Sibanye Gold successfully challenges apparent breach of merger conditions

Towards the end of 2014, the Competition Commission issued a notice of apparent breach of a condition imposed on a merger (Notice of Apparent Breach) to Sibanye Gold Limited (Sibanye Gold).

According to the Commission, Sibanye Gold had undertaken a retrenchment process in breach of a condition imposed by the Competition Tribunal to the effect that there may be no merger related retrenchments arising from Sibanye's acquisition of the Cooke mining operations from Gold One International in early 2014 (Retrenchment Condition). The Competition Tribunal's condition prohibited the parties from undertaking merger related retrenchments for a period of two years. Operational retrenchments, voluntary separation agreements and voluntary early retirement packages were not subject to the moratorium on retrenchments.

Sibanye Gold brought an application to review and set aside the Notice of Apparent Breach. Alternatively, Sibanye Gold sought an order confirming that it had substantially complied with its obligations in terms of the Retrenchment Condition.

The Notice of Apparent Breach was issued by the Commission following various happenings. During September 2014, Sibanye Gold informed the Commission that it had issued a retrenchment notice in terms of s189 of the Labour Relations Act, No 66 of 1995 (LRA), due to significant losses at the Cooke mining operations that could not be curtailed. In this correspondence, Sibanye Gold offered to meet with the Commission to provide it with further information of the anticipated retrenchment procedures. The Commission did not respond to the letter or take up the offer to meet. Subsequently, on 5 November 2014, the Commission received a complaint from the National Union of Mineworkers (NUM) in respect of the anticipated retrenchments. NUM complained that the retrenchment process was in contravention of the Retrenchment Condition. NUM urged the Commission to attend to the matter as after 12 November 2014 the retrenchments would take place and the process would apparently become irreversible. On 11 November 2014, the Commission served the Notice of Apparent Breach on Sibanye Gold.

On 17 November 2014, a meeting was held between representatives of Sibanye Gold and the Commission where Sibanye Gold complained that the Notice of Apparent Breach was issued by the Commission without affording Sibanye Gold the opportunity to engage with the Commission. The Commission then requested Sibanye Gold to provide submissions on the retrenchment process. Sibanye Gold made these submissions on 25 November 2014, denying that it had breached the Retrenchment Condition. Sibanye Gold also requested the Commission to confirm whether the submission satisfied the requirements of a remedial plan as contemplated in Commission Rule 39(2)(a). The Commission responded on 9 December 2014 stating that it would only be able to provide feedback on whether the remedial plan was adequate in January 2015. Sibanye Gold, however, launched an application to review the decision to issue the Notice of Apparent Breach on 10 December 2014.

The Tribunal aptly stated that the issuing of a Notice of Apparent Breach may have serious consequences (such as revoking the merger approval, ordering divestiture of an asset or the imposition of administrative penalties) and, accordingly, consultation between the merged entity and the Commission must take place prior to such serious consequences being imposed. In addition, the review provided for in Commission Rule 39(2)(b) is coupled with an implied declaration that the merged entity has substantially complied with its obligations with respect to the approval or conditional approval of the merger. In other words, if a merged entity is found to have substantially complied with its obligations, the Notice of Apparent Breach should be set aside.

Commission Rule 39(1) further states that a notice of apparent breach can only be issued if the merged entity has already breached an obligation of the merger approval and not if the breach will take place in the future. The Tribunal concluded that the Commission was thus not entitled to issue the Notice of Apparent Breach. The Commission would only be entitled to issue a notice of apparent breach once the retrenchments took place, irrespective of whether the retrenchment would be irreversible at that stage.

The Tribunal clarified that the Commission does not have the power to prevent or pre-empt a breach through the issuing of a notice of apparent breach and, during the time preceding the actual retrenchments, the employees could find recourse through employment laws to interdict the retrenchments.

The Tribunal commended the Commission for taking its responsibilities to safeguard the public interest seriously, but confirmed that the competition authorities are creatures of statute and the confines of the empowering legislation cannot be exceeded.