Summary of Judgment

1. Introduction

This was a merger approval proceeding before the Competition Tribunal of South Africa in which the Tribunal was required to determine whether a proposed transaction should be approved, and if so, whether it should be approved subject to conditions or unconditionally.

The primary acquiring firm was Lebashe Investment Group (Pty) Ltd (“Lebashe”). The primary target firms were Tiso Blackstar Group (Pty) Ltd (“TBG SA”), Rise Broadcast (Pty) Ltd (“Rise”), and Vuma 103 FM (Pty) Ltd (“Vuma”), with Rise and Vuma being wholly owned subsidiaries within the Tiso Blackstar group structure described in the reasons.

The matter followed the ordinary merger control process. The Tribunal heard the matter on 9 October 2019, issued its order on the same date approving the transaction, and issued written reasons on 4 November 2019 explaining why the merger was approved unconditionally. The Competition Commission (“Commission”) investigated the transaction and, as reflected in the reasons, conducted an assessment of both competition and public interest effects, including employment-related concerns raised by trade unions.

The general subject-matter of the dispute concerned whether the acquisition of control by Lebashe over the media, broadcasting, content, and radio businesses of the target group would (a) substantially prevent or lessen competition in any relevant market and/or (b) raise public interest concerns, particularly regarding employment and retrenchments.

2. Material Facts

Lebashe was described as an investment holding company that is not controlled by any shareholder or firm, and which controls a number of companies in South Africa. The Tribunal treated Lebashe and its controlled firms collectively as the Acquiring Group.

The target firms—TBG SA, Rise, and Vuma—were treated collectively as the Target Group. Rise and Vuma operated radio stations (Rise FM and Vuma 103 FM). TBG SA operated in print and digital media services and in broadcasting and content services, including Business Day TV, the Home Channel, and film and production activities.

The proposed transaction was to be implemented through indivisibly linked steps. In substance, it involved the disposal to Lebashe of (a) the group’s South African media, broadcast and content business (“SA Assets”) and (b) the group’s two radio businesses in South Africa (“SA Radio Assets”). Because the three target firms were controlled by a common shareholder, the Tribunal treated the transaction as one indivisible transaction. On implementation, Lebashe would acquire sole control over TBG SA, Rise, and Vuma.

On the competition facts relied upon by the Tribunal, the key feature was that the transaction did not result in any overlap because Lebashe did not hold investments in any company that competed with TBG SA, Rise, or Vuma.

On public interest and employment, it was common cause (as presented to the Tribunal) that no retrenchments were to arise as a result of the proposed transaction. However, the Target Group had already retrenched 65 employees in 2019, and the merging parties indicated that a further 52 employees were likely to be retrenched post-merger regardless of whether the transaction was approved or not. The Information Communication and Technology Union (ICTU) and the South African Typographical Union (SATU) disputed the implication that job losses were unrelated to the merger, expressing concern that the job losses were merger-related and advocating for approval subject to conditions.

The merging parties disputed that the retrenchments were merger-related, attributing them to weak economic activity and an ongoing structural shift towards digital media consumption, which had caused declines in newspaper production volumes and revenue. The Commission investigated whether the retrenchments were merger-specific by obtaining and reviewing the Target Group’s financial and strategy documents. On the facts recorded in the reasons, the Commission found the Target Group had experienced a decline since 2016 and had begun contemplating retrenchments and restructuring strategies from that period, without a temporal link to the commencement of merger negotiations. The Commission also considered broader conditions in the South African media industry, including revenue unpredictability and expected decline affecting staffing levels.

A further factual element relied on by the Tribunal was the Commission’s finding that the transaction did not create job duplications, because the Acquiring Group did not have employees performing jobs similar to those of the employees affected by the retrenchments described.

3. Legal Issues

The central legal questions were whether the proposed transaction was likely to substantially prevent or lessen competition in any relevant market, and whether it raised public interest concerns warranting conditions or prohibition, with employment impacts being the focus of the public interest debate presented in the reasons.

The Tribunal’s determination involved primarily the application of law to fact. On the competition assessment, the issue turned on the factual existence (or absence) of competitive overlaps and resulting competitive effects. On the public interest component, the issue turned on an evaluative assessment of whether retrenchments were merger-specific and whether the merger itself caused or exacerbated adverse employment outcomes requiring remedial conditions.

4. Court’s Reasoning

On competition, the Tribunal accepted that the proposed transaction raised no competition concerns because Lebashe did not have investments in firms that competed with the Target Group. On that basis, the Tribunal concluded that the transaction would not substantially prevent or lessen competition in any relevant market. The reasoning, as expressed, proceeded from the absence of competitive overlap to the absence of a substantial lessening of competition.

On public interest, the Tribunal’s reasoning focused on the employment concerns raised by ICTU and SATU and the Commission’s investigation into whether job losses were linked to the merger. The Tribunal recorded that the merging parties maintained the retrenchments were not caused by the transaction, but by adverse trading conditions and structural changes affecting the media sector, including reduced newspaper production volumes and revenue.

The Commission’s investigation was treated as material to the Tribunal’s evaluation. The Tribunal relied on the Commission’s finding that the Target Group’s business decline had been ongoing since 2016 and that retrenchments and other restructuring options had been contemplated well before merger negotiations began, with no identified temporal or causal link between the contemplated retrenchments and the merger process. The Tribunal also relied on the Commission’s consideration of the wider media industry context, where declining and unpredictable revenues were producing retrenchments as part of cost-cutting aimed at sustainability.

A further evaluative component in the Tribunal’s reasoning was the finding that the merger did not produce job duplication, because the Acquiring Group did not employ people in roles similar to those of the employees affected by the retrenchments. The Tribunal therefore accepted the Commission’s conclusion that the pre-merger retrenchments and anticipated further retrenchments were unlikely to be a direct result of the proposed transaction. On that basis, the Tribunal concluded that the transaction raised no public interest concerns requiring conditions.

5. Outcome and Relief

The Tribunal approved the proposed transaction unconditionally.

No special or additional relief was granted or refused beyond the approval decision reflected in the order and reasons. The reasons as provided do not record any costs order.

Cases Cited

No cases were cited in the reasons provided.

Legislation Cited

No legislation was expressly cited in the reasons provided.

Rules of Court Cited

No rules of court were cited in the reasons provided.

Held

The Tribunal held that the proposed transaction was unlikely to substantially prevent or lessen competition in any relevant market, because the acquiring firm did not have investments in firms competing with the target firms.

The Tribunal further held that the proposed transaction raised no public interest concerns on the evidence and investigation described, including the Commission’s findings that the retrenchments were not merger-specific, were contemplated in the context of an ongoing business decline predating merger negotiations, and were not attributable to job duplication arising from the transaction.

Accordingly, the Tribunal approved the merger without conditions.

LEGAL PRINCIPLES

In assessing a merger’s competitive effects, the Tribunal applied the principle that where the transaction does not create a competitive overlap between the acquiring and target firms, the merger is unlikely, on the facts, to result in a substantial prevention or lessening of competition in any relevant market.

In assessing public interest—specifically employment effects—the Tribunal applied the principle that adverse employment outcomes justify merger conditions only where they are shown, on the facts, to be merger-specific or directly attributable to the transaction, rather than to pre-existing financial difficulties, restructuring plans predating negotiations, or broader structural changes in the industry.

The Tribunal also applied the principle that where a merger does not create job duplications between the merging groups, this can support a finding that retrenchments are not caused by the merger, particularly when the evidence indicates that retrenchments are driven by operational pressures independent of the transaction.