The latest round of the ACCC's attempt to block the Metcash
deal has given useful guidance for future merger disputes.
In the latest chapter of the Metcash / Franklins deal, the
Federal Court has refused to grant the ACCC's application for
an urgent interlocutory injunction under section 80(2) of the
Competition and Consumer Act which would have restrained
Metcash and Pick n Pay from completing the share sale agreement
pending the ACCC's appeal.
There were two key issues for the Court: Should the injunction
be granted? And did the ACCC have to give an undertaking as to
The ACCC's need to give an undertaking as to damages
Section 80(2) gives the Court the power to grant an interim
injunction pending determination of an application for a final
injunction under section 80(1). Section 80(6) provides that the
Court shall not require the ACCC to give an undertaking to damages
as a condition of granting an interim injunction.
However, Metcash and Pick n Pay successfully argued that the
ACCC could not rely on section 80(2) on an appeal, and hence
section 80(6) did not apply. This was because the ACCC failed at
trial, so the application is more properly described as one which
seeks to preserve the subject matter of the appeal and that the
Court's jurisdiction to do so arises under section 23 of the
Federal Court of Australia Act 1976 (Cth).
In the ordinary merger case however, the ACCC is still not
required to offer an undertaking as to damages
Why wasn't the injunction granted?
Justice Jacobson said that the Court must weigh up the real
consequences to each party, bearing in mind not only the public
interest but the private interests involved. There is no
presumption that an injunction should be granted or refused, as the
matter is one for a judicial exercise of discretion, taking into
account all relevant factors.
The relevant factors which led him to dismiss the ACCC's
the fact that the ACCC's case at trial was dismissed by the
primary judge, and the ACCC did not point to any glaring error or
obvious oversight in the primary judgment – the ACCC
appeal points were "debatable";
the appeal would not be rendered pointless if the injunction is
refused – the ACCC is appealing for two reasons, one
being the legal principles of merger analysis which have broader
applicability than just this case;
in weighing the public vs private interest here, the private
ones win in this case because even if interim relief were granted,
the status quo is unlikely to be preserved until the determination
of the appeal, given the dire condition of the Franklins business
and the prospect its operations would be scaled back in some
although the ACCC believes that a third party will purchase the
Franklins' shares and operate the wholesale assets if the share
sale agreement does not proceed, there was no evidence to support
the difficulties to which the ACCC refers of reversing the
arrangements if the deal closes and then if the ACCC wins its
appeal which may well ensue if Metcash sells the Franklins'
shares to independent purchasers are relevant, but all parties are
aware of the appeal;
if injunctive relief were granted, Metcash and Pick n Pay may
well extend the deadline for completion – but this is
speculation, and Justice Jacobson wasn't about to act on
Pick n Pay has made it clear that it intends to complete the
agreement and cease to carry on business in Australia. This has
been its stated intention for some time but it has been delayed by
the processes involved in the ACCC's determination and the
trial process; and
the sale agreement provides Pick n Pay with the ability to make
a certain exit from the business which is of considerable
commercial benefit to it. In light of the matters referred to
above, Justice Jacobson said he did not see why it should be
further delayed in its ability to complete the agreement. Although
the matter is under appeal, some weight should be given to the
primary judge's finding that the transaction is
In summary this case was much affected by Franklins being
otherwise likely to be broken up, if not sold to Metcash. As the
company is a classic case of a failing company the ruling is of
limited application in other cases where a vendor or target
business is trading satisfactorily
The hearing of the appeal will expedited, commencing October 24.
We will be following this closely.
Clayton Utz communications are intended to provide
commentary and general information. They should not be relied upon
as legal advice. Formal legal advice should be sought in particular
transactions or on matters of interest arising from this bulletin.
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