I am increasingly convinced that whenever the Competition Commission encounters the bothersome business of capitalism, its instinct is to reach for the largest regulatory hammer in the tool shed.
Its latest crusade against Premier Group’s R6.5bn acquisition of RFG Holdings is typical Sunnyside tragicomedy. The deal was scrutinised, approved by the Competition Tribunal in March and then implemented. Done, one might have thought. Apparently not. Seven months later, the commission wants the tribunal either to revoke that approval and send the parties back through the merger mill, or rewrite the conditions after the fact.
Think about what “revoking” this merger would actually mean. Premier is the company behind some of the most familiar names in South African cupboards — Blue Ribbon bread, Snowflake flour, Iwisa maize meal — now combined with RFG brands such as Rhodes, Bull Brand and Hinds. The businesses have been legally combined, shareholders have exchanged paper, management structures are being integrated and capital allocated. You cannot simply reach into the pantry seven months later, separate the flour from the loaf and pretend you are back where you started.
There is a serious issue here. The commission alleges Premier and RFG knew before approval that closing the Tulbagh processing plant was being contemplated and failed to disclose this despite being specifically asked about factory closures. If that is proved, the tribunal should deal with it. Merger parties cannot be permitted to mislead regulators.
Let’s forget for a moment that the tribunal process was supposed to investigate all this to begin with (and cleared the deal). The commission’s central problem is causation.
Premier says the Tulbagh decision was not caused by the merger at all. And there is more than corporate spin behind that claim. Jacques Jordaan, CEO of the Canning Fruit Producers’ Association, is on record as saying global canning markets remain under pressure, with canners showing “limited appetite for cling peaches”, while US tariffs have “drastically reduced the competitiveness” of South African canned fruit. The industry exports roughly 80% of its output, leaving it acutely exposed to exchange rates and weak international demand.
Then there is the Western Cape government itself. On September 3, more than a month before the commission launched its application, agriculture MEC Ivan Meyer told the provincial legislature that government “cannot direct a private company to continue operating a loss-making business”.
None of that proves Premier’s legal case. But it does make the commission’s implied counterfactual, that Tulbagh would be happily humming along but for this merger, considerably harder to sustain.
Mandate creep
Companies remain entitled to restructure operations after mergers. Competition law cannot become a permanent regulatory standstill agreement under which every factory, job and production line existing on the day of approval must thereafter be preserved in aspic.
Indeed, Premier CEO Kobus Gertenbach has been remarkably explicit, saying the two businesses do not compete in a single product category, no factories would need to be consolidated because of the merger, and Premier would not undertake merger-related job losses.
That is not the same thing as promising that no business anywhere in the enlarged group will ever close.
Yet this is where the commission’s approach troubles me. It has stretched merger control from the legitimate policing of competition into something resembling industrial policy by administrative veto. Employment, ownership, localisation, procurement and an expanding catalogue of public-interest considerations are loaded onto transactions until investors cannot confidently know where merger regulation ends and economic planning begins.
The irony is that Premier is almost a case study in the behaviour the government claims it wants from business.
Over the past four years it has invested roughly R3bn in manufacturing facilities, and Gertenbach has repeatedly described a strategy of investing in scale, manufacturing efficiency and local production.
This is not some asset stripper arriving with a team of corporate financiers and a box of retrenchment notices.
Nor is Premier ducking the consequences at Tulbagh. Its section 189A process has concluded and, according to the company, the overwhelming majority of affected employees accepted voluntary severance packages, meaning no retrenchments will be implemented.
None of that absolves Premier if it misled the commission. But neither does regulatory anger absolve the commission from demonstrating its case.
And here proportionality matters.
Revoking an implemented merger is the nuclear button of merger regulation. It creates enormous costs not merely for the parties, but for the credibility of South Africa as an investment destination. Every board considering an acquisition must price in regulatory risk. If approval can effectively become provisional whenever subsequent commercial decisions offend the regulator, that risk premium rises.
There is an uncomfortable suspicion that the commission is furious because it believes it was blindsided and now wants to make an example of Premier. If true, that’s a dangerous basis for economic regulation.
South Africa needs more investment, more consolidation where scale improves productivity, more modern factories and more capital committed for the long term. We cannot simultaneously complain about anaemic fixed investment and then make corporate transactions hostage to an increasingly expansive interpretation of merger control.
