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11 March 2012 | Adam Leach
The benefits to consumers from the takeover
of retailer Massmart by Wal-Mart outweigh the potentially negative effects on
local manufacturers, according to the South African Competition Appeal Court.
On Friday the Court rejected an appeal to
prevent the takeover brought by the South African Commercial, Caterers and Allied Workers Unions (SACCAWU) over what it called a
“procedurally flawed” hearing by the Competition Tribunal, which approved the
merger in June. This is the second appeal against the decision to allow the
deal to proceed.
A key element of the SACCAWU challenge to
the merger was that if it went through, Wal-Mart would shift purchasing away
from local manufacturers in favour of lower cost products from China, damaging
the local economy. Ruling on this point, the judges concluded the consumer
benefits were as compelling despite the potential damage to local producers and
In their ruling Judges Davis and Zondi said:
“Having analysed this evidence, the Tribunal concluded that, notwithstanding a
legitimate concern which had been raised with regard to the effect of the
merger upon local producers and jobs, the possible consequent job losses had to
be weighed ‘against the consumer interest in lower prices and job creation at
Further to this, the Court ruled it was not
possible to impose specific local procurement conditions to the deal due to a
lack of data on Massmart’s previous levels of local procurement. In favour of
the merging parties, it ruled the commitment by Wal-Mart to establish an R100
million (US$13.3 million) local buying programme was “both appropriate,
proportional and enforceable”.
In order to strengthen the impact of the
fund, the Appeal Court ruled Wal-Mart must fund a study, to completed within
three months and to include a SACCAWU expert on the research panel, to identify
appropriate means by which “local South African suppliers may be empowered to
respond to the challenges posed by the merger and thus benefit”.
The judges also ruled Wal-Mart must
reinstate 503 Massmart workers who were “retrenched” (dismissed from their
positions) in 2009 and 2010, and take account of their prior years of service.
In addition, it must agree to not dismiss any Massmart workers for a period of
two years, unless voluntarily agreed by the worker, and honour the existing
labour agreements Massmart holds.
Massmart-Wal-Mart welcomed the court’s
decision. SACCAWU welcomed the decision to reinstate the 503 workers but said
they would consider the judgement carefully before deciding how to respond next