidental to the performance
of its functions in terms of this Act.”
[7]
The term “this
Act” is defined to include “the regulations”.
[19]
The Minister of Trade and
Industry (Minister) may make regulations relating to the functions of
the Commission and the Tribunal,
including their “procedures”.
[20]
The Minister has done so
in the form of rules for each institution.
[21]
The most pertinent rule
in this appeal is rule 39 of the Commission Rules. It
reads in relevant part as follows:
“
39.
Breach of merger approval conditions or obligations
(1)
If a firm appears to have breached
an obligation that was part of an
approval or conditional approval of its merger, the Commission must
deliver to that firm a Notice
of Apparent Breach in Form CC 19,
before taking any action—
(a)
in terms of section 15(1)(c) to revoke
that approval or conditional
approval;
(b)
in terms of section 59 or
60.
[22]
(2)
Within 10 business days after receiving
a Notice of Apparent Breach,
a firm referred to in sub-rule (1) may—
(a)
submit to the Commission a plan to
remedy the breach; or
(b)
request the Competition Tribunal to
review the Notice of Apparent
Breach on the grounds that the firm has substantially complied with
its obligations with respect
to the approval or conditional approval
of the merger.
.
. .
(5)
The Commission may act in terms of
section 15(1) to revoke the
approval or conditional approval of a merger referred to in sub-rule
(1), or in terms of section 59
or 60, only if—
(a)
the firm concerned does not respond
to the Notice of Apparent Breach
within 10 business days after receiving it, in the manner anticipated
in sub-rule (2).”
[8]
The remaining provisions of rule 39 deal with the
circumstances where a plan has been submitted. In this matter,
CCBA opted
for a review in terms of rule 39(2)(b). Accordingly,
they are not directly relevant.
[9]
A failure to
successfully review a Notice of Apparent Breach does not
automatically result in the imposition of revocation or other
penalties. Further, Tribunal proceedings against the offending
firm are required.
[23]
Against this statutory
background, it is now appropriate to set out the factual background.
Factual background
[10]
The dispute has
its origins in a large merger that was approved by the Tribunal on 10
May 2016 (merger decision).
[24]
The merger created a
single bottling entity, Coca Cola Beverages South Africa (Pty)
Ltd (CCBSA), from four, previously independent,
authorised bottlers
for The Coca-Cola Company (TCCC).
[25]
CCBSA was established as
a subsidiary of CCBA. I will refer to CCBSA and CCBA
interchangeably as Coca-Cola, unless it is necessary
to distinguish
between them. Pre-merger, TCCC supplied concentrate and
beverage bases to each of the four bottlers.
[26]
They were Amalgamated
Beverage Industries (ABI), Coca-Cola Sabco (Pty) Ltd (Sabco),
Coca Cola Shanduka Beverages South Africa
(Pty) Ltd (Shanduka)
and Coca Cola Canners (Pty) Ltd (Canners). The
bottlers were each separately authorised to
prepare, package,
distribute and sell the Coca-Cola products in a particular geographic
area. There was no overlap.
So the bottlers did not
compete.
[11]
A number of
interested parties participated in the merger proceedings.
[27]
Negotiations took place
between them. The merging parties negotiated settlement
agreements with the Minister and FAWU respectively,
shortly before
the hearing was to commence.
[28]
The settlements were
based on conditions to be attached to the approval of the merger.
The Commission was satisfied with them.
[29]
In considering the
merger, the Tribunal agreed with the merging parties that the merger
had a neutral impact on competition “as
the relevant bottling
operations already form part of the TCCC system”.
[30]
[12]
In relation to the
public interest, the Commission stipulated a number of
employment-related conditions. The Minister raised
objections
to these. As a result of his intervention, and as observed by
the Tribunal, “FAWU successfully negotiated
a strengthening of
the employment conditions”.
[31]
These were then extended
to employees who were members of the National Union of Food,
Beverage, Wine, Spirits and Allied Workers
(NUFBWSAW) in a separate
but identical agreement.
[32]
On the basis of the
agreed conditions, the Tribunal approved the merger.
[33]
Consequent upon the
merger, the consolidated bottling operation was held as to 11.3% by
TCCC, 57% by SABMiller plc and 31.7% by
Gutsche Family Investments
(Pty) Ltd.
[13]
The conditions included—
(a)
as condition 9.1: the maintenance of the
aggregate employee numbers
from the four operations, as at approval date, for a period of three
years;
(b)
as condition 9.2: that no
retrenchments of “bargaining unit employees”
[34]
were to be effected “as a result of the merger” and that
retrenchments outside of the bargaining units were limited
to 250
employees in category Hay Grade 12 and above;
[35]
(c)
as condition 9.4.5: that
retrenchments precluded by condition 9 did not include “necessary
steps taken by the Merging Parties
in terms of section 189 of
the Labour Relations Act
[36]
(LRA) should operational requirements in the ordinary course of
business that are not merger specific necessitate that such steps
be
taken”; and
(d)
as condition 11.2: that in the event of any “conflict
of
interpretation” between the conditions and the union
agreements, the agreements would prevail.
[14]
Clause 3.2 of the union agreements further required
harmonisation of employment conditions across all four bottlers
within four
years to no less than those attaching to the equivalent
posts in ABI, one of the four bottling companies.
[15]
A further merger at holding company level was approved on 27
September 2017. This involved the purchase by TCCC of SABMiller
plc’s 54% shareholding in CCBA. The conditions from the
first merger remained in place. The three-year period
in
condition 9.1, requiring the maintenance of a minimum level of
employment, started running afresh from the date of the second
merger.
[16]
Following the
second merger, according to Coca-Cola, things took a turn for the
worse. During 2017 economic conditions deteriorated.
With
effect from 1 April 2018 the Health Promotion Levy on Sugary
Beverages, colloquially known as the “sugar tax”,
was imposed.
[37]
Input prices,
particularly of sugar, rose sharply. Economic conditions in the
country continued to deteriorate. Sales
volumes were affected
and competitors continued to gain market share. The upshot was
that Coca-Cola wrote to the Commission
on 19 January 2019 informing
it of the challenges faced and warning that retrenchments for
operational requirements may be required.
[17]
On 21 January 2019
Coca-Cola addressed notices to FAWU and NUFBWSAW in terms of section
189(3) of the LRA.
[38]
It referred in the notice
to the adverse conditions, including the impact of the sugar tax.
These developments required it
to restructure, particularly within
logistical and commercial functions, which would result, amongst
others, in the reduction of
labour costs. It gave the assurance
that there would be “no forced merger related
retrenchments within the bargaining
units of the CCBSA group”.
However, if the proposals to restructure were implemented,
retrenchments might be necessary.
Before taking any decisions
in this regard, Coca-Cola wished to consult on possible measures to
avoid or minimise retrenchments,
or their impact if they were to take
place, and on selection criteria and severance pay if avoiding the
retrenchments was impossible.
In the event that the
retrenchments proceeded, Coca-Cola would use a two-phase approach.
Impacted employees would first be
given an opportunity to consider
voluntary retrenchment or early retirement. If operational
requirements were not met thereby,
it would move to involuntary
retrenchments. Consultations with the unions followed, with the
CCMA providing facilitation,
presumably, in terms of section 189A(3)
to (8) of the LRA.
[18]
On 16 April 2019, the Commission notified Coca-Cola that it
had received a complaint from FAWU of a breach of condition 9.1 of
the
merger conditions. It requested information on a number of
issues pertaining to the possible retrenchments. Coca-Cola
responded on 6 May 2019, pointing out inter alia that the total
number of employees continued to exceed the number required in
condition 9.1, that commercial, regulatory and operational factors
gave rise to the need for retrenchments and that the sugar tax
had,
in the nine months since its introduction in April 2018, already cost
Coca Cola approximately R2.1 billion. It
emphasised that
the retrenchments were “for reasons unrelated to the merger”
and denied any breach of the merger conditions.
[19]
On 28 May 2019, the Commission wrote to Coca-Cola asking it to
supplement its response of 6 May 2019. The Commission asked
how
Coca-Cola intended to maintain the employee headcount, as required by
condition 9.1, at the same time as effecting retrenchments.
It
also wanted to know how the sugar tax was causally linked to the
retrenchments. Financial statements and demand volumes
were
requested.
[20]
Coca-Cola
responded in a letter dated 7 June 2019.
[39]
A table provided showed that, whilst the minimum employment level had
dropped below the required level for a number of months
as a result
of “natural attrition” and voluntary retrenchments,
recruitment of 1067 employees in May 2019 into “newly
created
roles” had restored the numbers to above the required minimum
by the end of that month. As to the causal link,
the
retrenchments were required in order to mitigate the losses arising
from the sugar tax and to ensure profitability. An
extract from
the 2018 income statement was provided, with comments pointing out
that sales volumes had declined by 2%, discounts
in order to remain
competitive had increased by R850 million, gross profit had decreased
by R300 million and the various adverse
circumstances had led to a
profit decline for a third consecutive year. Coca-Cola
expressed its surprise at FAWU’s
stance, given that FAWU had
previously joined it in opposing the sugar tax on account of its
potential to cause job losses.
