The recently gazetted merger public interest assessment guidelines (Guidelines) caution that the Competition Commission (Commission) will consider, when assessing if merger-related job losses are justified, whether merging parties have provided sufficient information to employees. Even if merging parties can prove that there is a rational connection between the job losses and purported reasons for them, such job losses will not be justified if the parties did not properly engage with employees.

The Competition Act, No 89 of 1998 (Act) recognises employees are the most vulnerable in the context of mergers, and grants employees and trade unions the rights to access relevant and timeous information, make meaningful representations to the Commission and even appeal merger decisions.

The Commission has confirmed that simply providing employees with merger notification documents summarising the merger’s effect on employment is not sufficient to comply with the Act. The merging parties must also “consult” where employees or trade unions have indicated their intention to consult or participate in the merger review process.

In the BB Investments Company and Adcock Ingram merger, the Competition Tribunal (Tribunal), borrowing from a Labour Court decision, clarified that the duty to consult implies providing employees or their representatives with sufficient relevant information, so as to place them in a position to make informed representations and suggestions. The Tribunal further indicated that the right to consultation should even extend to where the contemplated retrenchments are “operational” (ie not merger related), as the employees have the right to dispute this claim and the opportunity to make submissions to the competition authorities, if they hold a contrary view.

The import of the Tribunal’s findings in BB/Adock Ingram is that merger parties must disclose all contemplated retrenchments to the Commission and the relevant employee or trade union representatives, even if they are not considered by the parties to be merger-related. The Tribunal’s reasoning makes sense: employees cannot challenge claims that retrenchments are not merger-related during the merger investigation if they are kept in the dark. It is, however, important to remember that the employment effects must still be “merger specific” in order to found the Commission’s jurisdiction to intervene on public interest grounds (ie prior to imposing employment-related conditions or prohibiting the merger for employment-related reasons, there must be a causal nexus between the employment loss and the merger). Remedies for non-merger related “operational” retrenchments must remain the domain of labour law.

Practically, the lines between merger-related and operational retrenchments can become blurred. Not being able to adequately prove operational reasons may lead the Commission to placing a moratorium on all retrenchments, as was the result of the BB/Adock Ingram case.

Also, the employees’ right to “consultation” under the Act should still be distinguished from what is considered proper consultation in terms of the Labour Relations Act, No 66 of 1995 (LRA). In the recent mergers involving Sibanye Platinum, Aquarius Platinum and Rustenburg Mines, the Tribunal recognised that meaningful consultations in terms of s189 and s189A of the LRA would still need to occur before any actual retrenchments took place but, notably, accepted that this could occur after the merger notification stage.

Written by Susan Meyer and Yusrah Ehrenreich, Cliffe Dekker Hofmeyr