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[2016] ZACT 59
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Amec Foster Wheeler SA (Pty) Ltd v Competition Commission (VAR252MAR16) [2016] ZACT 59; [2016] 2 CPLR 897 (CT) (13 July 2016)
COMPETITION
TRIBUNAL OF SOUTH AFRICA
Case
No: VAR252Mar16
In the
matter between:
AMEC
FOSTER WHEELER
SA (PTY)
LTD
Applicant
and
THE
COMPETITION
COMMISSION
Respondent
Panel
: Norman Manoim (Presiding Member)
: Andreas Wessels (Tribunal Member)
: Mondo Mazwai (Tribunal Member)
Heard
on
: 01 June 2016
Reasons
Issued on
: 13 July
2016
Reasons
for
Decision
I
ntroduction
[1] This
application was brought in terms of Tribunal Rule 42 for a variation
of a condition, imposed upon Amec Foster Wheeler South
Africa (Pty)
Ltd ("Amec FW") by the Competition Commission ("the
Commission") in an intermediate merger between
Foster Wheeler
M&M Ltd ("FW") and MOM Engineering Group Ltd ("MDM").
Background
[2] The
abovementioned intermediate merger was notified to the Commission on
23 June 2014. The Commission noted that the merging
parties had
predicted a number of retrenchments of skilled and semi-skilled
employees based on a duplication of roles, but that
their inability
to exchange competitively sensitive information pre-
merger, prevented them from determining with precision the
identity and number of employees affected.
[3] The
Commission concluded that this provided evidence that the merging
parties had not followed a rational process in arriving
at the number
of employees to be retrenched as a result of the proposed transaction
and that a balancing exercise had not been
engaged upon. For these
reasons, the merger was conditionally approved by the Commission on
12 September 2014.
[4] The
conditions imposed by the Commission were as follows:
"3.1
The
Merged
Entity
shall
not,
as
a
result
of
the
merger,
retrench
any
employees in South
Africa
for
a
period
of 3 (three) years
from
the Approval Date.
3.
2
Within the context of paragraph
3.
1
above, retrenchments
do not include
voluntary
separation
agreements,
voluntary
early retirement
packages
and
unreasonable refusals to be redeployed
in accordance
with the provisions
of the
Labour Relations
Act, No. 66
of 1995
,
as
amended."
[5] The
conditions also make provision for variation:
"4.9
The
Merged
Entity
may,
for
as
long
as
any
of
the
above
Conditions remain in force, approach the Commission to revise
the above Conditions on the
basis
that
changes
in
the
market,
economic
and
regulatory
conditions justify such
revision."
[6] Amec
FW accepted the conditional approval and did not approach the
Competition Tribunal ("Tribunal") for a consideration
of
the merger as provided for in
section 16
of the Act, read with
Tribunal
Rule 32.
[7] On 9
December 2015, Bowman
Gilfillan, the legal
representatives of
Amec
FW, informed
the
Commission
that
Amec FW
intended
to
approach
the
Tribunal
to
have
the
conditions
varied.
The Commission's response was that the
merging
parties
should
launch
the
application in
order
to
trigger
the
Commission's obligation
to investigate the allegations
made in
the
application.
[1]
[8] On 9
March 2016, the merging parties brought a formal application in terms
of Tribunal
Rule 42
to vary the conditions before the Tribunal. The
crux of this application was that economic circumstances had changed
following
the conditional approval of the merger and that the merged
entity was experiencing a reduction in revenue and profitability that
threaten its ability to remain sustainable.
[9] On 11
May 2016, having investigated the allegations in the merging parties'
application, the Commission filed a notice with
the Tribunal
indicating that it did not intend opposing the variation order sought
by the merging parties. This was primarily based
on the fact that
competitors of the merging parties contacted by the Commission had
confirmed that the Engineering, Procurement,
Construction and Project
Management ("EPCM") services industry was under pressure
due to declining mining projects and
the weak oil and gas sector
resulting from low prices of oil and gas.
[10
]
Furthermore, according to the Commission, the merging parties
had demonstrated that the envisaged retrenchments were
merger-specific
as they were a consequence of duplications arising
due to additional human capital that was acquired as a result of the
merger.
Jurisdiction
[11] At
the hearing on 1 June 2016, the parties were questioned by the
Tribunal as to why the matter was before the Tribunal and
not the
Commission, given the provision for variation in the Commission's
conditions. The Applicant conceded in this regard that
the merger
condition makes provision for a direct approach to the Commission to
alter the conditions, but explained (as in paragraph
7) that upon
informing the Commission of its intention to launch the application
in the Tribunal, the Commission's response was
that the Applicant
should launch the application to the Tribunal for the matter to be
decided.
[12] It
was
evident
in this
case
that
the
Commission
was
uncertain
on
how to
proceed
with
the
amendment
application
and
this
led to
the
merging
parties
on
its
advice,
incorrectly approaching the
Tribunal at first instance. The Competition Act ("the Act")
gives the Commission the power
to approve,
prohibit or conditionally
approve intermediate and small mergers.
[2]
The Act is, however silent on
whether
the
Commission
would
also
have the jurisdiction
to
amend
conditions
it has
imposed. However, the power to
impose a condition on intermediate and small mergers, must logically,
absent any statutory provision
to the contrary,
include the power to amend
these conditions subsequently. We are thus of the view that the
Commission would have the jurisdiction
to revisit its own conditions
in intermediate and small mergers, at least in circumstances
where the conditions
provide for
it do so. We do not need to
address the issue of whether
the
Commission would
have such power if the
conditions had not provided for
it
to
amend the conditions.
[13] In
light of the approach taken by the Commission, we consider it
instructive to set out the following on the question of the
Tribunal's jurisdiction:
a.
In circumstances where an application is brought by way of
consideration under section 16 read
with Tribunal Rule 32 to amend
conditions to an intermediate merger (or reverse a prohibition
decision by the Commission, as the
case may be), the Tribunal would
naturally have jurisdiction over the matter.
b.
However, in circumstances where the Commission imposes conditions in
an intermediate merger in
which it reserves the right to revisit its
own conditions, and where no consideration application is brought
under section 16,
the Tribunal would not have the required
jurisdiction to amend the conditions.
c.
Where a dispute between the Commission and the merging parties
regarding a variation or amendments
to merger conditions imposed by
the Commission arises in circumstances described in (b) above, then
the Tribunal would have jurisdiction
in terms of the general powers
provided for in Tribunal Rule 42 to amend the conditions.
[14] In
this case, the Commission had reserved its right in an intermediate
merger to amend its own conditions in clause 4.9 of
the conditions,
as set out above. As also mentioned, the Commission indicated that it
was satisfied with the reasons for the amendments
and did not oppose
them.
[15] In
light of this we directed the Commission to issue amended conditions
and stipulate the applicable date for the amended conditions.
13
July 2016
DATE
________________________
Ms
MondOaiwai
Mr
Norman Manoim and Mr Andreas Wessels concurring
Case
Manager:
Mr
KAmecl Pancham
For the
Applicant: Adv
Greta
Engelbrecht
instructed
by Mr Judd
Lurie
of Bowman
Gilfillan
For the
Commission: Mr Ziyaad Minty
[1]
Transcript
page
1
lines
18-21.
[2]
Section
13(5)(b)
in the
case
of
small
mergers
and
14(1)(b)
in the
case
of intermediate
mergers.