Just as the competition regulator, the ACCC hands a report on Australian grocery retailing, a New Zealand court has indicated there’s a limit to the size the country’s retailers can get by taking out a competitor.

The impending ACCC report has already got the business commentators moaning about nasty regulators and grandstanding politicians and calling for our retailers not to be hobbled.

“The ACCC report will be handed to Trade Practices Minister Chris ‘Page One’ Bowen today and if the petrol inquiry is any guide, the Government has already made up its mind on the outcome and, worse, the ACCC report may be tailored to suit that decision,” The Australian’s John Durie wrote today.

“It’s probably fair to give the ACCC boss Graeme Samuel the benefit of the doubt, but if the industry’s worst fears are realised, suffice it to say the report will run directly counter to many arguments Samuel has expressed before.

“Sadly, the minister has flagged key aspects already, which raises fears that, just like the petrol report, it will be a whitewash aimed at showing the Government is following through on its pre-election commitments.”

Across the Tasman it was a different story as the country’s Court of Appeal overturned a lower court’s ruling that had allowed Woolworths and its local rival, Foodstuffs to try and takeover a third retailer, discount retailer The Warehouse Group.

The Appeal Court’s decision, which was made public on Thursday in part (the full judgement won’t be released until sensitive information is removed), prevents Woolworths and the co-operative, Foodstuffs from bidding for The Warehouse. The Warehouse is actually NZ’s biggest retailer and any bid would cost more than $A1.5 billion.

Foodstuffs and Woolworths each have 10% stakes in The Warehouse, bought to block each other from succeeding in a full offer. The two retailers last year successfully went to the High Court to overturn a Commerce Commission decision to block any potential takeover.

The Appeals Court decision could now be appealed to the final court of appeal in NZ, the Supreme Court. It was established in 2004 to replace appeals from NZ to the Privy Council in London. The NZ Commerce Commission welcomed the ruling as a “victory for supermarket consumers and competition in markets”.

“In the second appeal from the Commission’s clearance decision, the Court of Appeal has today reversed the High Court’s November 2007 decision that cleared the way for the three Foodstuffs co-operatives and Woolworths Ltd to acquire up to 100% shares in, or assets of, The Warehouse.

“The Commission’s case has focused on its concerns about competition in the supermarket sector where there is, in effect, a duopoly at present, except in the three regions where The Warehouse has opened a supercentre.

The court decision upholds the powers of the Commerce Commission to regulate competition, and it has prevented duopolies from either being created or expanded in NZ. That’s an argument that is gaining coverage and attention in Australia and it was talked about extensively in the hearings that the ACCC had in Australia for today’s report.

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Peter Fray
Peter Fray
Editor-in-chief of Crikey
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