Australian Regulator Faces Stricter Standard on Mergers After Court Ruling
An Australian appeal court upheld Metcash Ltd. (MTS)’s acquisition of the Franklins supermarket chain from Pick n Pay Stores Ltd. (PIK), raising the bar for the country’s competition regulator to justify denials of mergers.
Federal Court Justice David Yates issued the ruling today in Sydney on behalf of the three-member appeal panel. The Australian Competition & Consumer Commission in September had appealed a court ruling approving the acquisition.
Metcash’s purchase of the stores was allowed to go ahead Sept. 20 when Federal Court Justice Peter Jacobson denied the ACCC’s request to delay the acquisition until the appeal was heard. Today’s decision upholds a higher standard for ACCC to follow in assessing the effects of future mergers.
“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,” ACCC Chairman Ron Sims said in a Sept. 9 statement.
Metcash climbed as much as 2.5 percent, the biggest intraday gain in more than two months, to A$4.07 before trading at A$4.03 as of 3:07 p.m. on Sydney’s stock exchange.
Federal Court Justice Arthur Emmett rejected on Aug. 25 the regulator’s argument that the A$215 million ($215 million) acquisition would give Sydney-based Metcash a monopoly in supplying independent grocery stores. He allowed the sale to proceed.
‘Real Chance’
Emmett had ruled the ACCC must prove that its view of what a market would look like with and without a proposed acquisition must be more probable than any competing argument. The regulator had failed to prove it would be more likely than not that an alternative buyer would be found for Franklins, he said at the time.
The ACCC had argued that it only had to establish there was “a real chance” another buyer could be found.
“The court’s approach, through its application of an onerous test, would make it an unrealistic task for the ACCC in future matters to establish what is likely to happen in the market,” Sims said in the Sept. 9 statement.
The South African company agreed to sell Franklins to Metcash in July 2010. The agreement was extended to Sept. 30 as the companies awaited the initial court ruling.
Franklins has 80 stores and 10 franchise outlets in Australia.
The case is: Australian Competition & Consumer Commission v. Metcash Trading Ltd. NSD1533/2011. Full Court of the Federal Court of Australia (Sydney).
To contact the reporters on this story: Angus Whitley in Sydney at awhitley1@bloomberg.net; Joe Schneider in Sydney at jschneider5@bloomberg.net
To contact the editor responsible for this story: Douglas Wong at dwong19@bloomberg.net
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