SA’s competition tsar will next month tell the Constitutional Court that the SA arm of Coca-Cola Beverages Africa (CCBA) conjured up a plan to get rid of workers after a 2016 merger, contravening one of the key conditions set by authorities in approving the deal.

In an affidavit filed with the court and seen by BusinessLIVE, the Competition Commission says Coca-Cola’s domestic unit (CCBSA) breached merger conditions by retrenching 368 employees in 2019.

One of the key conditions for the deal getting approved was that the merged entity will put a freeze on layoffs for three years.

‘What is clear is that CCBSA had devised a plan in terms of which it would render a number of roles redundant, retrench all the employees that occupied those roles and immediately refill those roles but pay the new recruits minimum wage,’ the affidavit notes.

‘In truth, therefore, the roles were not redundant; they were merely labelled ‘redundant’ so as to retrench the existing employees and replace them with new recruits willing to accept less favourable terms.’

The CCBA was formed in May 2016 after the Competition Tribunal conditionally approved the merger of the Southern and East African bottling operations of the non-alcoholic ready-to-drink beverages businesses of the Coca-Cola Company, SABMiller and Gutsche Family Investments.

SABMiller holds 57% and exercises control over CCBA, Gutsche Family Investments holds 31.7% and the Coca-Cola Company holds the remaining shareholding of 11.3%.

Following the 2019 retrenchments, the commission issued CCBSA with a breach notice, opening the door for a possible revocation of merger approval, administrative penalty and/or an order to disinvest.

BusinessLIVE notes that CCBSA tried unsuccessfully to get the competition appeal court to set aside the notice, a decision that will now be for the apex court to rule on.

CCBSA is expected to tell the Constitutional Court that it was not in breach of the merger conditions and that the retrenchments were not due to the merger but operational, which is legal.

‘There was no dispute concerning the fact (of) the imposition of the sugar tax or that CCBSA had paid more than R2bn in sugar tax in the period April to December 2018 alone. Given the timing of the merger and imposition of the sugar tax, it could not be disputed that the impact of the sugar tax had been unknown at the time of the merger,’ Coca-Cola says in its legal papers.

‘CCBSA recorded a significant decrease in gross profit, and the commission put up no facts to challenge the proposition that CCBSA had to cut costs to ensure long-term sustainability of the business. This was not solely attributable to the sugar tax but also to the macroeconomic climate and the sharp increase in the costs of raw materials. The commission did not deny these facts.’ 

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