Brief Summary

Competition Law — Merger Conditions — Interim Relief — Coca-Cola Beverages South Africa (Pty) Ltd sought urgent interim relief against Anhauser-Bush Inbev SA/NV and others regarding the exclusion of former SABMiller employees from benefits under the Zenzele Employee Trust following a merger. The Tribunal found that the merger conditions imposed a duty to secure future rights for these employees, establishing a prima facie right for the applicant. The Tribunal ordered the respondents to hold in abeyance the distribution of R52 million in benefits pending the outcome of the Competition Commission's investigation into the alleged breach of merger conditions.

Comprehensive Summary

Summary of Judgment

Introduction

The proceedings took the form of an urgent application for interim relief before the Competition Tribunal of South Africa, brought pending the finalisation of an investigation by the Competition Commission of South Africa into an alleged breach of merger conditions.

The applicant was Coca-Cola Beverages South Africa (Pty) Ltd (CCBSA). The first to third respondents were Anhauser-Busch InBev SA/NV (AB InBev), South African Breweries (Pty) Ltd (SAB), and the Chairperson of the SAB Zenzele Employee Trust Allocation Committee (collectively relevant to the administration and allocation decisions under the Zenzele Scheme). The Competition Commission of South Africa was cited as the fourth respondent given its ongoing investigative role.

The procedural history was anchored in a prior merger decision. On 27 September 2017, the Tribunal conditionally approved the acquisition of control by The Coca-Cola Company over Coca-Cola Beverages Africa (Pty) Ltd (CCBA) and its subsidiaries, a transaction that involved The Coca-Cola Company acquiring the SABMiller shareholding in CCBA. A merger condition (clause 4.6) was imposed to protect the interests of certain employees who had been beneficiaries under SABMiller’s empowerment trust scheme prior to the merger. Following events in late 2019 and early 2020, CCBSA approached the Commission in January 2020 alleging a breach, and then sought urgent interim relief from the Tribunal. The matter was heard on 20 March 2020, an order was issued on 30 March 2020, and reasons were issued on 31 March 2021.

The general subject-matter of the dispute concerned whether former SABMiller-group employees who moved to CCBSA due to the merger were being unlawfully excluded from a late-stage top-up allocation under the SAB Zenzele Employee Trust scheme, contrary to the merger condition intended to preserve their benefits.

Material Facts

A central, undisputed background fact was that the Tribunal’s 2017 approval of The Coca-Cola Company’s acquisition of CCBA was subject to conditions, including clause 4.6, which recorded an undertaking responding to concerns raised by the Food and Allied Workers Union (FAWU) that affected employees should not lose benefits under the SAB Zenzele Employee Trust (a B-BBEE employee scheme established in 2010). Clause 4.6 stated that former SABMiller employees shall not lose any benefits of the Zenzele Scheme by virtue of the proposed transaction, and that for participants without fully vested rights, the same vesting profile would apply as if CCBA was still part of the SABMiller group.

It was also common cause in the Tribunal’s narrative that, at the time of the merger, CCBA was part of the SABMiller group (under AB InBev’s control), and employees of CCBA were beneficiaries of the Zenzele Scheme. Following the merger, some employees became employees within the Coca-Cola bottling group (CCBSA), but their continued participation in the Zenzele Scheme was intended to be preserved by the merger condition. CCBSA brought the application on behalf of its employees who were beneficiaries of the Zenzele Scheme and who had transferred as a result of the merger but whose participation was, on CCBSA’s case, protected by clause 4.6.

In late 2019, in anticipation of the scheme’s scheduled maturation on 31 March 2020, the Chairperson of the Allocation Committee informed Zenzele beneficiaries that remaining unallocated participation rights held by the trust would be allocated on an equal basis as a top-up allocation to existing benefits. The material fact triggering the dispute was that the former SABMiller employees now employed by CCBSA were excluded from that top-up allocation.

CCBSA engaged the respondents from December 2019 regarding this exclusion, contending that affected employees qualified for the top-up allocation under the merger condition. Those efforts did not resolve the dispute. In January 2020, CCBSA informed the Commission of an alleged breach of the merger condition, and the Commission commenced (or continued) an investigation.

