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Massmart position on newspaper article about the competition tribunal’s report covering the acquisition of finro

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On 23 September, Masscash, a division of Massmart Holdings, was notified that the Competition Tribunal had unconditionally approved the proposed merger between Masscash and Port Elizabeth based Finro Enterprises, trading as Finro Cash & Carry.

In approving the deal the Tribunal noted the merger would not lead to a substantial prevention or lessening of competition in the wholesale grocery market in Port Elizabeth.

The Tribunal has subsequently released its formal report which further reinforces this perspective and which states that: “based on the available qualitative and quantitative evidence, there is no sound basis to conclude that the proposed acquisition is likely to substantially prevent or lessen competition. Likewise, there is no evidence of public interest concerns arising from the proposed deal.”

A national business daily newspaper, has however placed emphasis on a brief side comment from the Tribunal’s 64 page report, under the headline “Massmart plan for a fund to take out rivals ‘sinister’ – tribunal.”

This is in reference to minutes of a Masscash Board meeting that took place five years ago. The minutes include observations by the then Chairman of the Masscash Board that “We cannot allow our competitors to flourish. Our margins may have to drop to fend off competitors”. These and other related comments are characterized as “sinister” in the tribunal report, although in the same document the Tribunal states it found “no evidence to suggest that Massmart is likely to engage in a predatory pricing strategy.”

Our view is that the Tribunal’s decision to approve the Finro acquisition vindicates Massmart’s competitive intent in Port Elizabeth and elsewhere. Ultimately, if there was evidence that Massmart’s business practices tended to the anticompetitive, the merger would not have been allowed to proceed.

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