ACCC appeals Metcash / Franklins merger judgment

Posted by AFN Staff Writers on 9th September 2011

The Australian Competition and Consumer Commission (ACCC) today announced it is appealing against the Federal Court’s judgment dismissing the ACCC’s application to prevent grocery and hardware wholesaler Metcash from acquiring the Franklins supermarket business.

ACCC Chairman Rod Sims said today, “We are appealing this case for two reasons. First, because of the adverse effect of the proposed acquisition on independent supermarket retailers, consumers and competition in the New South Wales and Australian Capital Territory grocery sector.

“Second, the ACCC is appealing because, if left unchallenged, the Court’s interpretation of some fundamental principles of merger analysis could have serious implications for the ACCC’s ability to block anti-competitive mergers and so protect consumers in the future.”

The ACCC believes the Federal Court made a number of significant legal and factual errors in dismissing the ACCC’s application to stop the proposed acquisition.

Mr Sims said, “The ACCC has closely examined the grocery industry over the years, including the role of Coles and Woolworths, who are by far the largest players. The ACCC has consistently noted the competitive constraint these chains impose at the retail level, particularly on larger independent supermarket retailers located close to a Coles or Woolworths store. However, the most immediate competitive constraint on Metcash is direct competition at the wholesale level. The acquisition of Franklins would remove the only option for independent retailers who are unhappy with what Metcash offers them.

Federal Court’s analysis of Metcash / Franklins merger

Mr Sims said that the decision taken by the Federal Court in the Metcash case is at odds with the Federal Court’s decision in the 1994 Davids Holdings case. In that case, the Federal Court affirmed that there was a market for the wholesale supply of packaged groceries to independent retailers.

Mr Sims said, “Another important issue in merger analysis is that the ACCC has an obligation to examine the competition effects of alternative outcomes. A fundamental question is how certain do these alternative outcomes need to be before being accepted as the relevant benchmark against which to measure any anti-competitive effects of the merger.”