The world’s largest grocery wholesaler, Metcash, has been cleared in the Federal Court to buy the Franklins supermarket chain despite attempts from the Australian Competition and Consumer Commission (ACCC) to have it blocked.
Justice Arthur Emmet made the decision this morning, paving the way for Metcash to make the $215 million payment to the South African owner of Franklins, Pick n Pay retailers.
Unless the ACCC lodges an appeal, the company will make the payment before 31 September.
Metcash announced the deal more than a year ago to buy up 80 Franklins corporate stores and contracts with 10 franchised stores.
At the time, it said it would be adding competition to the market dominated by giants Woolworths and Coles.
Metcash wants to on-sell the Franklins stores to independent retailers who will then re-badge them with Metcash’s IGA logo.
The ACCC argued the merger would actually decrease competition in the wholesale supply of groceries to independent supermarkets in NSW and ACT.
It also argued it would increase Metcash’s market power over its customers, but Metcash said its ability to increase or decrease prices and service levels would still be impacted by Coles and Woolworths.
Emmet’s decision will be explained tomorrow and he said it is “quite likely” the move will strengthen Metcash’s ability to compete with the big two.
His 13 page summary said he had not been convinced there was a separate market for the wholesale supply of packaged groceries to independent supermarket retailers, as the ACCC claimed.
He was also not persuaded that it was “more likely than not” that if he disallowed the merger another buyer would make an offer to Pick n Pay.
‘‘The uncertainties surrounding the terms of any potential binding offer from a third party make it a matter of pure speculation as to whether a binding offer might ever be made, let alone whether it would be accepted by Pick n Pay,’’ he said.
‘‘Further, there is no evidence as to the extent to which Coles, Woolworths or Metcash would be prohibited from acquiring stores that might be disposed of by Franklins in a store-by-store sale process.
‘‘On the other hand, I consider that it is quite likely that the acquisition of Franklins by Metcash will strengthen the capacity of independent retailers operating under the IGA banner to compete more vigorously with the major supermarket chains.’’
The hearing earlier this year took a dramatic turn when it was revealed that the ACCC discussed investing in Franklins with Woolworths and Coles in a secret meeting.
Metcash argues this proved the ACCC was fighting the case on the false basis that the big two had no interest in competing with Metcash in wholesaling.
The ruling also heard of a former Metcash executive director, Lou Jardin, intending to merge his small Queensland wholesaler, SPAR Australia, with Franklins and while giving evidence, Justice Emmett said he was ‘‘getting the impression, Mr Jardin, that you are not trying to help the court’’.
Emmett dismissed the ACCC’s case this morning, ordering it to pay the costs of Metcash and Pick n Pay.