[21]
While this
exchange of correspondence with the Commission took place, Coca Cola
implemented retrenchments. A considerable
number of employees
opted for voluntary retrenchment. Ultimately 368 employees from
within the bargaining unit
[40]
were involuntarily retrenched with effect from 31 May 2019. In
response, FAWU launched unfair dismissal proceedings in the
Labour
Court on 6 September 2019, but these appear not to have been
persisted in. NUFBWSAW also launched unfair dismissal
proceedings in two separate cases. In one of those cases, the
Labour Court dismissed the claim and leave to appeal was refused
by
the Labour Court and Labour Appeal Court. At the time the
replying affidavit was filed in this Court, the other case
had not
been finalised, but it appears that the Labour Court subsequently
dismissed the claims of 13 employees and upheld the claim
of a
fourteenth employee, to whom Coca-Cola was ordered to pay
compensation.
[41]
[22]
On 24 October 2019, and acting in terms of Commission rule
39(1), the Commission issued a Notice of Apparent Breach, presenting
Coca-Cola with the two options in rule 39(2)(a) and (b) as referred
to earlier. The covering letter alleged that “the
retrenchment . . . took place during the moratorium period prescribed
in clause 9.2 of the merger conditions”. The
merged
entity was therefore in breach of that clause. Here the letter
was in error. Only condition 9.1 has a moratorium
period.
Condition 9.2 operates indefinitely.
[23]
Coca-Cola’s attorneys responded on 11 November 2019 by
seeking an extension of the 10-day time limit in rule 39(1) to enable
it to “address a formal written submission”. The
extension was granted. A submission was made on
20 December 2019
setting out Coca-Cola’s case,
asserting that the retrenchments were not merger specific and
requesting that the notice be
withdrawn.
[24]
On 9 April 2020 the Commission responded. It changed its
stance. Now it asserted that (a) Coca-Cola’s duty to
harmonise terms and conditions and (b) the cost cutting “in the
very areas where duplications arose from the merger (i.e.
bottling
operations)” were the true reasons for the retrenchments, not
the sugar tax. This pointed to a complaint based
on condition
9.2 rather than 9.1. The Commission also observed that
“[c]uriously, in parallel with that retrenchment
process, the
merged entity hired new employees in the same/similar positions but
for less wages and less benefits than the employees
who had been
retrenched”.
[25]
A supplementary submission by Coca-Cola’s attorneys on
20 April 2020 in response was to no avail. On 29 April 2020,
the Commission put Coca-Cola to terms to submit a plan, failing which
Coca-Cola would have to approach the Tribunal for appropriate
relief. Coca-Cola opted for the latter. On 14 May 2020 it
applied to the Tribunal in terms of rule 39(2)(b) to review
the
notice of apparent breach.
Before
the Competition Tribunal
[26]
The Tribunal,
[42]
pointed out that it has general appeal and review powers under
section 27(1)(c).
[43]
However, the Constitutional Court recognised in
Sidumo
[44]
that section 33 of the
Constitution does not preclude “specialised legislative
regulation of administrative action”.
[45]
Rule 39(2)(b) provides
for “a separate and context specific form of review” to
determine breaches of merger approval
conditions.
[46]
[27]
The Tribunal
reasoned as follows. As regards the test for determining
whether the retrenchments were “as a result of
the merger”
or “merger specific”, the Tribunal referred to
Aveng
.
[47]
That judgment concerned
whether the reason for certain dismissals was a refusal by employees
to accept a demand of the employer
on a matter of mutual interest
(which would have rendered the dismissals automatically unfair in
terms of section 187(1)(c)
of the LRA) or whether the reason was
Aveng’s operational requirements. The Tribunal in the
present case considered
that the “delictual test” for
causation adopted in the first judgment in
Aveng
[48]
to ascertain the true
reason for the retrenchments was inappropriate in the present
context.
[49]
The
approach in the second judgment in
Aveng
[50]
was to be preferred.
The latter approach characterises the enquiry as one related simply
to proof. Where conflicting
reasons are proffered for the
retrenchments, the true reason for them is a factual question to be
resolved on the probabilities,
applying
Stellenbosch Farmers’ Winery
.
[51]
This approach, in the
Tribunal’s view, was consistent with the Tribunal’s
judgment in
BB
Investment.
[52]
[28]
The argument that
the retrenchments sought to undermine the harmonisation obligation
arising from the merger did not hold, according
to the Tribunal,
because, amongst other things, there was no evidence to show that the
replacement of higher paid employees
with those who were
lower-paid had in fact impacted on the harmonisation.
[53]
[29]
The Tribunal
accepted that, if the retrenchments had been aimed at removing
positions that were duplicated as a result of the merger,
this would
be merger specific.
[54]
However, there was “insufficient evidence to demonstrate that a
principal reason for the retrenchments was the removal
of duplicate
roles” arising from the merger.
[55]
The probabilities favoured Coca-Cola’s reasons for the
retrenchments, namely the need to reduce costs to address the
impact
of the sugar tax, adverse macroeconomic circumstances and rising
input prices.
[56]
The
Tribunal accordingly granted an order declaring that Coca-Cola had
substantially complied with condition 9.2 and set
aside the notice of
apparent breach.
Before
the Competition Appeal Court
[30]
The Commission
appealed to the Competition Appeal Court.
[57]
That Court identified, as the main questions for decision, the
nature of the review under section 27(1)(c) read with
rule 39(2)
and the correct test for deciding whether retrenchments were “merger
specific” rather than due to operational
requirements.
[58]
As regards the test on review, the Competition Appeal Court held that
the Tribunal had erred in holding that section 27(1)
conferred
anything other than ordinary review powers.
[59]
It said that the decision to issue a Notice of Apparent Breach is
administrative action.
[60]
The Competition Appeal Court said that, although the Tribunal had
held that the rule 39(2) enquiry “necessarily involves
whether
the decision to issue the notice is lawful, reasonable and
procedurally fair”, it had only “paid lip service
to its
own injunction”.
[61]
The question was whether the Commission acted reasonably in deciding
that there was an apparent breach.
[62]
[31]
The Competition
Appeal Court criticised the Tribunal for imposing an evidentiary
burden on the Commission, because the merged party
had the full facts
and should be able to demonstrate compliance with the merger
conditions if that was the case.
[63]
Further, it said that the correct approach to causation was the test
laid down in
BB
Investment
.
That is, “an outcome that can be shown as a matter of
probability to have some nexus associated with the incentives
of the
new controller”.
[64]
Adopting a “causal
connection” or “principal reason” test would erode
the safeguards afforded to employees
by section 12A(3) of the
Act.
[65]
[32]
This nexus, the
Competition Appeal Court said, quoting the Tribunal in
BB Investment
,
is more easily established where merging firms are engaged in
overlapping activities.
[66]
It said that the letter of 20 December 2019 from Coca-Cola’s
attorneys, acknowledging that the retrenchments “sought
to
reduce the cost of employment . . . including the removal of
unproductive duplication of roles”, was significant.
The
Competition Appeal Court found compelling the Commission’s
argument that—
“
where
. . . a merger involves four entities, there will be a well-founded
expectation of duplication, and incentive on the part
of the merged
entity to retrench. Based on
BB Investment
,
the probability of a nexus will be accentuated and easily established
because it is not likely that a firm would continue to employ
more
people for a job that requires one person.”
[67]
[33]
The Competition
Appeal Court noted that, despite the extended operation of the
conditions following the second merger, TCCC as the
new controller
effected the retrenchments.
[68]
It said that “[t]he incentives of the new controlling
shareholder are highly implicated in the circumstances”.
[69]
The Competition Appeal Court accordingly overturned the decision of
the Tribunal and ordered Coca-Cola to pay the Commission’s
costs.
In
this Court
Issues
[34]
The main issues raised are these:
(a)
Is this Court’s jurisdiction engaged
on the substantive issues
identified below?
(b)
Is it in the interests of justice to grant leave
to appeal?
(c)
What is the nature and standard of the review
under rule 39(1) and
(2) of the Commission Rules?
(d)
Where merger approval is conditional on there being
no retrenchments
as a result of the merger, what is the test for determining whether
subsequent retrenchments are causally linked
to the merger or merger
specific?
(e)
Was the Competition Appeal Court entitled
to interfere in the
Tribunal’s factual findings?
Jurisdiction
[35]
The application
raises constitutional matters.
[70]
Section 33(3)(a) of the
Bill of Rights requires the passing of legislation that gives effect
to the right of judicial review of
administrative action before a
court or impartial tribunal.
[71]
Here national
legislation, the
Competition Act, confers
a general power of review
on a tribunal. Subordinate legislation under it arguably
creates a bespoke form of review.
How is the subordinate
legislation to be interpreted in relation to both the national
legislation and the right to administrative
justice in the Promotion
of Administrative Justice Act
[72]
(PAJA), in determining
the nature and standard of review? This is a constitutional
question.
[36]
The matter also
raises arguable points of law of general public importance.
[73]
What is the test when the Tribunal decides under rule 39(2) whether a
firm has substantially complied with a merger condition
imposed under
section 12A(3)(b) of the Act which restricts retrenchments?
That in turn raises questions in regard to the
test for causation
that are similarly points of law of general public importance.
Leave
to appeal: interests of justice
[37]
As pointed out by
Zondo J (as he then was) in
Dengetenge
[74]
—
“
[t]his
court grants leave to appeal if it is in the interests of justice to
do so. The factors that it normally takes into
account include
the importance of the issues raised by the matter, the prospects of
success and the public interest.”
