Coca-Cola retrenchments breached merger conditions, watchdog rules

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Regis Duvignau/Reuters

The Competition Appeal Court has ruled that there was a breach of merger conditions when Coca-Cola Beverages SA retrenched 368 bargaining unit employees in 2019.

The ruling, which relates to two mergers involving Coca-Cola, could result in merger approval being revoked - or in an administrative penalty or an order of divestiture if the firm and the Competition Commission cannot agree on a plan to remedy the breach. 

The two mergers included conditions intended to protect employees who were members of the bargaining unit from retrenchment as a result of the mergers. 

The first merger, between SABMiller, the Coca-Cola Company and Gutsche Family Investment, was approved by the Competition Tribunal in 2016, resulting in the formation of Africa’s largest bottling operations, Coca-Cola Beverages Africa (CCBA). The next merger transaction took place a just over a year later in 2017, when Coca-Cola acquired SABMiller’s CCBA stake. 

In 2019, the beverage maker’s local subsidiary, Coca-Cola Beverages South Africa, retrenched the 368 employees in the bargaining unit.

The Competition Commission then issued a Notice of Apparent Breach, which was set aside by the Competition Tribunal last year on the grounds that it believed CCBA had complied with the conditions of the merger.

The CCBA had argued that the retrenchment process was necessary at the time due to macroeconomic challenges, the government’s implementation of the sugar tax and raw material price increases.

The tribunal made its decision after weighing up CCBA’s reasons for the retrenchments, concluding that they didn’t constitute a merger breach.

The commission then approached the appeal court, which last week upheld the commission’s appeal that CCBA had breached merger conditions. It also granted a cost order against CCBA.

On Thursday, CCBA said it was aware of the court's decision and is weight its legal options.

This article has been updated with comment from CCBA.

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