Summary of Judgment

1. Introduction

The matter concerned merger proceedings before the Competition Tribunal of South Africa under the Competition Act 89 of 1998. The proceedings related to the Tribunal’s consideration of a merger between Wal-Mart Stores Inc and Massmart Holdings Limited.

The parties to the proceedings were the merging firms, namely Wal-Mart Stores Inc (one merging party) and Massmart Holdings Limited (the other merging party). The order reflects that the matter was adjudicated by a panel comprising N Manoim (Presiding Member), Y Carrim (Tribunal Member), and A Wessels (Tribunal Member).

From the procedural history recorded in the order, the Competition Commission had made a recommendation in terms of section 14A(1)(b) of the Competition Act. The Tribunal held hearings between 09 and 16 May 2011, and delivered its decision on 31 May 2011.

The general subject-matter of the dispute was whether the merger should be approved and, if approved, whether it should be approved subject to conditions directed at issues arising from the transaction, including conditions relating to employment impacts, labour-relations arrangements, and the development of local suppliers.

2. Material Facts

The Tribunal’s order indicates that the merger was assessed against the statutory framework governing merger approval, and that the Competition Commission had already made a recommendation to the Tribunal regarding the merger.

A key factual element expressly referenced in the relief granted concerns the existence of 503 employees who had been retrenched during June 2010. The order also reflects that the Tribunal considered the potential for merger-related retrenchments in South Africa and addressed this prospect through a time-bound condition restricting retrenchments connected to the merged entity’s operational requirements.

The order further records factual circumstances relevant to labour relations within the Massmart Group, specifically the existence of labour agreements to be honoured post-merger and a current practice within the Massmart Group relating to SACCAWU’s position as the largest representative union for bargaining units. These labour-relations circumstances were treated as matters warranting protection through conditions for a defined period.

In addition, the Tribunal’s order reflects a factual premise that the merger raised considerations regarding local South African suppliers, including SMMEs, and that a supplier-development intervention funded by the merged entity was appropriate. The order specifies the amount (R100 million) and the period within which it must be expended (three years), as well as reporting obligations to the Competition Commission.

3. Legal Issues

The central legal question was whether the Tribunal should approve the merger between Wal-Mart Stores Inc and Massmart Holdings Limited under the Competition Act, and if so, on what terms.

A further legal issue concerned whether approval should be granted subject to conditions in terms of the Tribunal’s merger-approval powers, and what the content and duration of such conditions should be. On the face of the order, the dispute required the application of law to fact within the statutory merger-control framework, including the imposition of conditions directed at identified concerns arising from the transaction.

The order also indicates issues that are typically evaluative in merger control, namely how to address prospective effects of the merger through forward-looking conditions, including conditions dealing with employment-related outcomes and public-interest oriented measures (as reflected by the conditions themselves), without the order setting out the underlying reasoning in detail.

4. Court’s Reasoning

The Tribunal’s order reflects that it acted further to the Competition Commission’s recommendation under section 14A(1)(b) of the Competition Act and proceeded to approve the merger in terms of section 16(2)(b), while attaching conditions.

Although the order does not set out a narrative exposition of the Tribunal’s reasoning, the structure and content of the conditions indicate that the Tribunal addressed specific areas of concern by crafting time-bound, compliance-oriented obligations. In relation to employment, the Tribunal imposed a two-year prohibition on retrenchments in South Africa where such retrenchments would be based on the merged entity’s operational requirements and would result from the merger. The order also clarified exclusions from the concept of retrenchments for purposes of compliance, identifying voluntary separation arrangements, voluntary early retirement packages, and unreasonable refusals to be redeployed in accordance with the Labour Relations Act 66 of 1995 (as amended).

The Tribunal further required a measure aimed at mitigating prior employment effects by directing that, when employment opportunities arise, the merged entity must give preference to the re-employment of the 503 employees retrenched during June 2010, while taking into account their years of service in the Massmart Group. The order additionally imposed obligations to honour existing labour agreements and to maintain, for a period of three years, the practice of not challenging SACCAWU’s position as the largest representative union to represent bargaining units.

In relation to supplier development, the Tribunal imposed a condition requiring the merged entity to establish a programme aimed exclusively at developing local South African suppliers, including SMMEs, funded in a fixed amount of R100 million to be contributed and expended within three years. The order records the administrative structure for the programme, including that it is to be administered by the merged entity with advice from a committee on which representatives of trade unions, business (including SMMEs), and government would be invited to serve. The Tribunal also imposed annual reporting obligations to the Competition Commission, and required the establishment of a training programme to train local suppliers on doing business with the merged entity and with Wal-Mart.

Finally, the Tribunal directed that a Merger Clearance Certificate would be issued in terms of Competition Tribunal Rule 35(5)(a), reflecting the formal procedural consequence of approval.

5. Outcome and Relief

The Tribunal approved the merger between Wal-Mart Stores Inc and Massmart Holdings Limited in terms of section 16(2)(b) of the Competition Act, subject to conditions.

The conditions imposed included restrictions on merger-related retrenchments for two years, obligations relating to preferential re-employment of identified retrenched employees, undertakings regarding the honouring of labour agreements and a commitment relating to SACCAWU’s representational status for three years, and the establishment and funding of a R100 million local supplier development programme (to be expended within three years) with governance and reporting requirements, together with a supplier training programme.

There was no order as to costs. The Tribunal directed that a Merger Clearance Certificate be issued under Competition Tribunal Rule 35(5)(a).

Cases Cited

No cases are cited in the provided judgment text.

Legislation Cited

Competition Act 89 of 1998, section 14A(1)(b).

Competition Act 89 of 1998, section 16(2)(b).

Labour Relations Act 66 of 1995 (as amended).

Rules of Court Cited

Competition Tribunal Rule 35(5)(a).

Held

The Competition Tribunal approved the merger between Wal-Mart Stores Inc and Massmart Holdings Limited, acting on the Competition Commission’s recommendation, but imposed conditions addressing employment impacts, labour-relations commitments, and local supplier development (including a ring-fenced R100 million programme with reporting obligations). No costs order was made, and a merger clearance certificate was to be issued.

LEGAL PRINCIPLES

The Tribunal exercised its statutory power under the Competition Act to approve a merger subject to conditions, reflecting that merger approval may be granted with binding, time-bound obligations directed at identified concerns arising from the transaction.

The order illustrates that merger conditions may extend to employment-related protections, including restrictions on merger-related retrenchments for a defined period, and may include clarificatory provisions specifying what is and is not captured by a condition (including reference to redeployment concepts under the Labour Relations Act).

The order further reflects that merger approval conditions may include public-interest oriented measures directed at local supplier development, including the creation of funded programmes, governance arrangements involving stakeholder participation, and ongoing reporting to the Competition Commission as a mechanism to monitor implementation.