[75]
[38]
For reasons that
will become apparent below, the appeal has reasonable prospects of
success. The matter raises important issues
pertaining to the
test on review in terms of rule 39(1) and (2) of the Commission Rules
and the test for a causal nexus between
a merger and retrenchments.
The Tribunal and the Competition Appeal Court relied on the same
Tribunal authority (mainly
BB Investment
)
on the test for causal nexus, but came to different conclusions in
this regard. This creates uncertainty in an important
area of
the regulation of the economy, that impacts beyond the immediate
parties to the dispute. A judgment of this Court
may help to
resolve it. It is accordingly in the public interest that the
matter be considered. As said in
Pickfords
[76]
—
“
[t]he
matter raises novel and complex questions that this Court has not as
yet pronounced on. And, as will be seen later,
there are strong
prospects of success. It is therefore in the interests of
justice that leave to appeal be granted.”
[77]
[39]
There is a complaint that the applicant shifted ground in the
Tribunal, Competition Appeal Court and this Court, with the
consequence
that new arguments are advanced for the first time in
this Court. On this basis, the Commission argued that leave
should
be refused.
[40]
However, the primary stance of the applicant in this Court as
to the nature and standard of review was set out in its founding
affidavit
in the Tribunal. The argument of the applicant on
appeal to this Court, that the review is a special statutory review,
is
entirely consistent with the reasoning of the Tribunal. So
it is not a point argued for the first time in this Court.
Likewise, the test for causation was considered in both the Tribunal
and the Competition Appeal Court. No substantial prejudice
has
been demonstrated by the Commission arising out of the shifting
stance of Coca-Cola.
[41]
I am accordingly satisfied that leave to appeal should be
granted. A consideration of the merits follows.
Merits
Applicant’s
submissions
[42]
Coca-Cola, in the main, supports the reasoning of the
Tribunal. The review contemplated by rule 39(2) is, it submits,
a special
statutory review in which the sole question, to be decided
afresh, is whether in fact the firm has substantially complied with
its merger conditions. It submits that it is not a conventional
administrative law review of the Commission’s decision
to issue
the notice, based on whether it was lawful, reasonable and
procedurally fair. The Competition Appeal Court, Coca-Cola
argues, erred in holding otherwise.
[43]
The test for
causation in this instance is, according to Coca-Cola, the same as
that applied in the law of insurance. Coca-Cola
submits that
factual causation, based on the question “but for the merger
would the retrenchments have taken place?”,
is the first
inquiry. If so, one must then ask whether the merger was the
proximate, real or dominant cause.
[78]
The Tribunal’s test
which sought the “true reason” for the retrenchments was
akin to this. The Competition
Appeal Court, so Coca-Cola
argues, erred in applying a test that sought only “some nexus
associated with the incentives of
the new controller”. On
the facts, the merger did not cause the retrenchments. Their
proximate, real and dominant
cause was the adverse circumstances that
Coca-Cola referred to.
Respondent’s
submissions
[44]
The Commission supports the reasoning of the Competition
Appeal Court on both the nature of the review and the test for
causation.
It submits that, on Coca-Cola’s approach, the
rule 39(2) review is a reconsideration or appeal, which is
inconsistent with
the use of the word “review” in rule
39(2)(b) and with our legal system’s steadfast insistence on
drawing a clear
distinction between appeal and review.
[45]
On merger specificity, the test is objective, so submits the
Commission. One asks if there was an incentive on the part of
the new controller to engage in retrenchments. If so, the
merged entity must put up evidence to show that the retrenchments
were motivated by something other than the merger, such as
operational reasons. This balances the rights of employee and
employer.
[46]
Here four firms carrying out overlapping functions were
collapsed into one, so duplication was, according to the Commission,
to
be expected and there was an incentive to retrench. Yet no
adequate explanation was provided by Coca-Cola. Indeed, its
attorneys’ submission of 20 April 2020 conceded that certain of
the retrenchments were occasioned by the removal of duplication.
The Competition Appeal Court did not interfere impermissibly with the
Tribunal’s factual findings.
The
nature and standard of review
[47]
The particular
review remedy in question is created exclusively by rule 39(1) and
(2).
[79]
No party has
challenged its constitutional validity. The rule must therefore
be taken as valid. Its meaning must
be discerned based on the
interpretive requirements emanating from section 39(2) of the
Constitution, paying particular attention
to its text and always
having due regard to its context and purpose.
[80]
Applying section 39(2)
requires that the values of fairness and justification
[81]
underlying the right to
administrative justice in section 33 be promoted. As to
purpose, the rule manifests a proactive approach
to ensuring
compliance with merger conditions. As soon as it appears to the
Commission on the basis of its investigations
that there is a breach,
it must raise a flag. If the firm acknowledges the breach, a
plan must quickly be submitted and agreed
to remedy it. If it
does not, a procedure is available to test this expeditiously, but
fairly.
[48]
As to context,
this must take into account the Rules’ source in the Act,
namely sections 21(4) and 27(2). They empower
the Minister to
make regulations for matters relating to the functions of the
Commission and the Tribunal respectively. This
includes the
power to make regulations for their “procedures”.
[82]
Context must also factor
in the parts of the statute that lay down the Tribunal’s
powers.
[49]
The Competition Appeal Court approached the matter on the
basis that the relevant empowering provision was section 27(1)(c),
which
empowers the Tribunal to “review any decision of the
Competition Commission”. The Competition Appeal Court
appeared
to regard section 27(1)(c) as predominating in the
interpretive process because “it is not permissible to look to
. . . rule
39 to give scope and meaning to the Act which created the
rule”. The Competition Appeal Court was of the view that
section 27(1)(c) contemplated only an “ordinary” judicial
review of administrative action, here constituted by the Commission’s
decision to issue the rule 39(1) notice. Rule 39 had to be
interpreted accordingly.
[50]
At the level of context, there are the following difficulties
with this approach:
(a)
This leaves out of account that the Minister
has the power under the
Act to prescribe regulations that include “procedures”
relating to the functions of the Commission.
(b)
It overlooks section
27(1)(b), which separately confers on the Tribunal the power to
“adjudicate on any other matter that
may, in terms of this
Act,
[83]
be considered by it”.
This wording would cover the performance by the Tribunal of the
review function provided for in
rule 39(2).
(c)
Even if it did not, the
word “review” is employed as a verb in section 27(1)(c)
in a way that is wide and unqualified.
It applies to the review
of “any decision of the . . . Commission that may in terms of
this Act
[84]
be referred to it”.
This could include any review under the Act and Rules, whatever its
particular characteristics.
It is a generic or umbrella
empowering provision that does not dictate the nature of each review
falling within its ambit.
[51]
On this basis, the
meaning of section 27(1)(c) is not dictated by the particular
features of the review under rule 39(2)(b), as
suggested by the
Competition Appeal Court. Section 27(1)(c) would
readily include a special statutory review.
It is a form of
review that is well recognised in South African administrative
law.
[85]
In this regard, Hoexter
and Penfold
[86]
say the following:
“
The
legislature may and often does confer on the courts a statutory power
of review. This is ‘special’ because
it differs
from ‘ordinary’ judicial review in the administrative-law
sense. The adjective also helps to distinguish
other statutory
reviews from PAJA review, which is of course statutory too.
Statutory
review is often a wider power than ordinary review, and thus more
akin to an appeal, but it may well be narrower,
with
the court being confined to particular grounds of review
or
particular remedies. While in
Johannesburg
Consolidated Investment Co
[87]
Innes CJ spoke of the
statutory review power as being ‘far wider’ than the
first two kinds of review mentioned by him,
it is clear that the
precise extent of the power always depends on the particular
statutory provision concerned.” (Emphasis
added.)
[52]
As to text, the wording of rule 39(1) and (2) is largely left
out of account in the judgment of the Competition Appeal Court. Yet,
the following features of the wording are significant:
(a)
The words “appears” and “apparent”
in the
introductory part of subsection (1) are all-important. As
soon as there is the appearance of a breach of a condition,
the
Commission is obliged to act in terms of the rule by placing the firm
on terms either to submit a plan to remedy the breach
or to “review
the Notice of Apparent Breach”.
(b)
The relevant dictionary
definition of “appear” in this context is as follows:
“Seem to the mind, be perceived
as, be considered; seem
outwardly or superficially (but not in reality)”.
[88]
(c)
Rule 39(1), in providing for the delivery
of a Notice of Apparent
Breach, is not framed as a self-contained, discretionary
decision-making provision. It is more in
the nature of a
notification of intended action, or a precursor to a decision-making
process.
(d)
Rule 39(2)(b) provides for the review of the notice,
not the
underlying decision of the Commission to issue it.
(e)
It sets out a single basis for the envisaged
review, that is, proof
to the Tribunal that the accused firm “has substantially
complied with its obligations with respect
to the . . . conditional
approval of the merger”.
(f)
It contains no provision for remittal
to the Commission for decision
afresh if the firm is successful.
(g)
It is framed so as to be objectively justiciable,
requiring the
applicant to demonstrate actual substantial compliance, rather than
to demonstrate any flaws in the procedure or
reasoning process of the
Commission.
