The Commerce Commission's argument forbidding a takeover of The Warehouse by supermarket companies Woolworths and Foodstuffs is wrong, wrong and wrong again, the High Court has been told.
Closing submissions in the two-week appeal against the commission's decision to block the acquisition began in Wellington yesterday with brief public summaries by lawyers for the appellants and the commission. The rest of the closing arguments, which are expected to finish today, were closed to the public because of confidential commercial information being shared.
In June the commission blocked any takeover bid for the Warehouse Group, which comprises 85 Red Sheds and 43 "blue shed" stationery outlets, by either Woolworths or Foodstuffs. The two groups dominate supermarket retailing, and each has a 10 per cent stake in The Warehouse. The case focused on the three Warehouse Extra hypermarket stores, which offer full supermarket service.
Yesterday commission lawyer Stephen Kos, QC, told the court the basis of that decision was that any takeover would lessen competition. The commission had good reason to doubt that any purchaser would run the Extra stores in a competitive and commercially "vigorous" fashion. The appellants' argument that Warehouse Extra would be unlikely to succeed should not be assumed by the court, Mr Kos said. "They will compete and the acquisition will decrease that competition."
Woolworths' lead lawyer, David Goddard, QC, said the commission's case was full of holes because its decision had been based on "theoretical assumptions" and "speculative possibilities". Mr Goddard said it should not be up to the appellants to disprove any doubt the commission had about the potential takeovers because only the commission had the full picture. Even then it had not used it. "(The commission) did not paint a complete picture (of the competitive forces in the market). Rather, it zoomed in on a tiny portion of that picture. That is not the process required by the (Commerce) Act."
Foodstuffs' lawyer Bruce Gray, QC, told the court that the commercial potential of the Warehouse Extra concept was irrelevant, and in any case had not been proved one way or the other. "The experts (witnesses) argued themselves to a standstill about what has happened in the past and what might happen in the future."
As it stood, the takeover would affect only the existing three stores, which had no competitive impact. Mr Gray said the commission had constructed its analysis to its own specifications, which were angled to promoting a third supermarket competitor in a market it was worried about being too small. "The job of the commission and the court does not change because markets are big or small."
A Foodstuffs acquisition of The Warehouse would strengthen the Extra business, because it could bring economies of scale not present now, he said.
