Walmart and Massmart resume battle against state departments, union

2011-10-21 11:44

Walmart and Massmart resumed their battle against three government departments and a union in the Competition Appeal Court in Cape Town today.

The proceedings started with Judge Dennis Davis grilling advocate Paul Kennedy, acting for the SA Commercial, Catering and Allied Workers’ Union (Saccawu), over whether it was possible for the merged company to have information about the effect the transaction would have on manufacturers in South Africa.

“In a case of this kind, who bears what burden?” Davis asked. “One has to be realistic about this. There are issues that they wouldn’t know anything about.”

Davis said much of the information on the impact the merger would have on the manufacturing sector in South Africa fell outside the ambit of what the merged company could know.

Davis asked Kennedy about the impact the merger would have on jobs losses. “If both of you are right, what do I do then? “If they were able to show me that probably (there were) not going to be job losses, then where does that leave you?”

Davis said in South Africa, manufacturers often could not respond to demand quick enough. “It is all about ensuring you can marry supply with the demand. It is not just about them getting volume. The real point is not to have stock on the shelf for too long.”

Yesterday, Davis asked the government, unions and the merging parties to consider what remedy they would accept to allow the merger to go ahead.

“There is no need to send it back to the tribunal if we can find a solution,” Davis said. “What remedy would be most expeditious? What relief can we bring about that will meet everyone’s interest?”

Davis said the court had the option of refusing the appeal, changing the conditions attached to the tribunal’s approval, or agreeing to a review of the proceedings – which would involve a new hearing by the tribunal.

“Sending this back to the Competition Tribunal causes me some anxiety,” he said. He said there was no real evidence about what would happen after the merger. “None of us has the foggiest idea about what the ultimate total welfare is after the merger,” he said.

Wim Trengove, counsel for the departments, argued that the tribunal’s hearing was procedurally and substantively unfair. He said the tribunal did not allow sufficient time for a “full and fair ventilation” of important public interest issues. The merging parties should also have to provide far more information around the circumstances of the merger.

Jeremy Gauntlett, counsel for the merging parties, said that the government’s application for a review of the tribunal’s proceedings should be dismissed because the government did not raise its concerns on the first day of the hearings.

The Competition Tribunal ruled on May 31 that Walmart, the world’s biggest retailer, could proceed with the deal on condition that no jobs were cut for two years and that the companies set up a R100 million fund to assist local suppliers.

The government said the conditions were inadequate and would result in a massive influx of imports that would undermine manufacturing output.
The appeal against the tribunal’s decision was brought by the departments of economic development, trade and industry, and agriculture, forestry and fisheries – as well as Saccawu.

Economic Development Minister Ebrahim Patel, Trade and Industry Minister Rob Davis and Forestry and Fisheries Minister Tina Joemat-Pettersson have said in court papers that the transaction should be reconsidered because the tribunal’s hearings were flawed.

Saccawu has filed a separate appeal against the approval of the takeover of Massmart on the grounds that the tribunal failed to take adequate consideration of the public interest.

Walmart paid R16.5 billion in June for a 51% stake in Massmart, South Africa’s biggest food and general goods wholesaler. Walmart said the deal would create 15 000 jobs in South Africa within five years. Most of the R60 billion it would spend on the buying of food and consumer goods would be sourced from local suppliers.

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