South Africa: Appeal By The Departments Of Economic Development, Trade & Industry And Forestry & Fisheries Against The Competition Tribunal’s (Antitrust Commission) Decision To Permit Wal-Mart’s Purchase Of 51% Of Massmart
On 20 June 2011, the Competition Tribunal approved
Wal-Mart's purchase of Massmart on condition that no jobs are
cut for two years, both companies ensure that existing labour
agreements are honoured for three years after the takeover, and
that $14.6 million is invested in a fund to assist in developing
The abovementioned South African government departments are
appealing the Competition Tribunal's decision on the grounds
that they are dissatisfied with the manner in which the Tribunal
conducted the hearing in May of this year. The review application
holds that "the merger hearing was unfair and not in
accordance with the principles of natural justice".
According to the government, the failure by the merger parties to
provide them with certain information and documents for discovery
prevented the government from placing their "best case"
before the Tribunal. Consequently, the lack of information in turn
affected the ability of the Competition Tribunal to properly
appreciate the potential damage of the merger and the crafting of
appropriate conditions to address such damage.
Government has petitioned the Court to either set aside the
Tribunal's decision to permit the merger or send the matter
back to the Tribunal for further consideration. If the matter is
sent back to the Tribunal for further consideration, they have
requested that tougher conditions be imposed in the form of higher
penalties to reduce the likelihood of a surge in cheap imports with
resultant job losses and the squeezing of local suppliers.
According to Massmart, the appeal will in all likelihood not
affect the merger process and the delivery of the benefits of the
The appeal could however impact negatively on foreign direct
investment in South Africa, and tarnish the nation's
credentials as an investor-friendly emerging market. Potential
foreign investors may be reluctant to invest in a country where the
government and labour unions rally to impose strict targets on a
foreign entity to use local suppliers to curb the loss of revenue
in South Africa and jobs for local manufacturers, noting the same
targets are not imposed on local entities.
The matter is expected to be heard by the Competition Appeal
Court in October.
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Dominant firms are prohibited by the Competition Act 1998 from charging excessive prices to the detriment of consumers. Why only dominant firms? The presumption is that a small firm will lose its customers to its competitors if it charges excessive prices.
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