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[2015] ZACT 144
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Southern African Clothing and Textile Workers' Union v Competition Commission and Another (IM161Dec14) [2015] ZACT 144 (28 May 2015)
COMPETITION TRIBUNAL
OF SOUTH AFRICA
Case No: IM161Dec14
In the matter between:
Southern African
Clothing and Textile
Workers'
Union
Applicant
and
The
Competition Commission
First Respondent
NEWCO ONE, BAGSHAW
FOOTWEAR (PTY) LTD,
BOLTON
FOOTWEAR (PTY) LTD,
KAP MANUFACTURING
(PTY) LTD, THE DIVISIONS,
UNITED FRAM, WAYNE
PLASTICS, MOSSOP WESTERN
LEATHERS, JORDAN SHOES
(together "THE
MERGING PARTIES")
Second Respondent
Panel
: Medi Mokuena (Presiding Member)
:
Andiswa Ndoni (Tribunal Member)
:
Fiona Tregenna (Tribunal Member)
Heard on
: 06 May 2015
Order Issued on
: 06 May2015
Reasons Issued on : 28
May 2015
Reasons for Decision
Conditional approval
[1]
On 11 December 2014, the Southern African
Clothing and Textile Workers' Union ("SACTWU") filed an
application in terms
of
section 16(1)(b)
of the
Competition Act No.
89 of 1998
("the Act") requesting the Competition Tribunal
("Tribunal") to reconsider an intermediate merger that was
conditionally
approved
by
the Competition
Commission
("Commission") on 30
September
2014. The merger entailed NewCo One
("NewCo"), Bagshaw Footwear (Pty) Ltd ("Bagshaw")
and Bolton Footwear (Pty)
Ltd ("Bolton") acquiring the four
divisions of Kap Manufacturing (Pty) Ltd ("Kap") namely:
United Fram, Wayne
Plastics, Mossop Western Leathers ("Mossop")
and Jordan Shoes. For purposes of this application these firms will
be referred
to as the Merging Parties.
[2]
The Commission conditionally approved the
transaction by imposing an obligation on the Merging Parties not to
retrench employees
at United Fram for a period of one (1) year from
the Implementation Date of the proposed transaction. The main reason
the Applicant
filed this application before us was because prior to
the notification of the transaction, SACTWU and the Merging Parties
had entered
into an agreement ("Prior Agreement"), which
entailed an undertaking not to retrench workers at several firms for
a period
of three years.
[3]
It is worth noting that the Application
before us was unopposed by both the Commission and the Merging
Parties. In light of this
we will not reconsider the transaction as a
whole but only consider the public interest issues that form the
basis of this application.
Background
The Applicant
[4]
SACTWU
is one of the registered trade unions present at the merging parties
operations in South Africa. It filed a Notice of Intention
to
Participate in relation to the current intermediate merger.
[1]
The Merging Parties
[5]
NewCo, at the time of the merger was yet to
be formed for purposes of the transaction.
5.1
Bolton comprises of three divisions, namely
Bagshaw Footwear, Watson Shoes and Barker Footwear, which all
manufacture different
types of footwear. Bagshaw is a manufacturer of
multiple brands of leather safety footwear.
Barker
Footwear manufactures men's formal footwear on leather sole. Its
target market is young business executives looking for
fashionable,
yet reasonably priced formal footwear. It is worthy to note that
Bolton also has another division called Watson
Shoes which has
manufacturing facilities in Southern Cape, and houses a number of
brands for men, women and children's footwear.
5.3
Kap is an investment company with a
portfolio of diverse manufacturing businesses including leather
products, footwear, automotive
components and food. All Kap's
businesses are conducted through United Fram, Wayne Plastics, Jordan
Shoes and Mossop. United Fram
is a manufacturer and importer of
leather safety footwear. Wayne Plastics is a manufacturer of
gumboots. Jordan Shoes is a manufacturer
and importer of civilian
footwear, but also specialises in casual and fashion footwear. Mossop
is a manufacturer of bovine tanned
leather used in the manufacturing
of leather footwear. It produces a range of leathers such
as full grain sides, corrected grain
slides, Tektan splits, suede splits
inter
alia.
Proposed transaction
[6]
The transaction entails various steps
wherein the following would take place:
6.1
The leather safety footwear transaction:
Beier and Bagshaw will form NewCo. United Fram will then be acquired
by NewCo. This would
then result in a horizontal overlap between
Beier, Bagshaw, United Fram and Wayne Plastics, as they all
manufacture and supply
safety footwear.
6.2
The civilian footwear transaction: This
involves the merger between Watson Footwear, Barker Footwear and
Jordan Shoes. This would
result in a horizontal overlap in relation
to civilian footwear.
6.3
The Acquisition of Mossop: Mossop will be
jointly acquired by Bolton, NewCo and SKN (Rahman Industries). Mossop
is a leather tanner
and thus a vertical relationship exists between
Mossop and Jordan Shoes, Barker Footwear and Watson Shoes.
The Current
Application
[7]
As already mentioned above, neither of the
respondents opposed the current application. The Merging Parties
informed us that they
had re-assured SACTWU that despite the
Commission's one year conditional approval, they would honour their
agreement with the union
that was concluded prior to the transaction
notification.
[8]
SACTWU
submitted that the reason for bringing the application related to the
enforceability of an undertaking
versus
that of a Tribunal condition. The former obviously carried less
weight than the latter. If one fails to abide by a condition
imposed
by the Tribunal one would be liable in terms of the Act and the
Tribunal can impose an administrative penalty in terms
of
sections 59
of the Act.
[2]
[9]
Although the Commission indicated that it
would regard such agreements between parties on a case by case basis,
the Commission would
be well advised when considering public interest
issues to take cognisance of those conditions agreed to between
unions and merging
parties, so that it does not undermine any
constructive engagement concerning employment which, in the current
economic climate
in South Africa, is of utmost importance.
[10]
Therefore, having heard the Applicant's
submissions, the Competition
Tribunal
orders that clause 3.4
in
the conditions attached to the
Merger
(and attached hereto as "Annexure A"), be amended as
follows:
"a. Apart from the
Affected Employees, there shall be no retrenchment of any other
employees as a result of the Merger in the
Acquiring Firms as well as
the Target Firms for a period of three (3) years after the
Implementation Date."
Conclusion
[11]
In light of the above, the application in
SACTWU's notice of motion is hereby granted.
Ms Medi Mokuena
28 May 2015
DATE
Ms Andiswa Ndoni and
Prof. Fiona Tregenna concurring.
Tribunal
Researcher:
Caroline Sserufusa
For the
Applicant:
Michelle le Roux
instructed by Cheadle Thompson &
Hayson
For the merging
parties: Andile Nikani of Fluxmans
Attorneys
For the
Commission:
Ziyaad Minty
[1]
SACTWU
filed its Notice of Intention to participate in the proceedings on
16 July 2014.
[2]
See
page 3 of the transcript of the hearing.