(h)
And, finally, rule 39(2)(b) is at once both broad
and narrow –
whilst it limits the applicant to a single review ground, on its
clear terms there is a full opportunity to
prove to the Tribunal
substantial compliance with the merger condition.
[53]
Nor is a decision
on the merits by a court or tribunal on review, as the text of
section 39(2) seems to require, an alien concept
in administrative
law. This category of reviews was recognised 120 years ago in
Johannesburg
Consolidated
as
conferring the power to decide the matter
de
novo
(afresh)
.
[89]
Deciding a matter on the
merits is to a degree what takes place when a court substitutes its
decision for that of the decision maker
in terms of section
8(1)(c)(ii)(aa) of PAJA, albeit on the basis of the evidence already
before a court. A more intrusive
and less-deferential degree of
review is appropriate where the reviewing court or tribunal enjoys
specialised expertise in the
area in question. The Tribunal is
a specialist adjudicator in the competition field and is
well-acquainted with the applicable
law, economics and policy.
[90]
[54]
Taking into
account the foregoing analysis, and viewed holistically, rule 39
operates as follows:
[91]
(a)
The Commission receives information that
a firm may have breached a
merger condition.
(b)
It might seek the comment of the firm on this information
to see if
there is an innocent explanation. Whether or not it is
compelled to do so need not be decided here.
(c)
If it appears on the basis of the information
that there has been a
breach, then the Commission issues a Notice of Apparent Breach to the
firm. The Notice will have to
provide sufficient information
for the firm to be able to appreciate the nature of the breach
complained of.
(d)
The firm then has an election. If it concedes
the breach, rule
39(2)(a) affords it the opportunity to submit a remedial plan.
If it does not concede the breach, it may
request the Tribunal to
review the Notice of Apparent Breach.
(e)
Rule 39(2)(a) then provides a single permissible
ground for the
review, namely that the firm has substantially complied with its
obligations; in other words, that there was no
breach. That is
then the objective inquiry that the Tribunal undertakes.
(f)
The firm must place the requisite evidence
before the Tribunal to
demonstrate substantial compliance. It bears the onus. If
it discharges the onus, that is the
end of the matter.
(g)
If it fails to discharge the onus, the Commission
may proceed to take
action against the firm in terms of section 15(1)(c), 59 or 60 of the
Act.
[55]
The decision of
the Tribunal in this matter is largely consistent with this approach
to the interpretation of rule 39(1) and (2)
and the review standard
contemplated by it. The judgment of the Competition Appeal
Court is not. The Competition Appeal
Court’s confinement
of the review to assessing whether the Commission acted lawfully,
reasonably and procedurally fairly
in deciding to issue the Notice of
Apparent Breach is irreconcilable with the specific wording of
rule 39(2)(b) –
in fact it ignores it and replaces
the special review ground it stipulates with the ordinary
administrative-law review grounds.
To do this is to legislate,
not adjudicate, something the Constitution does not permit.
[92]
[56]
The Competition
Appeal Court’s interpretation has potentially grave and unjust
consequences for a merged firm. The firm
may have to provide
and implement a plan for remedying the apparent breach or face
punitive proceedings for revocation, an administrative
penalty or,
possibly, divestiture,
[93]
in
circumstances where the Commission reasonably but wrongly believed
there to have been a breach; or where there was an apparent,
but not
an actual breach. That would sanction an injustice and a breach
of the rule of law. There is no support in
the Act for holding
a firm liable on the basis of an
apparent
breach. Section
15(1)(c), 59(1)(d)(iii) and 60(1) all require an actual breach.
[57]
The Competition Appeal Court’s approach provides no
convincing basis for rejecting the conception of
rule 39(1) and (2)(b)
as providing for a special
statutory review. Accordingly, the Competition Appeal Court’s
judgment cannot stand on this
aspect. The test for review is
simply that laid down in the text of rule 39(2)(b) –
objectively, has Coca-Cola substantially
complied with its
obligations under the conditions attached to the merger?
The
test for causal nexus or merger specificity
[58]
The Tribunal
rejected what it described as the “delictual test”
involving the two stage enquiry into factual and
legal
causation.
[94]
Its test
for determining whether there was a sufficient nexus between the
merger and the retrenchments for a finding of breach
of the merger
conditions was to ask whether, on an assessment of the probabilities,
the preceding merger, on the one hand, or the
alleged operational
requirements, on the other, was the true reason for the
retrenchments. It adopted this approach from
the following
passage in the second judgment in
Aveng
:
“
The
determination of the true reason for the dismissal appears to me to
be simply a matter of fact, which is established in accordance
with
the rules applicable to the evaluation of evidence. Where an
employee proffers a contrary version regarding the true
reason for
the dismissal, a court must resolve the dispute of fact by evaluating
the evidence and by making a finding as to which
of the two versions
is to be preferred on a preponderance of probabilities, and why.
Where there are two conflicting, irreconcilable
versions before it, a
court must apply the well-established approach laid down in
Stellenbosch
Farmers’ Winery.
”
[95]
[59]
The Competition
Appeal Court rejected the Tribunal’s approach. To seek
the “true reason” would, in its view,
erode the
safeguards afforded to employees by section 12A(3) of the Act.
The Competition Appeal Court preferred, as
a test, asking whether
there is “some nexus between the retrenchments and the merger”
or, as stated in
BB Investment
,
whether the “outcome . . . can be shown, as a matter of
probability, to have some nexus associated with the incentives of
the
new controller”
.
[96]
There are at least the
following difficulties with the Competition Appeal Court’s
test.
[60]
Firstly, given that the effect of a merger is generally that
the newly-merged firm attains control over the enterprise, there will
always be “some nexus” between the merger, on the one
hand, and the incentives of, and subsequent decisions and outcomes
in, the merged enterprise. This is so even if there are other
more immediate, more logical or more dominant reasons for them.
On an approach that only requires “some nexus”, a
finding of merger specificity and breach is inevitable.
Its
effect is to treat the “but-for” enquiry as a complete
test for causation.
[61]
Secondly, to link outcomes with
incentives
in the
present context is not entirely appropriate. In
BB
Investment
, the Tribunal was concerned with whether retrenchments
that were foreshadowed post-merger would be merger specific. An
examination
of incentives is appropriate in those circumstances.
Here we are concerned with retrenchments that have already taken
place.
Whilst evidence of incentives would be relevant, it is
actual decisions and conduct of the merged firm that must be tested
for
a causal nexus with the merger. Moreover, the test must be
applied at the time of the alleged breach, taking into account
all
that has transpired since the merger, including the time lapse.
The longer the lapse, the less probable the link with
the merger.
[62]
Thirdly, the test
extracted by the Competition Appeal Court from
BB Investment
is only part of the test
actually applied in that case. The nature of the test laid down
there can only be discerned if regard
is had to it in full.
[97]
This includes, as part of the test, examination of the
“pre-merger counterfactual”,
[98]
that is, what would have happened if the merger had not taken place;
and whether the impugned decision-making was “sufficiently
closely related to the merger”.
[99]
These paragraphs
were not fully considered, nor were they applied in the Competition
Appeal Court’s judgment.
[63]
Finally, the test
for a breach of a merger condition must be applied in the context of,
and with due regard to, the purpose and
wording of the Act, which
contemplates an
actual
breach of a condition
before punitive action may be taken.
[100]
Of particular
importance is the wording of the merger condition. A merger
condition that contemplates breach only where retrenchments
are “as
a result
of
the
merger”, or “merger
specific
”
is incompatible with a
test based on “some nexus”. Can it be said that
there is a breach where the
principal
reason for the firm’s
actions had nothing to do with the merger? The answer must
surely be “no”. Yet
this is the effect of the
Competition Appeal Court’s test.
[64]
It is important to
bear in mind that
Aveng
was
decided in the context of section 187(1)(c) of the LRA. It
expressly requires the question to be asked whether “
the
reason for the dismissal
is
. . . a refusal by employees to accept a demand in respect of any
matter of mutual interest”.
[101]
The second judgment in
Aveng
was at
pains to emphasise this wording as a distinguishing feature in
deciding that the ordinary two stage causation test did
not
apply.
[102]
Here we are principally
concerned with the wording of condition 9.2 which obliged Coca-Cola
“not [to] retrench any Bargaining
Unit Employees
as
a result of
the
Merger” and condition 9.4.5, which in effect permits
retrenchments that are not “merger specific”.
[65]
The phrase “as
a result of” is recognised causal terminology.
[103]
In the context of a
statute containing this phrase, it has been held to invoke the
two-stage enquiry into factual and legal causation,
but subject to a
constitutionally compliant, purposive and context-sensitive approach
to the interpretation of the instrument in
which the words are to be
found.
[104]
In the contractual
setting, the approach to causation was described in
Concord
Insurance
[105]
as follows:
“
Legal
causation is not a logical concept and the law does not ascribe
causative effect to every logical
sine
qua non
(cf
International
Shipping Co (Pty) Ltd v Bentley
1990
(1) SA 680
(A) at 700E-I). Basically this is so because complex
legal questions – often involving considerations of policy –
cannot be solved satisfactorily by a general positive application of
the simple logical proposition that a particular fact or state
of
affairs cannot be regarded as the cause of another unless the former
is a
sine
qua non
for
the latter. Such questions usually arise where several factors
concurrently or successively contribute to a single result
and it is
necessary to decide whether any particular one of them is to be
regarded legally as a cause. In criminal law and
the law of
delict legal policy may provide an answer but in a contractual
context, where policy considerations usually do not enter
the
enquiry, effect must be given to the parties' own perception of
causality lest a result be imposed upon them which they did
not
intend.”
