NATIONAL ASSEMBLY

WRITTEN REPLY
QUESTION NO 757
DATE OF PUBLICATION: 16 March 2012

Mr M H Hoosen (ID) to ask the Minister of Economic Development:

Whether his department has incurred any legal cost in the appeal against the Walmart-Massmart merger; if no, how was this conclusion reached; if so, what were the detailed costs?

NW925E

REPLY

The Department (EDD) was a party to proceedings involving the Walmart-Massmart merger at the Competition Appeal Court, involving both a review of a decision of the Competition Tribunal, as well as an appeal against the decision. Costs of approximately R1,4 million were incurred for the account of the Economic Development Department for the review and appeal at the Competition Appeal Court to date, and details are provided, together with the context, in the reply below.

The merger parties applied to the Competition Commission for approval of the proposed transaction, during late 2010.

In early 2011, the Competition Commission recommended that the Competition Tribunal approves the transaction without any conditions.

Based on this outcome, the Economic Development Department, together with two other government departments, approached the Competition Tribunal to participate in the proceedings.

Section 18 (1) of the Competition Act provides for the Minister of Economic Development to participate in mergers in order to make representations on public interest ground to the Competition Commission, Tribunal and Appeal Court, in any intermediate or large merger proceedings.  The Departments of Trade & Industry and Agriculture, Fisheries and Forestry respectively, were permitted to intervene in the Competition Tribunal proceedings on application to the Tribunal. Their involvement arose from the potential impact that the merger may have on small farmers, local manufacturers and agro-processing sectors in the economy.

Following government's participation in the Competition Tribunal proceedings, the Competition Tribunal approved the merger in May 2011 subject to certain conditions, amongst others, the suspension of retrenchments for a 2-year period, preferential employment opportunities for 503 employees previously retrenched, recognition of SACCAWU's union position within the merged entity and the establishment of R100 million supplier development fund. 

Government launched review proceedings against the decision of the Competition Tribunal and asked to be party to the appeal launched by the trade union involved, on the basis of both procedural and substantive defects in the Tribunal outcome.  Government's objective in doing so was to ensure that all pertinent matters in relation the effect of the merger on employment, local manufacturers and small business could be ventilated before the Competition Authorities. 

In deciding the matter on appeal and review, the Competition Appeal Court recognised the importance of public interest considerations in assessing any merger, in particular those relating to small business and employment in supply-chains. This has been at the heart of government's case during all the legal proceedings in this matter.

As a result of government's participation in these proceedings, the court found that the conditions that were imposed by the Competition Tribunal had not been sufficiently interrogated in the process.  In addition, the court has ruled that an in-depth study be commissioned on the effects of the merger on small business and suppliers in South Africa.  A further significant outcome of this process has been the court's ruling that the 503 employees previously retrenched should be re-instated.

The appeal process is not completed, since the court directed that three experts be nominated: one by government, one by Walmart and one by the trade unions. The costs of the experts work will be for the account of Walmart. Once the experts have concluded their work, parties may make submissions to the CAC, who will then conclude on the appropriate conditions.

The legal costs (which include the costs of an economic expert)  incurred to date by government as a result of its participation in the appeal and review proceedings before the CAC, amount to approximately R 4,1 million.  It is not possible to separate out the costs only for the appeal, since the work conducted by the lawyers/and the expert covered both the review and appeal processes in what was essentially a single matter at the CAC.

These costs are divided equally between three departments and include costs related to the appointment of senior counsel, junior counsel, an expert economist on competition, a team of attorneys specialising in competition law and other disbursements incidental thereto. EDD's share to date of the costs for the review and appeal to the CAC is therefore approximately R1,4 million.

The costs related to government's participation in the review and appeal proceedings before the CAC, should therefore be viewed in the context of the significant outcomes which have been achieved for the public in this matter.

Issued by Parliament, April 10 2012

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