The Tribunal treated as materially significant that the Zenzele Scheme was to be wound up by 31 March 2020, and that, absent interim relief, the benefits would be distributed and potentially dissipated before the Commission’s investigation could reach a final determination. The Tribunal recorded an estimate by AB InBev that approximately R52 million would be required for payments to the former SABMiller employees on the basis contended for by CCBSA, with records reflecting approximately 2 229 employees who would receive payments of approximately R23 000 each on that basis.

A further contextual fact noted by the Tribunal was that SAB intended to implement a new empowerment transaction (the Zenzele Kabili Scheme) following maturation of the Zenzele Scheme, although the respondents indicated that implementation of Zenzele Kabili was postponed due to the Covid-19 pandemic. This postponement was treated as context rather than a decisive factual premise for the core interpretive dispute about clause 4.6 and the immediate top-up allocation.

Legal Issues

The central legal questions concerned whether CCBSA met the requirements for urgent interim relief pending the Commission’s investigation into the alleged breach of the merger condition, and specifically whether CCBSA established a prima facie right arising from the merger condition to prevent the disbursement of disputed benefits.

A key issue of application of law to fact was the interpretation of merger condition clause 4.6, including whether it protected only employees’ existing Zenzele benefits at the time of the merger, as the respondents argued, or whether it extended to future benefits and allocations under the scheme (including the 2019 top-up allocation), as CCBSA contended.

Relatedly, the Tribunal had to determine whether the respondents’ reliance on the Trust Deed (particularly a clause addressing the consequences of transfer to a new employer) displaced or constrained the protection given by the merger condition, and whether that reliance undermined the existence of a prima facie right.

The Tribunal also had to address preliminary objections raising issues of urgency, locus standi, and non-joinder. These were primarily procedural and jurisdictional questions in the context of interim relief.

Court’s Reasoning

The Tribunal approached the application on the footing that, in merger-related matters, the Tribunal’s adjudicative role does not exclude a power to grant interdictory interim relief, and that it may issue orders necessary or incidental to the performance of its functions under the Competition Act framework. It identified the conventional requirements for interim relief, including a prima facie clear right, injury committed or reasonably apprehended, balance of convenience, and the absence of another satisfactory remedy.

On the prima facie right, the Tribunal concentrated on the text and purpose of clause 4.6. It noted that the condition arose directly from FAWU’s concern during the 2017 merger proceedings that employees would be prejudiced by moving out of the SABMiller group and thereby losing Zenzele Scheme benefits. The Tribunal rejected the respondents’ narrow construction that clause 4.6 addressed only the preservation of already-accrued rights and not entitlement to future allocations. On an ordinary reading, the condition did not create the distinction advanced by the respondents. The Tribunal considered that the language dealing with employees who did not yet have “fully vested rights” and providing that “the same vesting profile will apply as if CCBA was still part of the SABMiller group” pointed toward the protection of future accrual and vesting consequences over time, not merely the freezing of existing entitlements.

The Tribunal reasoned that clause 4.6 created a legitimate expectation that, for purposes of the Zenzele Scheme, the affected employees would continue to be treated as if they remained employed within the SABMiller/AB InBev group. In the Tribunal’s analysis, that expectation supported the proposition that future benefits under the scheme should also accrue to them, which rendered their exclusion from the top-up allocation at least prima facie inconsistent with the merger condition.

The Tribunal reinforced this interpretation by reference to correspondence in the record. It noted that in a letter dated 21 August 2017 to the Commission, the merging parties confirmed that the former employees would not lose Zenzele Scheme benefits due to the CCBA transaction and confirmed that CCBSA employees would have the opportunity to benefit in a new ESOP arrangement within four years of the approval date of the first CCBA transaction. The Tribunal treated this as demonstrating that the protection contemplated by the merging parties extended beyond merely existing rights at the merger date and encompassed forward-looking benefits.

Addressing the respondents’ contention that the Trust Deed rendered it inconsistent or unlawful to afford future rights to employees transferred to a new employer, the Tribunal held that the Trust Deed could not be read in isolation. It reasoned that the Trust Deed provisions relied upon had to be read together with the merger condition, which expressly required that the former SABMiller employees be treated “as if” they were still part of the SABMiller group. On that premise, the Tribunal concluded that those employees did not fall within the category contemplated in the Trust Deed clause addressing loss or limitation of rights following transfer to a new employer, because the merger condition operated to treat them, for scheme purposes, as not having transferred.