[106]
[66]
In the more recent
case of
Guardrisk
Insurance,
[107]
the Supreme Court of
Appeal was concerned with an insurance policy that indemnified the
insured for “loss . . .
resulting
in interruption (of) the
business due to notifiable disease”. The question was
whether the policy indemnified the insured
against losses caused by
the lockdown consequent upon the Covid-19 pandemic.
[108]
The Supreme Court of
Appeal said that “[t]he general approach to causation also
applies to insurance law” and begins
with factual causation as
the first enquiry and legal causation as the second.
[109]
It said that “[i]n
the contractual context it has long been accepted that causation
rules should be applied ‘with good
sense to give effect to, and
not to defeat the intention of the contracting parties”
[110]
and went on to hold that
the legal causation enquiry involved identifying a proximate cause .
. . as a matter of “reality,
predominance [and]
efficiency”.
[111]
That in turn is
ascertained by “applying good business sense”.
These judgments in my view correctly state the
approach to causation
in a contractual setting.
[67]
The setting in which the causation enquiry arises in this case
is an amalgam of statute and contract – statute because the
rule 39 enquiry is a precursor to sanction under the relevant
sections of the Act; and contractual because the merger conditions
imposed by the Tribunal were the product of written agreements
between Coca-Cola and the trade unions. The first enquiry
is
one based purely in logic. It is in the second enquiry that the
contemplation of both the Legislature and the parties
must be
ascertained.
[68]
Textually, the
exclusion in condition 9.4.5 from the prohibition on retrenchments of
those that are not “merger-
specific
”
points to the need to
link the retrenchments directly, or at least predominantly, to the
merger for there to be a breach.
Contextually, the
circumstances in which these merger conditions were formulated
included that they had been strengthened in the
employees’
favour.
[112]
That strengthening may
well have been motivated by concerns about the high level of
unemployment in South Africa. That aligns
with the likely
purpose of section 12A(3)(b) of the Act. Strict compliance with
the conditions would therefore be expected
of Coca-Cola. And
close scrutiny of its conduct would follow if a breach was alleged.
At the same time a context-sensitive
approach must take into account
the severe impact of the consequences that would flow in terms of the
Act in the event that Coca-Cola
was found to be in breach. This
calls for a blend of rigour and fairness in applying the second leg
of the causation enquiry.
Did
the Tribunal apply the causation test correctly?
[69]
Although the wording of the conditions did not in my view
warrant the application of the second judgment in
Aveng
, the
Tribunal ultimately asked itself the right questions. It said,
quoting
BB Investment
, that—
“‘
firms
are dynamic institutions’ and ‘not every change that
results post-merger is necessarily attributable to the merger’.
That approach it held ‘is far too mechanistic’ and
changes can be conceived of ‘a firm’s behaviour even
post-merger that would have happened in any event and can be thought
of as not being merger specific’”.
[113]
[70]
That observation
on the part of the Tribunal aligns with the but-for test, the first
stage of the enquiry. In then seeking
to identify the “true
reason” for the retrenchments, the Tribunal tested for the
requisite link between the merger
and the retrenchments and found
this wanting. Its reasoning was consistent with the authorities
relating to the test for
causation in the contractual and statutory
settings. The Tribunal’s analysis of the facts
[114]
reflected the rigour and
fairness required in the context of these particular conditions, as
is elaborated upon below. To
the extent explained above, the
Competition Appeal Court was accordingly wrong in finding that the
Tribunal applied the incorrect
test for a causal nexus.
Was
the Competition Appeal Court entitled to interfere in the Tribunal’s
factual findings?
[71]
As pointed out by
this Court in
Mediclinic
,
[115]
the Competition Appeal
Court “does not have unbridled powers to interfere with the
decision of the Tribunal”,
[116]
particularly in relation
to the latter’s findings of fact. In
Mediclinic
,
this Court applied the Competition Appeal Court’s reasoning in
Imerys
.
[117]
Imerys
holds that the
Competition Appeal Court must take into account the composition, role
and expertise (on policy, financial and economic
issues) of the
Tribunal and apply a measure of deference to it. Additionally,
the Competition Appeal Court must, as an appeal
court, apply the
general rule that an appellate court will not lightly interfere with
the factual findings of a court of first
instance.
[118]
[72]
Was the Competition Appeal Court entitled to interfere with
the Tribunal’s decision on the facts, as it did? This
must
be assessed with reference to the three main grounds on which
the Commission alleged breach of the merger conditions, namely
(a) the
reduction of staff costs through retrenching and
rehiring at lower wages, (b) the alleged breach or circumvention
of the merger
condition pertaining to the harmonisation of employment
conditions and (c) the alleged misuse of the retrenchments to reduce
staff
through the elimination of posts or roles that were duplicated
because of the merger. On each, the Tribunal found in favour
of
Coca-Cola.
Retrenching
and rehiring at lower salaries
[73]
On the issue of the alleged retrenching and rehiring of staff
at lower salaries in the same posts, the Tribunal considered the
rehiring
issue to be tied up inextricably with, and indistinguishable
from the argument that the retrenchments sought to eliminate posts
that were duplicated consequent upon the merger. The
duplication issue is dealt with below.
[74]
Staying with this
topic, if employees were retrenched and then rehired (or replaced by
new employees) in the same roles but at lower
salaries, the end
result would be that no duplicate posts were eliminated, only a
change in their terms and conditions. This
may be unfair under
the LRA,
[119]
but that would have no
bearing on whether or not the retrenchments were in breach of
condition 9.2. Indeed, it tends to confirm
that Coca Cola
did
not
seek to retrench
employees so as to eliminate duplication resulting from the merger,
but rather to reduce its labour costs.
Alleged
breach of harmonisation condition
[75]
The Commission alleges that “it is plausible that the
underlying reasons for retrenching employees and rehiring in the same
roles at lower costs is an attempt by Coca-Cola to avoid the higher
employment costs that are associated with . . . [c]lause 11
of
the 2016 merger conditions [which] requires [Coca-Cola] to harmonise
working terms and conditions”. The observation
that must
immediately be made is that, once again, this is self-defeating for
the Commission’s case. If posts or roles
have been
refilled at lower pay levels, they have not been eliminated through
merger-specific retrenchments of those in duplicate
roles, but rather
to save costs by paying lower wages in straitened circumstances.
[76]
A fundamental difficulty facing the Commission on this point
is that there was no complaint of breach of the harmonisation
condition
made against Coca-Cola in the Notice of Apparent Breach.
To then find non-compliance with that condition would be in breach
of
Coca-Cola’s fundamental right to procedural fairness. The
Commission’s argument before this Court, that Coca-Cola
was
obliged in terms of the wording of rule 39(2)(b) to prove
substantial compliance with
all
conditions, regardless of what
is alluded to in the Notice of Apparent Breach, is not sustainable
and would similarly give rise
to procedural unfairness.
Supporting the view that there was no intention to bring a complaint
regarding the harmonisation
condition, the Commission’s
answering affidavit says “[r]egarding harmonisation, the Team
correctly noted that ‘it
was not able to assess whether a
breach of the Conditions has transpired’”.
Elimination
of duplicated posts or roles
[77]
The Commission’s primary case for a breach of condition
9.2 was based on Coca-Cola’s having used the retrenchments to
eliminate duplication of posts that arose from the merger.
[78]
This complaint must be assessed on a conspectus of the
evidence. This includes the very substantial evidence put up by
Coca-Cola
regarding the three primary reasons it advanced for the
retrenchments, namely the poor macro-economic climate, the sugar tax,
and
the sharp increase in raw material prices.
[79]
There was an
attempt by the Commission to suggest that the sugar tax was already a
known problem at the time of the mergers.
However, the Tribunal
demonstrated that this was not so, pointing out that the first merger
was notified in March 2015 and
approved in May 2016, whereas the
sugar tax was first raised as a single, unquantified line item in the
Minister of Finance’s
budget speech in February 2016 and
formed the subject matter of a National Treasury Policy Paper in
July 2016.
It then had to make its way through
Parliament. Both Coca-Cola and FAWU made a series of oral
submissions to Parliament’s
Standing Committee on Finance
regarding the proposed sugar tax, pointing out its potential for
causing job losses amongst other
things.
[120]
It was only once the
legislative process had been completed by publication of the Rates
and Monetary Amounts and Amendment of Revenue
Laws Act
[121]
on 14 December 2017 that the impact of the tax could be
quantified. By then, both mergers were complete.
[80]
As the Tribunal noted, the evidence regarding the challenges
faced by Coca-Cola was uncontested. The Commission’s
stance
was rather that a substantially reduced profit was still a
profit, leaving the Commission’s case for disguised
merger-specific
retrenchments intact. However, on the basis of
the evidence of the challenges faced, Coca-Cola established at least
a prima
facie case that the operational requirements, not the merger,
caused the retrenchments. Notwithstanding the concession in
this Court by Coca-Cola that it bore the onus, the effect of
Coca-Cola having made out a prima facie case was to impose an
evidentiary
burden of rebuttal on the Commission. The Tribunal
was correct in recognising that the Commission faced this evidentiary
burden.
