The Coalition Group’s Concerns
14.
Both the Coalition Group and TAWU attended and made representations at the hearing. The Coalition
Group’s complaints focused on the process of privatising NTI. They also complained that the commuters had not been consulted
or involved in the process. They alluded to certain allegedly irregular practices taking place and requested that the entire process
be reviewed.
15.
The contract with the North West government gives CCT the exclusive right to provide a bus service
on the routes for the seven-year period. Given that the only alternatives to consumers on the routes in question are taxi services,
which the Commission did not consider an adequate substitute because of their relatively high prices to those of buses, the parties
have been granted a monopoly by the North West Government. However the parties point out that prior to the merger, NWS enjoyed the
same monopoly, so that nothing has changed except the identity of the party that enjoys the exclusivity. They also make the point
that consumers are protected in two respects. Firstly, because as we have noted, the service is subsidized and secondly, that the
rate the parties may charge consumers is regulated in terms of the agreement.
16.
What the merger does change is the incentive of the holder of the exclusive contract. Prior to the
merger the contract was the responsibility of a parastatal, now it is in private hands. For this reason the protection afforded consumers
in the contract needs to be made transparent to consumers so that they can, if need be, enforce their rights. For this reason, given
the opaque nature of the process thus far, we believe that it is in both the interests of competition and the public interest (See
section 12(3)(a)) to impose a condition to ensure price transparency for consumers in the affected region. Hence condition 1.2 in
our order that requires the merging parties to make known to consumers by way of either an advertisement in the newspapers or a notice
on the buses of the contractual stipulation insofar as they relate to fares the merging parties may charge to consumers during the
contract.
Employment Concerns
17.
Employment concerns were raised by TAWU, which represents a minority of the employees in the target
firm. Whether because of the nature of a tender process or a very poor communications strategy or both, the merging parties’
treatment of employees belonging to the minority union has been unfortunate. Not surprisingly they have viewed the process with suspicion
and looked to the public interest considerations in the Act to afford them some protection.
18.
Initially, according to their tender proposal, the merging parties were going to utilise CCT as
the operating company. It would have the contract, take over the employees and operate the routes. The employees were being transferred in terms of Section 197(2) of the Labour Relations Act. In the Sale Agreement their rights to
employment were further guaranteed for a minimum of one year.
19.
Subsequently, it appears that the shareholders have decided to divide the business between them.
TAH would run certain routes and Expectra the rest. CCT would remain solely to own the rights in the contract. It appears that this
created some difficulties as to where to house the employees and this was the query, which in frustration, TAWU’s attorney
sought clarity on at the hearing. Only then did it emerge that notwithstanding the apparent division of the routes into the separate
entities, all the employees would be employed by Expectra. The Commission rightly pointed out that the undertakings not to retrench
had been made by CCT and since this company was no longer the employer, the Commission questioned what the undertaking was worth.
20.
We sought clarity on this issue from the merging parties and a further memorandum was filed subsequent
to our hearing. In this memorandum Expectra gave an undertaking to respect the one year moratorium on retrenchments that CCT had
given. Although we welcome this undertaking we nevertheless are of the view that given the history of the transaction thus far it
would be appropriate to protect employees by ensuring that the undertaking ‘bites’ and hence we have made it a condition
of the approval of the merger. Note that in this case the moratorium is an agreement between buyer and seller and therefore not something
that an individual employee could enforce. The peculiar arrangements in this transaction justify making the undertaking a condition.
In this respect we have followed our approach in the large merger between Telkom SA Ltd and Praysa Trade 1062 (Pty) Ltd.
21.
It remains for us to consider another issue raised by TAWU. The union is unhappy with the one-year
moratorium on retrenchments and feels that this period is too short. TAWU points out that given that the company has a guaranteed
contract for seven years, which includes a subsidy, there is no reason why workers should not receive a far longer period of protection
since the risk to the business going forward is minimal. The merging parties argued that there was still a risk inherent in the business
going forward and substitute transport modes such as taxis may well become a greater competitive risk to them than they are now.
22.
They also point out that the majority union, SATTAWU, which represents approximately 90% of the workers in the target firm, has accepted the undertaking. In this respect we have received correspondence from SATTAWU confirming
that this is the case. Whilst we are not unsympathetic to the argument raised by TAWU, we do as we have said in the past, have to
respect the outcomes of collective bargaining. To alter an arrangement agreed to would undermine that process and lead to uncertainty
for both employees and employers. Accordingly we decline to extend the period given in the undertaking. Although we decided to refrain
from extending the period given in the undertaking in this instance, every case will be assessed on its own merits. If circumstances
are compelling, we would vary arrangements that are made for employees.
23.
We further urge the North West Provincial Government, if their concern really is for employee rights, to ensure that these are adequately
protected.
Conclusion
We conclude that the merger will not lead to a substantial lessening of competition. The Tribunal however approves the transaction
conditionally, in deference to the public interest issues that arise in this case. The conditions are contained in the Order attached
hereto.
_____________
20 October 2004
D. H. Lewis
Date
Concurring: N. Manoim, M. Mokuena
For the merging parties:
A. Gotz, instructed by Tabacks Attorneys
For the Commission:
M. van Hoven, Competition Commission
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