Tribunal issues reasons for Wal-Mart decision

In what was the most eagerly anticipated decision in South African retail history, the Competition Tribunal gave the nod on the R16.5 billion mega-deal late last month adding a few conditions.

The Tribunal said the companies must uphold existing labour agreements for three years and ensure that no jobs are cut for two years. It added that it accepted the condition proposed by the merging companies to set-up a R100-million supplier development fund.

Notably, the tribunal shied away from local procurement targets - government and labour unions were concerned that the acquisition would lead to job losses and hurt local procurement.

In a statement, the tribunal noted that it had found that the merger was not likely to lead to a substantial prevention or lessening of competition and unless the merger was the cause of the public interest concerns, it had no remit to do anything about them [the companies].

"Our job in merger control is not to make the world a better place, only to prevent it becoming worse as a result of a specific transaction," it said.

Furthermore, the tribunal said there was no evidence from the internal documents of the merging parties that retrenchments at Massmart were contemplated as a consequence of the merger.

"On the contrary, there is evidence that suggests, given the expansionist ambitions of Massmart, the group expects employment to grow between 2011 and 2013. The merger is expected to expedite this expansion suggesting that new jobs are likely to be created more quickly as a result," the tribunal said.

It added that in June 2010 Massmart retrenched a number of employees who worked for Game in Nelspruit, and a number of other employees working for regional distribution centres (RDC's) were also retrenched.

"The union alleges that these retrenchments came about in anticipation of the merger. The coincidence in timing of the deal's imminence with the retrenchments is not strong enough to show its connection," the tribunal said.

The antitrust authority said it had noted the unions' concern that post-merger, individual employee rights would be degraded.

"The merging parties deny this will happen. However if Massmart should, contrary to this protestation, attempt to lower levels of remuneration to below that of the rest of the industry, the strong protection given to union recognition in this undertaking would empower it to resist that tendency.

"Any remedy to extend a condition into setting levels of remuneration post- merger would be disproportionate and an inappropriate interference with the process of collective bargaining," it said.