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 local suppliers.

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 merger.

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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