[81]
The Competition
Appeal Court criticised the imposition of an evidentiary burden on
the Commission as being erroneous because Coca-Cola
had all the
information at its disposal and it is not provided for in rule
39.
[122]
But the rules regarding
onus and evidentiary burdens are part of the law of evidence.
[123]
They need not be
expressly sourced in legislation, save perhaps for a reverse onus.
The Tribunal did not impose any reverse
onus. The
Commission has exceptionally wide investigative powers under the
Act
[124]
and these provide more
than adequate tools for the Commission to gather the evidence to
satisfy a burden of rebuttal.
[82]
Part of the evidence that the Commission relied on to
demonstrate that the retrenchments were as a result of the merger was
information
contained in its merger report prepared at the time that
the first merger was under consideration. It is dated
11 December
2015. It describes the immediate effect of the
then-proposed merger on employment. It points out that “the
merging
parties submit that the proposed merger will result in the
duplication of about 387 functions and hence there will be
retrenchments
post-merger. In total [the bottling companies]
have about 7 549 employees.” A table then sets out
how those
7 549 employees are divided up between the different
bottling companies, listed in the top row of the table, with employee
numbers provided, row by row, for the various parts of each
enterprise, that is, human resources, finance, marketing, sales,
manufacturing,
logistics, management and administration. The
right-hand column of the table gives the total employees for each
part and
the total in the bottom right-hand corner of the table
reconciles with the total of 7 549 employees.
[83]
In the paragraph following the table, it is pointed out that
2 688 of the 7 549 employees are non-bargaining unit
employees
and the remaining 4 861 employees fall within the
bargaining unit. It then states—
“
[t]he
merging parties have indicated that the implementation of the
proposed transaction will result in the duplication of about
387
positions (non-bargaining unit employees) at an executive,
managerial, administrative and technical level. The parties
have however reduced the number of job losses from 387 to 250.”
[84]
What underlay these retrenchments, already envisaged at the
time of the merger, is that the combining of the various bottling
companies’
head offices would lead to duplication at that
level. Hence the provision in condition 9.2 that “any
retrenchments
of employees outside of the bargaining units shall be
limited to 250 employees within the category of Hay Grade 12 and
above.”
Retrenchments were not then envisaged in the job
categories below this level, because each bottling company operation
continued
as it had done before the merger, employing the same staff
in the same roles. Given that there was no geographical overlap
of these operations, there was at that time no prospect that the
merger would lead to a duplication of positions.
[85]
The Commission’s conclusion that the present
retrenchments from within the bargaining unit were as a result of the
merger
was based substantially on a memorandum dated 30 August 2019
“to inform the Competition Commission Meeting . . . of a
complaint
alleging a breach of the Merger conditions . . . by the
Merged Entity”. Central to its reasoning was the
following:
“
11.3
The team notes that the retrenchments are taking place in the
bottling operations of the Merged Entity. . . . These
are the same
roles where duplications occurred as a result of the merger and this
is what the Conditions aimed to avoid.
Below is a table from
the Commission’s merger report in relation to the Merger
indicating the roles where duplications would
occur as a result of
the merger.”
[86]
The identical table from the 2015 merger report is then set
out. The memorandum then continues as follows:
“
11.4
From the above table, the Team notes that the merger resulted in
duplications of roles, but the roles which had
a high number of
duplications were roles such as manufacturing, logistics and sales
and those are the same roles where retrenchments
have largely taken
place. This indicates that the retrenchments are merger
specific as the employees that have been mostly
affected by the
retrenchments are in the same roles where most of the duplications
occurred as a result of the merger.”
[87]
The drafters of the memorandum were seriously mistaken.
The table extracted from its earlier merger report was not one
showing
where duplications would occur. It was a table giving a
breakdown of the
entire workforce
at each of the bottling
plants. Hence its total of 7 549 employees. The
table did not give any indication of where
the duplications would
take place. The high numbers in manufacturing, logistics and
sales are simply high total numbers of
employees in those roles at
the time of the merger, as one would expect in bottling and
distribution operations. The retrenchments
envisaged at the
time of the merger were not from these categories. Condition
9.2 itself makes that clear. It envisaged
any retrenchments
being limited to employees within the categories of Hay Grade 12 and
above, namely managerial and administrative
staff and the like.
[88]
In truth, the merger report is evidence against the
Commission’s case. It points to the retrenchments
foreseen as a
result of the merger as being located at head-office
level. This is logical. Head office functions can be, and
were
in fact, rationalised and consolidated into a single head
office. A centralised head office was placed in control over
all
the operations in the different parts of the country. Not
so in the case of employees engaged in operations. No
duplication
was envisaged in their ranks as a result of the merger
because their operations would continue as before in each of their
different
regions with the same staff.
[89]
What
would
give rise to duplication in operations in
different regions would be a decline in production; or a
restructuring to achieve greater
efficiency to save costs.
Functions that might have required, say, three persons doing the same
job at a higher level of
production, might now require only one at a
lower level of production or following a restructuring. The
evidence bears this
out. Those subject to retrenchments
included warehouse operators, janitors, cleaners, wash-bay
attendants, truck helpers,
fleet artisans, panel beaters and so on in
the regional bottling businesses. These are not the type of
functions that, on
the multi-regional logic of this merger, became
duplicated because of it.
[90]
In a similar vein,
the Commission, with support in the judgment of the Competition
Appeal Court,
[125]
seized upon a paragraph
from Coca-Cola’s attorneys’ written submission to the
Commission of 20 December 2019.
The attorneys said—
“
CCBSA
recognises that certain job losses were occasioned by the removal of
duplication so as to reduce staff costs, and to change
the nature of
employment within the firm so as to reduce overall costs in view of
unforeseen events post-merger.”
[91]
This is not a concession that the retrenchments targeted
duplication as a result of the merger. It is an assertion that
the
need to eliminate duplication followed the unforeseen events that
followed the merger, which led to the need to reduce overall costs.
It lacks any concession of the causal connection with the merger for
which the Commission contends.
[92]
In these circumstances, there was no basis for the Competition
Appeal Court to interfere in the factual findings of the Tribunal.
The Tribunal’s analysis of the facts was cogent and revealed no
misdirection, nor any clear error.
Conclusion
[93]
The Competition Appeal Court mischaracterised the nature of
the appeal and applied the wrong tests in respect of both review and
causation. There was no basis in law or fact for overturning
the judgment of the Tribunal. The appeal therefore succeeds.
[94]
Coca-Cola sought
costs against the Commission in the Competition Appeal Court and in
this Court. This would only be appropriate
if the Commission
had acted unreasonably, frivolously or vexatiously.
[126]
Coca-Cola has not made
out any such case.
[95]
The following order is made:
1.
Leave to appeal is granted.
2.
The appeal is upheld.
3.
The order of the Competition Appeal Court is set aside and replaced
with the
following order
“
(a)
The appeal is dismissed.
(b)
Each party must bear its own costs.”
4.
Each party must bear its own costs in this Court.
For
the Applicant:
W
Trengove SC and M Engelbrecht SC instructed by Bowman Gilfillan
Incorporated
For
the First Respondent:
T
Ngcukaitobi SC, T Charlie and S Quinn instructed by Maenetja
Attorneys
[1]
See the unemployment data of the International Labour Organisation
placing South Africa’s unemployment rate second after
eSwatini
(11 January 2024), available at
https://ilostat.ilo.org/topics/unemployment-and-labour-underutilization/.
[2]
89 of 1998.
[3]
Section 12A(3)(b) read with section 12A(1A) of the Act.
[4]
Under
the heading “merger control”. It is made up by
sections 11-18.
[5]
Section 11(5).
[6]
Section 11(1) and (5).
[7]
Section 14A(1)(a) and (b).
[8]
Section 12A(1).
[9]
Section 12A(1)(a) and (b).
[10]
Section
12A(1A).
[11]
Section 12A(2) and (3).
[12]
Section 16(2)(a) to (c).
[13]
Section 16(3) of the Act, which provides:
“
Upon
application by the Competition Commission, the Competition Tribunal
may revoke its own decision to approve or conditionally
approve a
merger or, in respect of a conditional approval, make any
appropriate decision regarding any condition relating to
the merger,
including the issues referred to in section 12A(3)(b) or (c), and
section 15, read with the changes required by the
context, applies
to a revocation or other decision in terms of this subsection.”
Section 12A(3)(b)
relates to the effect of the merger on employment. Section
12A(3)(c) relates to the effect of the merger
on small and medium
businesses or firms owned by historically disadvantaged persons.
Section 15 governs revocation
of the approval of a small or
intermediate merger by the Commission. The effect is to add,
as grounds of revocation under
section 16(3), a merger approval
decision having been based on incorrect information for which a
party to the merger is responsible,
or the approval having been
obtained by deceit or a breach of a merger condition.
[14]
This
is provided for in section 15(1)(c), which is incorporated into
section 16(3) by reference.
[15]
Administrative
penalties and divestiture are dealt with in Part D of Chapter 5,
under the heading “Tribunal hearings
and orders.”
[16]
Section
59(1)(d)(iii) of the Act.
[17]
Section
59(2) and (2A) of the Act.
