Reuters

In a hard-hitting submission to the Competition Tribunal three government departments have criticised Wal-Mart and Massmart for their unwillingness to make any binding commitments that would address public interest concerns about the impact of the merger on local procurement, food security and broad-based black economic empowerment (BEE).

“A merger of the size of the proposed Wal-Mart/Massmart transaction, and with the size and leverage of the parties which are involved, could, if not properly regulated, go some way towards undermining the New Growth Path”, the departments said.

A key condition sought by the three departments is that the merged entity will “at least maintain or increase the percentage of pre-merger local procurement by product category”.

The departments’ submission suggests that Wal-Mart and Massmart’s initial “willingness to co-operate in an attempt to alleviate those concerns” faded significantly last month after the Competition Commission recommended unconditional approval for the proposed merger.

The submission is also critical of Massmart’s unwillingness to provide the Economic Development Department (EDD) with information necessary for an indepth analysis of the likely impact of a merger between Wal-Mart and Massmart.

The submission, which was made on behalf of the EDD, the Department of Trade and Industry and the Department of Agriculture, Forestry and Fisheries, requests the tribunal to postpone the hearing scheduled for March 22 to 24.

The departments have requested the postponement because they now believe that as a result of “the refusal of the merging parties to make any tangible or enforceable commitments, particularly with regard to procurement and small (especially broad-based BEE) businesses”, it is necessary for them to intervene more actively in the merger proceedings.

According to the submission, such intervention will require consideration of the negotiations that were facilitated by the EDD, as well as analysis of information that was sought from the merging parties in November but has still not been received.

The decision to intervene actively in the tribunal’s proceedings marks a significant change in the EDD’s initial approach to the merger. While the Competition Act empowers the EDD to address public interest issues relating to a merger, the EDD has chosen in this instance to use this power to facilitate discussion between the merging parties and affected parties, such as the trade unions.

Ten days after the proposed transaction was announced last September, the minister of economic development and the minister of trade and industry met with representatives of the two companies and their financial advisers.

At that stage, “the merging parties were not only receptive to the concerns voiced by (the) government, but also indicated a clear willingness to co-operate in an attempt to alleviate those concerns”, the submission said.

Despite not being provided with the information required to analyse the public interest aspects of the merger, and despite being given information that “presented the merger in a more positive light (than) would appear to actually be the case”, the EDD was keen to encourage the negotiations between Massmart and the unions.

However “since the commission’s recommendation that the merger be approved unconditionally, the EDD-facilitated negotiations have stalled”.

It appears that since the commission’s favourable recommendation, which was influenced by the prospect of a negotiated agreement between Massmart and the unions, the two merging parties have become “less flexible” on the issues of concern. - Ann Crotty