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New trade union notification rules for merging companies in South Africa

A new Practitioners Update on trade union merger notification in South Africa introduces practical difficulties for merging companies in the country, writes Bowmans senior associate Xolani Nyali.

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The South African Competition Commission recently published a Practitioners Update on the notification of trade unions as required in terms of section 13(2) of the Competition Act. The Update outlines the procedure to follow when notifying trade unions of a merger in South Africa.  While the Update is intended to encourage a more collaborative relationship between the merging parties and trade unions, it has introduced some practical difficulties which might result in significant delays to the merger notification process.

Notification requirements 

The Update states that the delivery of hard copy merger notification to a trade union must include the acknowledgment of receipt in writing/signed by the recipient. The appropriate method of delivery for electronic mail notifications will now be proof of a read receipt. In addition, the appropriate method of delivery by fax will be the confirmation of sending of the document. For the delivery through affixing filings to a notice board, the Commission requires that the merging parties provide an affidavit attesting to this.

Background

The Update came about after the South African Competition Tribunal expressed concern regarding what it perceived to be a formalistic approach from the merging parties and the Commission regarding how trade unions were being notified of mergers. The issue came up during a large merger hearing at the Tribunal on the 8 February 2017.  This Update was subsequently issued by the Commission nine days later, on 17 February.

The Tribunal expressed its concerns about what efforts were being taken to ensure that trade unions receive merger notifications, in terms of the Competition Act. The Tribunal suggested that merging parties should ensure that trade unions had received the merger notification and should try to engage with them even when they hadn’t raised concerns. This was to ensure that, in circumstances where trade unions had not raised concerns, it was because of an informed decision and not because they did not know about the merger. 

Key changes

The Update has introduced some key changes to the merger notification process.

Previously, if a merging party did not have a trade union representative in the workplace, they would ask the human resources manager to act as the employee representative to receive the merger notification and distribute it to employees. The Update now states that the employee representative should not be a member of the management team. The Update seems to seek alignment between an employee representative in merger control cases and an employee representative as outlined in the Labour Relations Act. According to the Labour Relations Act, an employee representative is elected by the employees to interact with management on their behalf. An employee representative in terms of the Competition Act is someone who will simply accept service of a merger notice and provide it to the employees. This person does not interact with management on behalf of the employees and as such, is not a ‘representative’ in the labour law context. This significant legal difference should always be borne in mind.

Practical challenges 

There are also some practical difficulties with the Update. For example, delivering a hard copy of the merger filing has the potential to significantly delay a merger when the merging parties and the trade union are not in the same location or where there are multiple branches of the merging parties nationally.

In addition, electronic mail notifications now require a read receipt. With trade unions often being busy with their daily activities, they might not have time to look at their emails and practitioners will have to track them down to ensure they click on their email and issue a read receipt. The challenge is that the Commission may now take the view that a merger filing is incomplete until a read receipt from the trade union has been provided. If the Commission takes the more practical view, however, that the parties could provide a read receipt within a day or two of the filing, that would help as it would give the interested parties time to read their emails and send a read receipt. In the meantime, the merger filing could go ahead.

With notification via fax, the merger could be delayed if there is no paper in the fax machine on the receiving side, for example, which means a fax confirmation would not go through. Again, this would involve the parties having to track down the trade unions to get them to put paper in their fax machine. Failing which, the merger would be delayed.

Looking forward 

The Update will be tested during upcoming merger transactions and these practical difficulties will probably be put forward for the attention of the Commission. It is hoped that the Commission will then consider these difficulties and take a more nuanced approach to the concerns of the Tribunal.

The Update appears to be aimed at introducing a more collaborative approach between merging parties and trade unions in the merger review process. To the extent that there is good will on either side, things should proceed smoothly. However, South African labour relations are a contested terrain so to assume that merging parties and organised labour are going to be cooperative in every merger might well be too ambitious. The specifications outlined in this Update might therefore result in unintended and significant delays to mergers in South Africa.

However, besides the practical difficulties occasioned by these enhanced notification requirements, they may well serve to open lines of communication between the merging parties, Commission and trade unions very early on in the merger review process so as to address any potential public interest concerns.  It is hoped that the Tribunal’s wish for closer collaboration between merging parties and organised labour is realised through this mechanism.

Xolani Nyali is a senior associate in the competition practice of Bowmans South Africa 

Posted by:

Xolani
Nyali

31 March 2017

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