Next week the Competition Tribunal will hear the proposed large merger between retail giants WalMart Stores and Massmart Holdings (MSM), which has met with some opposition from local trade unions.
The hearing follows the Competition Commission’s recommendation to the tribunal in February 2011 that the merger be approved without conditions. According to the Commission’s recommendation, it could find no persuasive reasons not to recommend an approval of the merger.
WalMart, the buyer in this transaction, is a United States-based company which also operates in other countries throughout the world including Canada, Brazil, China, Chile, Japan and Mexico. It retails a wide range of products from groceries to electronics, furniture to clothing. Massmart on the other hand is a South African wholesaler and retailer of grocery products, liquor and general merchandise. Stores within the Massmart group include Game, Dion Wired, Makro, Builders Warehouse and Masscash.
According to WalMart, its rationale for entering into the transaction is a desire to be in emerging markets, especially South Africa and the sub-Saharan region. Wal-Mart believes South Africa is a key market for growth, accounting for approximately 20% of consumer spending on the African continent as a whole. WalMart also believes South Africa is a sophisticated market with a stable economic, political and regulatory environment. It sees Massmart as an ideal entry point into the region.
While the Commission received several submissions from unions and industry bodies during its assessment of the WalMart/Massmart merger, it had not received government submissions by the time it had to file its recommendation with the tribunal and so was not in a position to take its views into account. However, the commission was aware of talks underway between the merging parties and the Economic Development Department. After the filing, the tribunal received a joint submission on the merger from the Economic Development Department, the Department of Trade and Industry and the Department of Agriculture, Forestry and Fisheries in which the departments indicated their concerns about the potential impact of the merger on labour and small and medium-sized business in South Africa.
Four trade unions: the South Africa Commercial, Catering and Allied Workers Union, the National Union of Metalworkers of South Africa, the Food and Allied Workers Union and the Southern African Clothing and Textile Workers Union have filed submissions requesting the tribunal to prohibit the merger. Alternatively, impose conditions on it that relate to employment protection and the protection of local industries. An organisation representing small and medium size enterprises, the Small Medium and Micro Enterprises Forum, will make submissions as well.
In March 2011, the hearing was postponed in order to allow the government departments time to file their economic expert report on the merger. The hearing will now run from May 9 to May 16.
The tribunal expects to hear evidence and testimony from the commission, the merging parties, the above government departments and other third parties during next week’s hearing. After considering these views, the tribunal must decide whether to approve the merger, approve the merger with conditions or whether to prohibit the merger outright. — I-Net Bridge