1 December 2014 by Cliffe Dekker Hofmeyr Competition Alert

Competition Commission remains pro-active in ensuring job security in merger transactions

In the context of merger transactions, the Competition Commission is mandated to consider the effect of a merger on competition, as well as the effect that a merger has on the continued employment of personnel of the merger parties. Whilst the Commission's mandate is limited to considering whether as a result of the merger, retrenchment of employees would ensue (for example, through the duplication of certain roles post-merger), the Commission is becoming increasingly pro-active in ensuring that employment remains secure even in situations of potential retrenchments where those retrenchments may occur for reasons unrelated to the merger.

The Commission recently approved the acquisition by Coricraft Group (Pty) Ltd (Coricraft) of Dial-a-bed, a division of the financially distressed Ellerines Furnishers (Pty) Ltd (Ellerines) and imposed a condition relating to employment.

In its analysis of the possible effects of the merger on employment, the Commission found that Dial-a-bed employs some 200 employees in its stores, and that 18 of these employees are employed at stores identified by Ellerines as being non-viable. Given that the potential liquidation of Ellerines will result in the retrenchment of an entire workforce of 7,060 employees, the Commission considered that the proposed acquisition presents an opportunity to save at least some jobs.

Coricraft also undertook to the Commission to employ the 18 staff employed at the Dial-a-bed stores identified as non-viable, which staff would potentially have been negatively affected by the liquidation of Ellerines. Notwithstanding the fact that the potential job losses did not occur as a result of the merger, the Commission saw an opportunity to negotiate a condition with the parties which would result in the saving of jobs in danger of being lost. The decision of the Commission demonstrates that in the current economic environment, it is intent on confronting the issues of employment and remedying any potential job losses through the merger analysis forum, even though the retrenchments may not be merger specific.

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