/ 9 March 2012

Court dismisses government’s Walmart appeal

Court Dismisses Government's Walmart Appeal

The Competition Appeal Court dismissed government’s appeal to the Walmart Massmart merger on Friday.

Judge Dennis Davis, the president of the Competition Appeal Court, handed down the decision at a hearing in Cape Town today, after the appeal was heard by the court in October last year.

However Davis did acknowledge that there were legitimate concerns about the effect of the deal on small producers and employment.

The court ruled that three experts be commissioned within a month to produce a report, which will determine “the best means by which South African small- and medium-sized suppliers could participate in Walmart’s global value chain and thereby ensure that benefits from this merger will flow to this important sector of the economy”.

The court ruled that the South African Commercial, Catering and Allied Workers Union would appoint one of the experts, the three government ministries another and the merged entities the third.

The experts have three months to complete their study, or four months from the date of the judgment.

The three parties will have a month to respond to the study’s findings before it is submitted to the Competition Appeal Court for evaluation.

The costs of the study must be paid for by the merging parties.

The court also ruled that the merged entity must reinstate 503 employees who were retrenched in 2009 and 2010.

The tribunal had previously ruled that these 503 retrenched employees should be given preferential treatment when Massmart hires more staff.

Following the Competition Tribunal’s approval of the merger on May 31 2011, the ministries of trade and industry, economic development and agriculture and fisheries lodged an appeal to the decision.

The three ministries argued that they did not have a “fair hearing” before the tribunal.

They contended that the tribunal had erred in refusing to order the merging parties to discover a range of documents which had been sought by them and which, in their view, were wholly material to the determination of the merger.

Further, they argued that the tribunal had erred in making certain scheduling decisions with regard to the oral hearing which then precluded the parties, which opposed the merger from fully and adequately ventilating their concerns.

The appeal by government was attacked by critics who argued that it created the perception of government as being against foreign direct investment.

However the entry of Walmart into South Africa through the purchase of 51% of the ordinary share capital of Massmart, which was first mooted in September 2010, has faced serious opposition from Cosatu and its affiliated unions.

The tribunal hearing was dogged by regular protests outside the department of trade and industry’s head office in Pretoria, where the Tribunal is housed.

However the court’s judgment seemed to dismiss decision around job losses stating, “the evidence indicated that consumers will benefit from lower prices and that these lower prices may, in turn, generate greater job creation than the job losses that may result from the merger”.

“There was insufficient evidence to conclude that the detrimental effects of the merger would outweigh the clear benefits.”