The Competition Tribunal yesterday heard submissions relating to the proposed merger of Shoprite Supermarkets acquiring certain stores from Massmart Holdings, as retailer Pick n Pay voiced its objections.
Shoprite plans to acquire 56 retail supermarket stores and 43 retail liquor stores operated under the brand names Rhino Cash & Carry, Rhino Liquors, Cambridge Food and Cambridge Food Liquor, 10 wholesale (Cash & Carry) stores, two wholesale liquor stores; and Massfresh, with two entities: a meat-processing plant facility and Fruitspot, comprising three processing facilities in Cape Town, Durban and Johannesburg.
The target businesses are active in the retail and wholesale trade of grocery, liquor, and associated items and are wholly owned and controlled by Massmart. Massmart is, in turn, controlled by Walmart.
Last week, Massmart reported a headline loss of more than R900 million for the six months to end-June, compared to a loss of R359m last year. The group announced that Walmart, its owner, plans to take full control of Massmart and delist it from the JSE.
Yesterday the Competition Commission and Pick n Pay, whose role is the intervener, made their submissions.
In its submission, the Competition Commission said it could not compel businesses to keep non-performing stores open. It said it had seen that there was an attempt by Massmart in 2021 to try to ramp up or turn around particular stores.
“We’ve tried to indicate that although the target businesses are loss-making, we haven’t certainly made the case that they are of no value to other participants. And of course, that is evident from the bidding process as well. What we have said is that there has been a process. We have in our report also indicated that merging parties will choose the most anti-competitive outcome,” it said.
The commission said the seller, Massmart, indicated that they could not continue to sustain and carry these businesses, “and any other outcome would simply close (the loss-making stores), because that was the most commercially viable outcome”.
According to the commission, it made a call on recommending approval of the transaction based on what was the best outcome for a vulnerable group, which is the employees, and it's also in the public interest.
Pick n Pay said in its submissions that there were a host of bidders who expressed interest in these assets from the outset. If the process had been allowed to go its proper distance and if the sellers had considered other alternatives, there might have been a range of less anti-competitive alternative buyers for these assets.
“We say that the onus is on the merging parties to demonstrate that there were no other viable alternative purchases for this business. And the commission has already found that there were fewer anti-competitive alternatives for these assets. So we say the second one was appropriate that the commission considered, which was Massmart, setting the target businesses to purchase, other than Shoprite that is,” it said.
Pick n Pay said it also identified store overlaps should the merger be allowed. It said in previous cases the Competition Commission made sure that there were 1.5km to 3km radius between the target stores.
“So what is the real extent of the store overlap? If you look at it on a 2km radius, there are about 53 overlaps and if you look at it on a 3km radius, there are about 55 overlaps…
“It appears to us that the commission's assessment on 3km radii showed about 38 local areas… For which you would have combined shares above 35 percent,” Pick n Pay said.
The hearing continues today, when Spar and the Department of Trade, Industry and Competition (dtic) are set to make make their submissions.
BUSINESS REPORT