Massmart conditions are 'irrational'

The Competition Tribunal has ­criticised the government’s call for procurement quotas to apply to the Walmart-Massmart merger, describing the proposed conditions as not being “appropriate, proportional, rational or enforceable”.

The tribunal has released a report containing its reasons for approving the merger in which it says the demand by the government and trade unions to apply procurement quotas conflicts with its core mandate.

“The conditions will contradict the major objective of competition regulation—to secure lower prices—and the procurement conditions would likely affect the merged entity’s ability to provide customers with the lowest possible prices,” the report states.

“Competition authorities do not lightly impose conditions that contradict their primary mandate, unless there is overwhelming justification for doing so. If we are not for competition, then who is?”

The report adds: “A possible loss of jobs in manufacturing of an uncertain extent must be weighed up against a consumer interest in lower prices and job creation at Massmart.

“Since the evidence is that the likely consumers who will benefit most from the lower prices associated with the merger are low-income consumers and those consumers without any means of support of their own, thus the poorest of South Africans, the public interest in lower prices is no less compelling.”

The tribunal approved the R16.5-billion merger in May with certain conditions that were proposed by the merging entities themselves.

These included that the merged entity had to ensure there were no job cuts for two years, and that all existing labour agreements were honoured for three years after the purchase.
The merged entities also agreed to establish a R100-million supplier development fund. The tribunal’s ruling angered the unions that had joined the proceedings as intervening parties.

The Mail & Guardian understands that Cosatu’s commercial affiliate, Saccawu, has lodged an appeal against the decision. It will be heard by the Competition Appeal Court.

Saccawu secretary general Bones Skulu has reportedly said the appeal would seek to strengthen the conditions attached to the merger.

In its report, the tribunal said the supplier development fund was a “more positive” response to domestic procurement concerns.

“Instead of insulating local industry from international competition for a period, it seeks to make local industry more competitive to meet international competition,” it states.

The tribunal document says the Massmart-Walmart merger raises no competition concerns and that the conditions proposed by the merging entities are more than adequate to meet any concerns raised by the intervening parties.

The tribunal warns that there could be “grave dangers” if it imposes itself on labour matters that should be thrashed out at the bargaining table.

“We step cautiously into shop-floor issues, lest we forget our purpose as a competition regulator,” it says.

Because the document was released late on June 29, attempts to obtain comment from the department of economic development, Saccawu and Massmart were unsuccessful.

However, Massmart and Walmart released a statement this week saying the merged entities and their legal teams were reviewing the tribunal’s reasons for conditionally approving the merger.

Lloyd Gedye

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