Stakes high in Metcash appeal, says ACCC
THE competition regulator has lodged a far-ranging appeal against the Federal Court's "commercially unrealistic" rejection of its attempt to block Metcash's purchase of the Franklins supermarket chain.
THE competition regulator has lodged a far-ranging appeal against the Federal Court's "commercially unrealistic" rejection of its attempt to block Metcash's purchase of the Franklins supermarket chain.The Australian Competition and Consumer Commission yesterday lodged 19 grounds of appeal covering all major parts of Justice Arthur Emmett's August 25 decision, which handed a comprehensive victory to Metcash and the unwilling South African owner of the Franklins stores, Pick n Pay Stores.The new ACCC chairman, Rod Sims,said the appeal to the full Federal Court was necessary to protect the independent supermarket retailers who buy their supplies from Metcash, Australia's largest grocery wholesaler.The ACCC argues the merger would remove Metcash's only real competitor in NSW and the ACT, where Franklins owns 80 stores and supplies 10 franchise stores.But Metcash argues the entire independent sector is already constrained by competition from Woolworths and Coles.Mr Sims also said that if left unchallenged, the judgment could affect a wide range of future mergers and acquisitions.It could "make it very hard for us to stop mergers that you would think are just straight-out ones that should be blocked," the commission chairman said.Yesterday the share price of another would-be merger partner, the regional pay television operator Austar, fell 7 per cent.The ACCC is reviewing Foxtel's proposal to buy Austar, after saying its preliminary view was that it would substantially lessen competition.Pick n Pay hinted yesterday it might not extend again the completion date for the $215 million deal it struck with Metcash in July last year."It will take us time to fully review this decision and evaluate our options," the retailer said."However the tender process for stores conducted late last year demonstrated the individual stores continue to have strategic value," the company said. Pick n Pay extended the completion deadline by a year to September 30 this year to allow for Justice Emmett's ruling.The ACCC's formal appeal document says Justice Emmett did not take sufficient account of the way Metcash charged different prices to its supermarket customers.The judge should have found this meant Metcash was "not closely constrained by any indirect competition at the retail level by the major supermarket chains", it said.Mr Sims said the judge had also imposed "a very high hurdle" for the ACCC to persuade him that another offer for Franklins from a consortium of supermarket operators, mostly in Canberra, was likely to succeed if Metcash were blocked. The judge appeared to expect "stringent and commercially unrealistic standards", he said."In my commercial experience that bid was as developed as you would ever expect one to be at that stage," he said.The appeal will also challenge evidence from Pick n Pay executives that if Metcash's deal were blocked, they would reject the consortium's $110 million offer and sell the Franklins stores individually, mostly to Woolworths, Coles and Metcash.The judge should have given more weight to Pick n Pay's incentive to support the Metcash bid when assessing its evidence, Mr Sims said.