Wal-Mart’s South Africa Antitrust Terms Lack Protections, Ministers Say

South African antitrust conditions imposed on Wal-Mart Stores Inc. (WMT)’s acquisition of a controlling stake in local retailer Massmart Holdings Ltd. (MSM) are insufficient and need to be tightened, government ministers said.

Authorities are seeking a “binding commitment” from Bentonville, Arkansas-based Wal-Mart that the deal won’t result in a “massive reduction in jobs, compromise South Africa’s food security and decimate local production,” Economic Development Minister Ebrahim Patel told reporters in Pretoria today.

Patel is one of three ministers to file a court appeal against Massmart’s 16.5 billion-rand ($2.4 billion) takeover in June by Wal-Mart, the world’s biggest retailer. The South African Competition Tribunal approved the purchase on May 31, on condition that no jobs be cut for two years and that the retailers set up a 100 million-rand fund to help farmers and manufacturers who want to become suppliers.

The fund could “pale into insignificance,” given the expected effects of a substantial shift to imports by Johannesburg-based Massmart, Patel, Trade and Industry Minister Rob Davies and Forestry and Fisheries Minister Tina Joemat- Pettersson said in a joint statement handed to reporters today.

Photographer: Nadine Hutton/Bloomberg

A customer leaves with his purchases from a Game supermarket, part of Massmart Holdings Ltd, in Johannesburg, South Africa. Close

A customer leaves with his purchases from a Game supermarket, part of Massmart Holdings... Read More

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Photographer: Nadine Hutton/Bloomberg

A customer leaves with his purchases from a Game supermarket, part of Massmart Holdings Ltd, in Johannesburg, South Africa.

‘Package’ Sought

The ministers are seeking a “package of proposals” together with an increase in the supplier-development financing, Patel said. He declined to specify the government’s demands pending further discussions with Wal-Mart and future court proceedings. The U.S. company now owns 51 percent of Massmart, South Africa’s biggest wholesale retailer.

Massmart fell 1.25 rand, or 0.9 percent, to 144.73 rand in Johannesburg trading. The stock has declined 1.3 percent this year, valuing the retailer at 31 billion rand.

The minister’s statement “appears to delve into territory that the Competition Appeal Court has been called upon to adjudicate in,” Massmart and Wal-Mart said in an e-mailed statement. “It presents as fact various propositions that were argued before, and rejected by, the Competition Tribunal.”

“Out of deference to the legal proceedings currently under way, Massmart and Wal-Mart cannot comment publicly in relation to issues that have yet to be determined by the Appeal Court.”

Wal-Mart outlined plans on June 26 to create 15,000 jobs in South Africa within five years and to allocate most of an expected 60 billion rand in additional food or fast-moving consumer goods purchases to local suppliers.

The government’s appeal in July followed one filed in June by the South African Commercial, Catering and Allied Workers Union, which said the antitrust tribunal’s conditions were inadequate to protect jobs and safeguard worker rights. The Competition Appeal Court has yet to decide whether to merge the two lawsuits.

To contact the reporter on this story: Janice Kew in Johannesburg at jkew4@bloomberg.net

To contact the editor responsible for this story: Gordon Bell at gbell16@bloomberg.net

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