The Competition Commission on October 6 filed an application with the Competition Tribunal under Section 16(3) of the Competition Act seeking the revocation of the tribunal’s decision to conditionally approve the merger between Premier Group and RFG Holdings.

The tribunal approved the large merger on March 6, subject to conditions that included employment protections.

Before the merger was referred to the tribunal, the merger parties stated that they contemplated neither closing nor disposing of any manufacturing facilities or production lines, or equipment, after the merger.

They repeated this assurance before the tribunal approved the transaction, confirming that they did not contemplate closing, integrating or consolidating their respective production facilities.

The merger was implemented on March 30.

In July, four months after the merger was implemented, Premier informed the commission that it intended to close RFG’s fruit-canning facility in Tulbagh, in the Western Cape.

The facility, Fruit Processing Western Cape, is one of only two fruit-canning facilities in South Africa and provides an important route to market for about 200 Western Cape fruit growers, the commission points out.

It adds that the facility is also a significant regional employer and that its proposed closure would affect more than 400 permanent and fixed-term employees, as well as thousands of seasonal workers across the broader agricultural value chain.

The commission’s application follows its investigation of a complaint lodged by, among others, the South African Clothing and Textile Workers Union.

The complainant alleged that the planned closure of this cannery would result in retrenchments in breach of the merger conditions.

The investigation found that Premier and RFG had failed to disclose information about the contemplated closure to the commission and the tribunal, despite the parties having known of and discussed the option to do so before the tribunal approved the merger.

This information was material to the commission’s assessment, particularly because the commission had expressly requested confirmation of the parties’ post-merger plans for the closure, integration or consolidation of their production facilities.

The non-disclosure denied the commission and the tribunal an opportunity to assess and address the closure’s competition and public-interest implications before approving the merger.

The merger-control process is characterised by significant information asymmetries between merger parties and regulators. Withholding material information, whether by omission or as a deliberate act, undermines the integrity of the merger-control regime and may result in the revocation of an approved merger, the commission stresses.

It notes that the contemplated closure of the Tulbagh cannery was material to the assessment of both the competition and public-interest aspects of the merger.

“It would remove the only competitor to Langeberg from the South African market, effectively creating a monopoly in the sector. The public-interest consequences would also be significant, including the aforementioned loss of permanent and seasonal jobs, farmers would lose a longstanding customer, and exports would decline,” the commission cautions.

“The integrity of South Africa’s merger-control regime depends on merger parties making full, frank and honest disclosure of all material information. The commission cannot properly assess the competition and public-interest consequences of a transaction when crucial facts are withheld.

“Where parties fail to meet this obligation, the commission will not hesitate to take appropriate action to protect the integrity of the regulatory process,” commissioner Doris Tshepe says.

In a statement, Premier explains that the in terms of the relief the Commission is seeking, it requests that the Tribunal either revoke the initial merger approval and have the merger refiled and considered, or amend the conditions it imposed as part of the initial merger approval. The Commission’s application also seeks to urgently restrain Premier from taking steps that may undermine the Tulbagh Facility's ability to continue operating as a canning facility.

Premier says it strongly disagrees with the Commission’s characterisation of the parties' conduct and the basis for the application and will defend its position before the Tribunal.

Premier also rejects any suggestion that it acted unlawfully, withheld material information or sought to mislead the Commission or the Tribunal during the merger review process.

Premier asserts that it has proactively engaged with the Commission on the potential closure of the facility since July, and provided the entity with the chronology of events and supporting documents related to its decision-making process regarding this. 

Premier states is position that the proposed controlled was not a decision, intention or merger implementation step at the time of the merger approval process; and that it is not in any way related to the merger but arose after implementation of the transaction, following the deterioration in the facility's operating environment and the commercial realities facing the canned deciduous fruit category.

Premier points out that the recent decisions taken relating to the business were driven by structural and economic pressures in the canned deciduous fruit industry, including changing global demand, export-market pressure, rising input costs, lower use and the need for greater scale in an increasingly competitive international market.

It was neither Premier nor RFG’s intention to close the facility during the merger review process, and there has to date been no evidence presented to Premier to demonstrate that the likely fate of the Tulbagh Facility is related or linked to the merger, the company avers.

Premier says it will continue to engage with the Commission through the appropriate legal channels.

Premier also confirms that a CCMA-facilitated Section 189A consultation process relating to the facility has concluded. Following consultations and negotiations with recognised trade unions, Premier made voluntary severance packages available to affected employees. The overwhelming majority of affected employees entered into voluntary severance agreements. As a result, no retrenchments will be implemented, the company assures.