Advertise with fastmoving.co.za
 
 

The merger battle continues
The merger battle continues

Massmart Walmart Merger - Summary of 10 May court proceedings

RETAILER NEWS

May 11th 2011, 08:41

With the third day of the Competition Tribunal Hearings into the Massmart Walmart merger underway, we have compiled a summary of the proceedings.  

MASSMART / WALMART MERGER : SUMMARY OF PROCEEDINGS, 10 MAY 2011

The merger hearing resumed at 10h00 on 10 May 2011 with a number of questions put to Grant Pattison, the CEO of Massmart, by the Chairman of the Competition Tribunal, Norman Manoim.

The Chairman’s questions addressed the prospect of a conditional approval and the ambit of conditions that could be imposed. He emphasised that the Tribunal was not yet in a position to consider the necessity for conditions (or otherwise), but expressed the desire to explore the possibility with Pattison while he had the opportunity to do so (i.e. with Pattison in the witness box).

The questions posed covered the following topics –

o would Massmart be prepared to accept a condition imposed on the merged entity designed to preserve the extent of the collective bargaining rights currently enjoyed by Massmart’s employees;

o would Massmart be prepared to consider for re-employment, where possible, those
approximately 500 Game employees retrenched as a result of Massmart’s re-engineering
strategies during 2010; and

o would Massmart be prepared to accept a carefully formulated condition requiring the merged entity to maintain current levels of local procurement for a period of time post the
implementation of the proposed merger?

Pattison’s responses to the Chairman’s questions were prefaced by the statement that, in his view, the proposed merger did not warrant the imposition of conditions and, as such, the hypothetical conditions proposed by the Chairman were unnecessary. More particularly, Pattison responded that –

o as regards the diminution of existing bargaining rights, since it is not Massmart’s intention to do so, Massmart would be prepared to consider a condition dealing with this subject;

o Massmart is prepared to consider the re-employment of the approximately 500 retrenched
Game employees. This is a matter in relation to which Massmart has already engaged the
relevant trade unions; and

o he struggled to conceive of a procurement condition that was capable of efficient, fair,
meaningful and equitable implementation. Pattison identified 4 broad deficiencies with the
Chairman’s hypothetical proposal : (i) on a practical level, the data management and IT
systems of Massmart (and, presumably, its suppliers) are not configured to identify and
record the local content of products procured. Given that Massmart sells over 120 000 line
items, this data would have to be captured on an item-by-item basis, thereby introducing a
substantial administrative burden;

o for a product to be sold by Massmart, it must be attractive to, and sought after by,
consumers. Massmart has no control over the demand for products by its customers
(whether locally produced or imported);

o the proposal will generate consequences that impact negatively on Massmart’s ability to
compete in the marketplace. For instance, it will distort the competitive dynamic of
negotiations with local suppliers in a way that favours the supplier; and

o the proposal fails to take into account factors that fall outside of Massmart’s control, for
instance, interest and exchange rate fluctuations, governmental intervention, and trade
union policies.

The second witness called by the merger parties was Andy Bond, the former chairman of ASDA – Wal-Mart’s operation in the UK.

Bond’s cross-examination commenced with questions from Advocate Kennedy SC, counsel for the “Anti-Walmart Coalition”, comprising SACCAWU, COSATU, FAWU, NUMSA and Uniglobal. The broad themes explored by Kennedy covered the following subjects -

o Wal-Mart’s attitude towards trade unions and the so-called “unionisation” its employees;

o an exploration of possible conditions that Wal-Mart would be prepared to accept in order to
alleviate the concerns of SACCAWU (and other trade unions within the broader Anti-
Walmart Coalition) around employment security, employment conditions, job quality, job
creation and the like;

o the extent of Wal-Mart’s knowledge around retrenchments effected by the Massdiscounters
division of Massmart during 2010 in which approximately 500 Game employees were
retrenched as a result of re-engineering strategies;

o various lawsuits in which Wal-Mart has been involved around the world with a focus on
allegations of employee abuses;

o the history of Wal-Mart’s interaction with prospective targets in South Africa (including
Massmart); and

o the history of Wal-Mart’s negotiations with Massmart.

Bond was then cross-examined by Advocate Bhana SC for the Government Departments (i.e. the

Departments of Economic Development; Trade and Industry; and Agriculture, Forestry and
Fisheries). The broad themes explored by Bhana covered the following subjects –

o the extent of consumer welfare benefits expected to arise as a result of the proposed
transaction (including the sources of such benefits);

o an examination of the synergistic benefits expected to arise as a result of the proposed
merger, including the methodology employed in identifying and quantifying such benefits;

o an examination of Wal-Mart’s sourcing strategies; and

o the performance of ASDA, Wal-Mart’s operation in the UK.

Day 2 of the hearing concluded with the end of Bhana’s cross-examination of Bond. It is expected that day 3 of the hearing (11 May 2011) will commence with the cross-examination of Bond by Paul McNally SC for SACTWU.

For more information as to the nature of the evidence presented by Pattison and Bond, you can access non-confidential versions of their respective witness statements at www.comptrib.co.za. The witness statements submitted by the other participants in the merger hearing referred to above may also be located at this website. 

Read more about: walmart | wal-mart | retailers | massmart |

Related News

The V&A Waterfront’s Victoria Wharf is SA’s greenest shopping centre
19/09/2019 - 09:13
The V&A Waterfront’s far-reaching waste management and recycling practices has earned the property a prestigious Green Buildings Council of SA (GBCSA) 5 Star Green Star Existing Building Performance v1 certification (EBP v1) for the popular Victoria Wharf Shopping Centre – the highest rating for any existing shopping centre in South Africa.

Violence can impact availability of retail stock in SA, says industry body
12/09/2019 - 14:06
The Consumer Goods Council of South Africa (CGCSA) is concerned that the violent protests in the country could lead to a significant impact on stock available for retailers.

UK retailers bristle at demand of no-deal Brexit
10/09/2019 - 14:52
A British demand for supermarkets to prepare for a potentially chaotic no-deal Brexit by stockpiling food is stoking anger in the industry, with bosses saying they should not be blamed if people can't find everything they want on the shelves.

Massmart partners with Walmart’s global sourcing team to help local suppliers export to Walmart markets
10/09/2019 - 09:28
Representatives from Walmart’s Global Sourcing team are in Johannesburg to meet with 18 of Massmart’s South African suppliers who are interested in exploring opportunities to export their products to Walmart markets.

Multi-million rand Rustenburg Mall underway
09/09/2019 - 11:07
Rustenburg shoppers can look forward to a brand new shopping centre – Rustenburg Mall – set to introduce its first phase in April 2021.