Walmart: State's appeal unsubstantiated

2011-10-20 14:25

Cape Town - An appeal for a review of the merger between United States retail giant Walmart and local company Massmart Holdings [JSE:MSM] is "factually insupportable" and "legally misconceived", the Competition Appeal Court heard on Thursday.

The submission was made in the heads of argument of the merged firm's counsel, who include Jeremy Gauntlett and David Unterhalter.

The appeal started in the Cape High Court on Thursday and was brought by the departments of agriculture, forestry and fisheries; economic development; and trade and industry.

They want the review and setting aside of various decisions by the Competition Tribunal, which has allowed the merger subject to certain conditions.

Wim Trengove is arguing on behalf of the four departments.

In its submission, the merged firm said it had never seriously been contended that the merger gave rise to competition concerns. The merger was therefore not likely to substantially prevent or lessen competition in any relevant market.

The firm argued the merger would result in significant pro-competitive and consumer welfare benefits in the form of significantly lower prices. It intends expanding its operations and creating jobs in South Africa.

"Even if job losses were to occur through domestic manufacture displacement or consolidation in the retail sector, these will be dwarfed by the positive effect that the significant consumer gains associated with the merger would have on jobs, not only with Massmart but with the broader economy as well," the merged company said in its submission.

The appeal is being heard by a panel of three judges, headed by Judge Dennis Davis.

The appeal is expected to last two days, but Monday has also been set aside in case the hearing extends longer than expected.

Threat to jobs

The government departments, which filed their heads of argument earlier this month, argue that Walmart's acquisition of Massmart could have a "potentially devastating" effect on local jobs.

They want the transaction to be sent back to the Competition Tribunal for proper consideration and for more effective conditions to be imposed.

Economic Development Minister Ebrahim Patel raised concerns that tens of thousands of jobs could be lost in the local factories supplying Massmart and other local retailers.

Trade and Industry Minister Rob Davies said there was no evidence that Massmart would create 15 000 jobs because of the merger, as it had advertised.

Agriculture Minister Tina Joemat-Pettersson said the implications of a displacement of local suppliers by Massmart would result in lost income and most likely the loss of jobs.

Dozens of anti-Walmart protesters sang "I'm a Communist" and "Awulethu' Mshini Wami" (Bring me my Machine Gun) outside the Cape High Court as the hearing got underway.

"Walmart is going to cost us thousands of jobs. We can't allow them to come in," said one of the protesters, wearing a "Coalition Against Walmart" T-shirt.

  • CAD - 2011-10-20 15:02

    If this government had been in place when the first automobiles were developed they would have called for the protection of the ox wagon industry. They don't seem to get it that protection will eventually lead to further job destruction. Instead of focusing on creating an enabling environment for industry they want to micro manage everything. This is ironic as the "government" is an organisation that seems unable to do anything right. I doubt they could organise a party in a brewery.

      will294 - 2011-10-20 15:14

      Not sure they would even have invented the wheel - so they wouldn't have had ox carts

  • SA Rugby Fan - 2011-10-20 15:54

    Why dont government do their jobs at the border, and properly prevent imported goods from entering our stores. Blocking a deal like this to enforce local content makes no sense at all.

      Becks - 2011-10-21 07:20

      Prevent imported goods from entering our stores?? We won't have any products to buy if we weren't allowed to import goods, genius.

      SA Rugby Fan - 2011-10-21 09:59

      I guess becks is an importer. My statement was generic, but was specific to the concerns of the merger. Why is it that every wise guy who couldnt get matric opens an import export business ...

      chrislbecker - 2011-10-21 11:19

      Hehe, I'm a consumer. I like to buy foreign-produced products like cellphones, fuel, computers, cars, clothes, medicine and medical equipment, rent dvd's and watch movies, etc etc etc. as I'm sure you do too. In this sense, you can describe me as an importer, but then so is every other person in this country.

  • BlueCapital - 2011-10-20 17:06

    Walmart promised to adhere to certain rules within their boundaries. So the merger was passed subject to conditions of job creation, being one of the main aspects worth mentioning. However, once the merger was passed, and Walmart now had their foot in the door of the South African retail sector, Walmart is essentially free to do as it pleases so long as it adheres to the vague and easily achievable conditions imposed by the competition tribunal. Message from Walmart should read, "Dear South African Gov. Thanks for the discounted buy into your retail sector, we will be buying from external suppliers effective immediately as our business model, which you approved merely states we should consider local suppliers. We considered them, and subsequently decided to buy else where." Was it not obvious Walmart was eventually going to pursue their own interests, and maximise their profits if conditions so allowed. Walmart is larger than most companies listed on our JSE. If they decide to change their business model after the conditions have been met, whose to stop them. This is a free economy after all. If it unemployment wasnt bad enough in the 1st place. Now the farmers and supplies will have to consider their ability to continue as a going concern into future after loss of their largest customer. Apparently our government considered this and the PRO's outweighed the CONS. Really??

  • mb curtains - 2011-10-20 17:26

    Walmart sorry you have not paid the required bribe to alll concern Please Fill their coffers more to ease into the position you require

  • Faith - 2011-10-20 17:46

    I'm not buying this Walmart deal... It's not gonna work!

  • scud - 2011-10-20 18:11

    The action by the three ministers is also petulant,childish,silly and economically harmful--not at all unusual for the ANC,and Cosatu who are instructing the ministerial stooges.

  • totaltruth - 2011-10-20 20:44

    govt wants a bribe ,,,pay up more for the right to do business

  • AncientGeek - 2011-10-21 08:32

    Have any of these ministers been to Game in the last 5 years? For years the goods have been 100% imported.

  • Bullhunter - 2011-10-21 11:00

    State's appeal unsubstantiated OR JUST PLAIN DUMB?

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