There are questions being raised about South Africa’s Competition Commission being tasked with investigations into the employment issues surrounding mergers, and there are those who believe that other government agencies are better equipped to undertake such investigations.
The introduction of public interest provisions, which need to be considered during the merger process, came into effect when the South African legislature enacted the Competition Act No 89, of 1998.
The Act complements government’s efforts to improve employment, support promising entrepreneurs, particularly those who are from a historically disadvantaged background, and complement consumer transparency. However, despite public interest provisions not having an impact on competition, they may still determine whether or not the Commission approves a merger. Thoughts are that, as a result of the rights given to employees and subsequently trade unions, the time needed to approve a merger might be significantly extended when investigating the effect mergers have on employment.
Corporate law firm Webber Wentzel Attorneys partner Martin Versfeld says that it is not surprising that many commentators suggest that it is a public interest consideration best left to other agencies better equipped to deal with such issues, given that the focus on the impact on employment is unique to South Africa.
While he is inclined to agree that the effects mergers have on employment should be investigated by other agencies, he believes that South Africa’s legislature is unlikely to amend the Competition Act. Versfeld says that the legislature’s decision to promote employment carve out an exception for collective bargaining and agreements, as defined by the Constitution and the Labour Relations Act, and the requirement to consider the impact on employment are informed by socioeconomic imperatives, which remain a reality in South Africa.
“In this circumstance, practitioners and the clients should rather focus their energy on engaging with the Commission to find ways of streamlining the current process to significantly eliminate unnecessary delays.”
Versfeld says that only in exceptional cases has he experienced needless delays as a result of the Commission’s investigations into the effects mergers have on employment.
He explains that, as seasoned practitioners, lawyers in the mergers and acquisitions field are sensitive to the fact that the Commission is mandated by the Competition Act of 1998 to assess the impact of a merger on employment. Therefore, steps are taken to try lessen the impact.
“Management teams of the firms concerned need to closely interact with their employees and representative unions, assess the impact of the merger at an early stage and establish a training programme to deal with the Commission’s reskilling requirements. It is also strategically important to try to secure a letter of approval from the affected unions.”
Business law firm Cliffe Dekker Hofmeyr director and national practice head for competition practice Mondo Ntlha also believes that employment issues may cause delays in the investigation of mergers.
“It is the Commission’s duty to investigate the effects mergers have on employment. To do other- wise would be neglectful of one of their statutory duties. However, the Commission could speed up investigations by liaising with trade unions as early as possible, rather than at a later stage. The Commission should also be firmer on trade unions lodging complaints after the five-day period allowed in the Act for objections to a merger has lapsed. However, the Commission generally allows late objections, which then impact on timing,” she says.
Corporate and competition law firm Edward Nathan Sonnenbergs competition director Lee Mendelsohn says that the Com-mission is required, in terms of the provisions of the Act, to consider the employment effects of mergers.
“Where it is claimed that negative effects will result from a merger, the Commission investigates such matters thoroughly. This sometimes prolongs the time taken by the Commission to finalise its merger analyses. This is no different to the manner in which the Commission investigates alleged competitive harm.”
She adds that, although it may be frustrating for the parties involved in a merger process to be delayed by employment consider- ations, this may be unavoidable depending on the nature and extent of the employment effects. However, the Commission should approach employment issues as efficiently as possible and dismiss spurious complaints without delay.