“But Did You Really Comply…?” Insights into Post-Merger Conditions

By: By Brandon Cole (African Antitrust)

On April 17, 2024, the Constitutional Court of South Africa delivered a landmark ruling in the case of Coca-Cola Beverages Africa (Pty) Ltd versus the Competition Commission. This decision has significantly altered our understanding and enforcement of post-merger conditions in business transactions.

The case originated from a 2016 merger that formed “Coca-Cola Beverages South Africa” by consolidating four separate entities. The merger was approved with conditions to prevent job losses and harmonize employment terms across the new entity. However, economic challenges, including a sugar tax and rising input costs, led Coca-Cola to undertake retrenchments, prompting a legal challenge from the Food and Allied Workers Union (FAWU). FAWU argued that these retrenchments breached the merger conditions approved by antitrust authorities.

At the heart of the dispute was the interpretation and enforcement of merger conditions under the South African Competition Act. The key issue was whether Coca-Cola’s retrenchments violated the merger-specific conditions or were justified by external economic pressures. Initially, the Competition Tribunal ruled in favor of Coca-Cola, acknowledging the economic factors involved. However, the Competition Appeal Court overturned this decision, leading Coca-Cola to appeal to the Constitutional Court.

The Constitutional Court’s ruling clarified several critical aspects regarding the enforcement of merger conditions:

• Nature of Review: The Court emphasized that the review should focus on whether Coca-Cola substantially complied with the merger conditions, considering the external circumstances, rather than demanding strict adherence without regard to these factors.

This decision highlights the complexities of adhering to merger conditions and underscores the need for flexibility in enforcement to account for changing economic realities.

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