[18]
Section
60(1)(a) and (b).
[19]
Section
1 of the Act. “Regulation” is defined in section 1
as “a regulation made under this Act”.
[20]
Sections
21(4) and 27(2) of the Act.
[21]
Rules
for the Conduct of Proceedings in the Competition Commission,
GG
22025,
1 February 2001, as amended (Commission Rules). See also Rules
for the Conduct of Proceedings in the Competition
Tribunal
GG
22025,
1 February 2001. Neither set of rules was published with a
notice or regulation number.
[22]
See
the discussion of sections 59 and 60 at para [5]
above.
[23]
In this regard, rule 37 of the Tribunal’s rules provides in
relevant parts as follows:
“
37
Revocation of approval or conditional approval
(1)
In respect of a merger that has been approved or conditionally
approved by the Tribunal, the Commission may file a Notice of Motion
in Form CT 6 to revoke the approval or conditional approval
of that
merger provided, if the proposed revocation is based on
section 15(1)(c), that it has taken the steps set out in
rule
39 of the Competition Commission Rules.”
[24]
Coca-Cola
Beverages Africa Limited v Various Coca-Cola and Related Bottling
Operations
[2016]
ZACT 68
(
Coca-Cola
merger
decision
).
[25]
TCCC
is a company incorporated in accordance with the laws of the United
States and listed on the New York Stock Exchange.
[26]
These
are described, along with their holding companies, at paras 21-6 of
the
Coca-Cola
merger decision
.
[27]
Coca-Cola
merger
decision
above
n 24 at paras 8-9.
[28]
Id
at
para 16.
[29]
Id
at para 17.
[30]
Id
at
para 34.
[31]
Id
at para 55.
[32]
Id
at
paras 50-5.
[33]
Id
at
para 56.
[34]
“
Bargaining
unit employees” are defined in the conditions of the
Coca-Cola
merger
decision
above
n 24 at para 1.9 as—
“
those
employees of the Merging Parties falling within the respective
bargaining units as defined in the various recognition agreements
of
the Merging Parties in terms of the Labour Relations Act”.
[35]
The definition adopted by the Commission in its merger report was as
follows:
“
According
to the Hay Correlation Table, the positions graded at Hay Grade 12
and above . . . are skilled positions which include
the following
positions: specialised, skilled, technical specialist and senior
supervisory, middle . . . management, high level
advisory etc.”
[36]
66
of 1995.
[37]
The Health Promotion Levy on Sugary Beverages was introduced in
terms of the Rates and Monetary Amounts and Amendment of Revenue
Laws Act 14 of 2017.
[38]
The
letter refers to “section 189 (A)”, but the letter is
clearly the notice contemplated in section 189(3) of the
LRA.
Section 189(3) reads as follows:
“
(3)
The employer must issue a written notice inviting the other
consulting party
to consult with it and disclose in writing all
relevant information, including, but not limited to—
(a)
the reasons for the proposed dismissals;
(b)
the alternatives that the employer considered before proposing
the dismissals, and the reasons for rejecting each of those
alternatives;
(c)
the number of employees likely to be affected and the
job
categories in which they are employed;
(d)
the proposed method for selecting which employees to
dismiss;
(e)
the time when, or the period during which, the dismissals are
likely to take effect;
(f)
the severance pay proposed;
(g)
any assistance that the employer proposes to offer to
the employees likely
to be dismissed;
(h)
the possibility of the future re-employment of the employees who
are dismissed;
(i)
the number of employees employed by the employer;
and
(j)
the number of employees that the employer has dismissed
for reasons based on its operational requirements in the
preceding 12 months.”
[39]
Sent
on 10 June 2019.
[40]
See
para 13(b) above.
[41]
National
Union of Food Beverage Wine Spirits and Allied Workers v Coca-Cola
Beverages South Africa (Pty) Ltd
[2022]
ZALCJHB 268.
[42]
Coca-Cola
Beverages Africa (Pty) Ltd v Competition Commission of South
Africa
[2021] ZACT 101
(
Tribunal decision
).
[43]
Id
at para 32.
[44]
Sidumo
v Rustenburg Platinum Mines Ltd
[2007]
ZACC 22; 2008 (2) SA 24 (CC); 2008 (2) BCLR 158 (CC).
[45]
Id
at para 91.
[46]
Id
at para 35.
[47]
National
Union of Metalworkers of South Africa v Aveng Trident Steel (a
division of Aveng Africa (Pty) Ltd)
[2020]
ZACC 23
; (2021) 42 ILJ 67 (CC); 2021 (2) BCLR 168 (CC).
[48]
Id
at paras 69-92. The Court divided evenly on the test for
determining the reason for the dismissal.
[49]
Tribunal
decision
above
n 42 at para 42.
[50]
Id
at paras 106-136.
[51]
Stellenbosch
Farmers’ Winery Group Ltd v Martell et Cie
[2002]
ZASCA 98
;
2003 (1) SA 11
(SCA) (
Stellenbosch
Farmers’ Winery’
).
[52]
BB
Investment Company (Pty) Ltd v Adcock Ingram Holdings (Pty) Ltd
[2014]
2 CDLR 451 (CT) (
BB Investment
).
[53]
Tribunal
decision
above
n 42 at para 62.
[54]
Id
at para 57.
[55]
Id
at para 76.
[56]
Id
at para 79.
[57]
Competition
Commission v Coca-Cola Beverages Africa (Pty) Ltd
[2022] ZACAC 4
; (2022)
43 ILJ 1971 (CAC) (
CAC
judgment
).
[58]
Id
at para 1.
[59]
Id
at para 54.
[60]
Id
at para 55.
[61]
Id
at para 56.
[62]
Id
at para 62.
[63]
Id
at para 69.
[64]
Id
at
para 82.
[65]
Id
at para 83.
[66]
Id
at para 84;
BB
Investment
above
n 52 at para 60.
[67]
Id at para 87.
[68]
Id
at para 88.
[69]
Id.
[70]
The first jurisdictional basis in section 167(3)(b)(i) of the
Constitution.
[71]
Eskom
Holdings SOC Ltd v Vaal River Development Association (Pty) Ltd
[2022]
ZACC 44
;
2023 (4) SA 325
(CC);
2023 (5) BCLR 527
(CC) at para 237.
[72]
3 of 2000.
[73]
The second jurisdictional basis in section 167(3)(b)(ii) of the
Constitution.
On
the interpretation of this provision, see
Paulsen
v Slip Knot Investments 777 (Pty) Limited
[2015]
ZACC 5
;
2015 (3) SA 479
(CC);
2015 (5) BCLR 509
(CC) at paras 13-28.
[74]
Dengetenge
Holdings (Pty) Ltd v Southern Sphere Mining & Development Co Ltd
[2013] ZACC 48; 2014 (5)
SA 138 (CC); 2014 (3) BCLR 265 (CC).
[75]
Id
at
para
52.
[76]
Competition
Commission of South Africa v Pickfords Removals SA (Pty) Limited
[2021] ZACC 49; 2020
(10) BCLR 1204 (CC); 2021 (3) SA 1 (CC).
[77]
Id
at para 18.
[78]
Guardrisk
Insurance Co v Café Chameleon CC
[2020]
ZASCA 173
;
2021 (2) SA 323
(SCA) (
Guardrisk Insurance
)
at paras 37-40.
[79]
Rule
39 is set out in relevant part in para 7 above.
[80]
Chisuse
v Director-General, Department of Home Affairs
[2020] ZACC 20
;
2020 (6)
SA 14
(CC);
2020 (10) BCLR 1173
(CC) (
Chisuse
)
at
paras
46-59 and the authorities there referred to.
[81]
Mureinik “A Bridge to Where? Introducing the Interim Bill of
Rights” (1994) 10
SAJHR
31 at 32, often cited in
the judgments of this Court – see for example
Chisuse
above n 80 at para 18.
[82]
Section 21(4)(h).
[83]
The
words “the Act” are italicised in the original statute
to show that the definition in section 1 applies.
That
definition includes regulations made in terms of the Act as part of
the statute.
[84]
Again these two words are italicised in the original statute to show
that the definition in section 1 applies.
[85]
See
below.
[86]
Hoexter
and Penfold
Administrative
Law in South Africa
3
ed (Juta & Co Ltd, Cape Town 2021) at 143-4, 154 6.
They also cite
Nel
N.O. v The Master
[2004]
ZASCA 26
;
2005 (1) SA 276
(SCA) at para 23 and
Fesi
v Ndabeni Communal Property Trust
[2018]
ZASCA 33
;
[2018] 2 All SA 617
(SCA) at para 54.
[87]
Johannesburg
Consolidated Investment Co v Johannesburg Town Council
1903
TS 111
at 116.
[88]
Kendall J
Shorter
Oxford English Dictionary on Historical Principles
6 ed
vol 1 (Oxford University Press, Oxford 2007) at 101.
[89]
Id at page 117. T
he
judgment must be read subject to the qualification referred to by
Hoexter and Penfold (see paragraph 51 above) to the effect
that each
statutory review power must be interpreted on its particular
wording. Such a power might not be conferred if
the wording of
the statute suggests as much. Examples of special statutory
reviews that involve a decision on or full reconsideration
of the
merits include those in
section 151
of the
Insolvency Act 24 of 1936
and
sections 35(10)
and
95
of the
Administration of Estates Act 66 of
1965
.
