The government is seeking to overturn the Competition Tribunal’s decision to allow Walmart’s takeover of Massmart

State’s court bid to undo Walmart merger

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Business Day - Jul 21st 2011, 11:04

IN A move that will set alarm bells ringing in the minds of potential investors, the government is seeking to overturn the Competition Tribunal’s decision to allow Walmart’s takeover of Massmart . 

Citing an "unfair" merger hearing "not in accordance" with natural justice, the government argued in papers filed at the Competition Appeal Court yesterday that the tribunal’s decision to approve the merger should be set aside .

"The tribunal erred in making the scheduling decisions in that they precluded the parties who opposed the merger, or had otherwise intervened, including the applicants, from fully and properly ventilating their concerns and their submissions on the conditions to which any approval should be subject," three Cabinet ministers argued in the papers.

The application is being brought by Economic Development Minister Ebrahim Patel, Trade and Industry Minister Rob Davies , and Agriculture, Forestry and Fisheries Minister Tina Joemat-Pettersson .

The government’s appeal against approval of the R16,5bn takeover followed an announcement by the South African Commercial Catering and Allied Workers Union (Saccawu) that it would challenge the deal.

The government’s challenge of merger scrutiny procedures established under its own legislation will raise questions among potential investors about whether any purchase they make in SA will be subject to further hurdles, even when approved under the country’s transparent merger regime.

It comes in the same week that Parliament’s portfolio committee on economic development is holding hearings on the deal .

The companies, which last month completed the takeover, had a muted response yesterday. "Our legal team is in the process of reviewing the application," Massmart spokesman Brian Leroni said in a media statement.

Timing was an issue throughout the hearing, delayed from its original March start date by the Department of Economic Development’s failure to make a submission on time.

The tribunal’s May 31 judgment surprised many by accepting the conditions offered by the companies and not demanding anything more onerous. The conditions included no retrenchments for two years and a R100m fund to develop local suppliers. But the judgment did not include union and government calls for local procurement guarantees that these critics said were crucial to stop a flood of imports harming local industry.

The government argued in its application that it was denied access to documents that would let it show the true effect of Walmart’s entry to SA. "Access to this information would have indicated the extent to which the post- merger entity would have been able to use the Walmart network to obtain products more cheaply…. This would have enabled a realistic and accurate quantification of local procurement displacement in consequence of the merger," the application reads.

The ministers’ application criticised the tribunal’s decision to allow only four of Saccawu’s 13 witnesses who gave written testimony to appear in person.

"This decision to limit to such an extent the number of factual witnesses called on behalf of trade unions reflects a process that unduly preferred expedition over other fundamental considerations," their affidavit reads.

The tribunal declined to comment last night.