On irreparable harm and balance of convenience, the Tribunal considered detailed treatment unnecessary because the prejudice was evident on the facts it accepted as material. The Zenzele Scheme was due to be wound up on 31 March 2020, and absent interim relief the benefits would be distributed and the fund dissipated, potentially rendering later enforcement of any Commission finding ineffective. The Tribunal accepted that setting aside the disputed amount pending the Commission’s final determination would cause little prejudice to other beneficiaries, while protecting the position of the former SABMiller employees should a breach be found.

The Tribunal also dealt with the respondents’ preliminary objections. It found urgency self-evident given the imminent winding up of the scheme and the incomplete Commission investigation, and further noted that CCBSA had been attempting to resolve the matter since late 2019 and into January 2020. It found that CCBSA had locus standi because, as a party to the merger, it had a material interest in compliance with the merger condition, and as employer it had a material interest in protecting the rights of affected employees under that condition. On non-joinder, the Tribunal reasoned that the trustees were not responsible for administration or the allocation decision at issue; SAB had been appointed as administrator under the Trust Deed, and the Allocation Committee (through its Chairperson) was the body responsible for allocating participation rights and for furnishing SAB with lists of qualifying employees. The Tribunal therefore held that the cited parties were the appropriate respondents for the relief sought.

Outcome and Relief

The Tribunal granted interim relief requiring SAB (as administrator) and the Chairperson (as head of the Allocation Committee) to hold in abeyance and not distribute R52 million from the 2019 top-up benefits intended for the former SABMiller employees, pending the final determination of the Commission’s investigation.

The Tribunal further ordered that if the Commission’s final determination found a breach of merger condition 4.6, the scheme respondents, with assistance from CCBSA, must compile a list of former SABMiller employees who would qualify for the 2019 top-up benefits.

No order as to costs was made.

Cases Cited

Gold Fields Limited v Harmony Gold Mining Company Limited and Another (44/CAC/Nov04)

Competition Commission v Hosken Consolidated Investment Holdings and Another (CCT296/17)

The Coca-Cola Company (TCCC) and Coca-Cola Beverages Africa (Pty) Ltd (LM021Apr17)

Legislation Cited

Competition Act 89 of 1998

Rules of Court Cited

No rules of court were cited in the reasons.

Held

The Tribunal held that CCBSA established a prima facie right to interim protection based on a reasonable interpretation of merger condition clause 4.6, which was understood to protect not only existing Zenzele Scheme benefits at the time of the merger but also future vesting and benefit consequences “as if” the affected employees remained within the SABMiller group. The Tribunal held that, given the imminent winding up of the scheme and the risk of dissipation of funds, interim relief was appropriate to preserve the disputed amount pending the Commission’s final determination. The Tribunal also held that the preliminary objections on urgency, locus standi, and non-joinder lacked merit.

LEGAL PRINCIPLES

The Tribunal applied the principle that, in merger matters, the Tribunal’s duty to adjudicate does not exclude a competence to grant interdictory interim relief, and that it may issue orders necessary or incidental to the execution of its statutory functions.

The Tribunal applied the established requirements for interim interdictory relief, including the need for a prima facie right, a reasonable apprehension of harm, a favourable balance of convenience, and absence of an adequate alternative remedy, and it treated the imminence of dissipation as materially informing the harm and convenience enquiries.

In interpreting merger conditions, the Tribunal applied an approach grounded in the ordinary reading of the condition’s language in its merger-proceeding context. It treated an undertaking that employees would not lose “any benefits” and that the “same vesting profile” would apply “as if” the business remained within the group as extending, at least prima facie, to future vesting and allocations, not merely to the preservation of existing entitlements.

Where there is potential tension between private scheme instruments (such as a trust deed) and a Tribunal-imposed merger condition, the Tribunal treated the merger condition as relevant to construing how the scheme should be applied to the affected class, and it reasoned that the trust deed provisions had to be read together with, and in light of, the merger condition’s “as if” requirement for the affected employees’ treatment.

Coca-Cola Beverages South Africa (Pty) Ltd v Anhauser-Bush Inbev SA/NV and Others (URG164Mar20) [2020] ZACT 91; [2020] HIPR 140 (CT) (31 March 2020)