[90]
See
in this regard
A.C.
Whitcher (Pty) Ltd v Competition Commission of South Africa
[2009]
ZACAC 2
where the Competition Appeal Court said at para 24:
“
[A]s
David Mullan 2006
Acta
Juridica
42
at 50 has noted, an important criterion in assessing the level of
deference owed in a review application is the expertise of
the
reviewing court relative to that of the administrative body. In
this case, the Tribunal has significant economic expertise
and
knowledge of competition matters. It was set up for the
purpose of constituting a specialist body. It is in an
entirely different position from a general court, whose members are
not appointed, as is the case with those of the Tribunal,
because of
their specific expertise in the field upon which they are called to
review.”
[91]
I
leave out of account here the scenarios where the firm opts to
submit a remedial plan, but fails to co-operate in adapting it
to
the satisfaction of the Commission or in implementing it. See
rule 39(3)
to (5).
[92]
Natal
Joint Municipal Pension Fund v Endumeni Municipality
[2012] ZASCA 13
;
2012
(4) SA 593
(SCA) at para 18. Endorsed in
Airports
Company South Africa v Big Five Duty Free (Pty) Ltd
[2018]
ZACC 33
;
2019 (2) BCLR 165
(CC);
2019 (5) SA 1
(CC) at para 29.
[93]
See
rule 39(1)(a) and (b) of the Commission Rules and the sections of
the Act referred to there.
[94]
Although
nothing ultimately turns on this, the Tribunal was incorrect in
characterising the two-stage test for causation as applying
only to
the law of delict. As was pointed out in
Napier
v
Collett
[1995]
ZASCA 44
;
1995 (3) SA 140
(A) at para 143E-G—
“
Despite
the differences between various branches of the law, the basic
problem of causation is the same throughout. The
theoretical
consequences of an act stretch into infinity. Some means must
be found to limit legal responsibility for such
consequences in a
reasonable, practical and just manner.”
The theoretical
consequences of an act are those that would be identifiable through
the but-for test. Finding the means
to limit legal
responsibility is what takes place in assessing legal causation or
finding the legal cause of the harm or other
consequences complained
of. The two-stage enquiry thus applies across the different
branches of the law.
[95]
Aveng
above
n 47 at para 119.
[96]
BB
Investment
above
n 52 at para 56.
[97]
The
full test is set out at
paras
54-67 of
BB
Investment
as
follows:
"54.
The public interest requirements in section 12A(3) of the Act are
implicated
only if the ‘merger will have an effect on . . .’
the various factors which are then listed, amongst which, relevant
to this case, is employment. This requirement has been
interpreted in the case law as founding jurisdiction to intervene
on
public interest grounds if the effect is ‘merger specific’.
55.
What does merger specific mean?
56.
It means conceptually an outcome that can be shown, as a matter of
probability,
to have some nexus associated with the incentives of
the new controller.
57.
But firms are dynamic institutions. Not every change that
results
post-merger is necessarily attributable to the merger.
Such an approach is far too mechanistic. Thus, we can conceive
of changes in a firm’s behaviour even post-merger that would
have happened in any event and can be thought of as not being
merger
specific.
58.
Translated to considerations of the public interest effect on
employment,
the practice thus far has been to distinguish,
post-merger, between employment loss associated with the merger
nexus, referred
to as ‘merger specific’ employment loss
and those in the second category of non-merger specificity, often
referred
to as ‘operational’ employment loss.
59.
The
Competition Act intervention
is jurisdictionally premised on the
former ‘merger specific’, but not the latter
‘operational kind’,
which is considered to be purely the
sphere of labour law.
60.
Most cases where we have imposed conditions relating to employment
have
involved firms with overlapping activities. Here the
nexus is more easily established because the inference of merger
specificity
is highly probable, when merging firms are engaged in
overlapping activities. Why would the firm continue to employ
two
people to do the same job, when employing one would suffice?
61.
The nexus becomes more complicated evidentially, but not
conceptually,
and this distinction is important not to lose sight
of, when the target firm and its acquirer do not have overlapping
activities,
as in the present case.
62
Does this mean that in the absence of merger created overlaps we
can
never determine that employment loss is merger specific? We
think such an approach would be going too far. It
may well be
that a particular controller may be more likely to shed jobs than
others and hence have an incentive to cut jobs
than might another
firm or the target firm’s management prior to the merger.
63.
In
Walmart
the Tribunal decided that an acquiring firm’s
history as being hostile to collective bargaining justified imposing
a condition
on the merged firm to protect existing collective
bargaining rights.
64.
This case was taken on appeal and one of the issues related to the
protection
of employees who had been retrenched prior to the
notification of the merger. Despite this not being a case
where there
was evidence of redundancies, and where the merger had
not been implemented, the Court nevertheless ordered their
reinstatement
holding:
‘
A
retrenchment, which takes place shortly before the merger is
consummated may raise questions as to whether this decision forms
part of the broad merger decision making process and would,
accordingly, be sufficiently closely related to the merger in order
to demand that the merging parties must justify their retrenchment
decision.’
65.
Although in Walmart the employees in question had already been
retrenched,
the CAC’s reasoning would apply equally to
contemplated retrenchments. We recognise however that the
evidence would
need to be robust to justify such a conclusion.
66.
In competition analysis in mergers we typically compare the
pre-merger
counterfactual with that of the post-merger scenario.
Such an approach seems equally sound in evaluating the public
interest
provided any inferences sought to be drawn are arrived at
carefully.
67.
On this approach, pre-merger management plans in operation already
or
proposed may be useful to compare to the plans the firm has
post-merger if available. If the differences are stark, and
particularly if the change in plans takes place within a short
period of time, then it is reasonable to infer that the
post-merger plans of the acquirer reflect a different set of
incentives to those of the pre-merger management and hence can be
considered merger specific.”
[98]
BB
Investment
above
n 52 at para 66
.
[99]
Id at para 64, citing
Walmart
Stores Inc v Massmart Holdings Limited
[2011]
ZACT 429
(
Walmart)
.
[100]
See
para 56 above.
[101]
Emphasis
added.
[102]
Aveng
above
n 47 at paras 117, 119 and 129.
[103]
Hart
and Honoré
Causation
in the Law
2
ed (Clarendon Press, Oxford 1985) at 87.
The
Court in
Department
of Land Affairs v Goedgelegen Tropical Fruits (Pty) Ltd
[2007] ZACC 12
;
2007 (6)
SA 199
(CC);
2007 (10) BCLR 1027
(CC) (
Goedgelegen
)
at paras 48-55 and 67-9 confirmed that “as a result of”
in
section 2(1)
of the
Restitution of Land Rights Act 22 of
1994
requires a “causal enquiry”, but emphasised the
importance of nonetheless ensuring a constitutionally compliant,
purposive and context-sensitive approach to the interpretation of
the statute in which the words are to be found
.
[104]
See also
Minister
of Land Affairs v Slamdien
1999
(4) BCLR 413
(LCC);
[1999] 1 All SA 608
(LCC) at paras 35-9,
referred to by this Court in
Goedgelegen
at
footnotes 44 and 45. See also the authorities referred to in
Slamdien
at
paras 36-9.
[105]
Concord
Insurance Co Ltd v Oelofsen N.O.
1992
(4) SA 669 (A).
[106]
Id
at 673H-674B.
[107]
Guardrisk
Insurance
above
n 78.
[108]
Id
at paras 3-4.
[109]
Id
at paras 37-43.
[110]
Id
at para 39.
[111]
Id
at para 48.
[112]
An
indication of this is condition 11.2, which provides:
“
In
the event of any conflict in interpretation between the terms of
these conditions and the Union Agreements, the terms of the
Union
Agreements shall prevail.”
[113]
Tribunal
decision
above
n 42 at para 47, quoting
BB
Investment
above
at n 52 at para 57.
[114]
Tribunal
decision
above
n 42 at
paras
48 to 79.
[115]
Mediclinic
Southern Africa (Pty) Ltd v Competition Commission
[2020]
ZACAC 3; [2020] 1 CPLR 66 (CAC).
[116]
Id
at
para 44.
[117]
Imerys
South Africa (Pty) Ltd v The Competition Commission
[2017] ZACAC 1.
[118]
Id
at
paras 40-1. See also
Rex
v Dhlumayo
1948
(2) SA 677
(A) at 705-6.
[119]
I
express no view on that.
[120]
In
one submission, FAWU predicted as many as 8000 job losses.
[121]
14 of 2017.
[122]
CAC
judgment
above
n 57
at
para 69.
[123]
See
Zeffertt
and Paizes, “Chapter 3: The Onus of Proof” and “Chapter
5: Cogency and Proof, Aspects of the Onus of
Proof, the Evidentiary
Burden, the Meaning of Prima Facie and other Topics relating to
Proof” in their
The
South African Law of Evidence
3
ed (Lexis Nexis Butterworths, Durban 2017).
[124]
Chapter 5 parts A and B.
[125]
CAC
judgment
above
n 57 at paras 77 and 85.
[126]
Competition
Commission of South Africa v Pioneer Hi-Bred International Inc
[2013] ZACC 50
;
2014 (2)
SA 480
(CC);
2014 (3) BCLR 251
(CC) at para 28.
sino noindex
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