Trouble in store
US union challenges ‘discriminatory’ defence in opposing deal
WALMART IS BEING disingenuous in saying an approval with conditions for its acquisition of South Africa’s Massmart would be “discriminatory”. That’s the stance of the United Food & Commercial Workers’ International Union (UFCW) – the United States union advising SA trade union Saccawu in opposing the deal. Michael Bride – UFCW’s deputy organising director for global strategies – says elsewhere worldwide Walmart has supported “discriminatory” measures when it stands to benefit. It should therefore be amenable to accept conditions for acquiring Massmart if it’s consistent with its practices.
Bride contends Walmart’s British subsidiary – Asda – has supported Britain’s Competition Commission’s highly contested regulations aimed at preventing dominance by one supermarket chain in a particular area. The commission mulled the regulatory framework after its investigations into Britain’s grocery market found adverse effects on competition arising from the existence of highly concentrated local markets for larger grocery stores, resulting in reduced choice and detrimental effects on prices, quality, range and service. Britain’s Tesco – which stands to be worse affected by the proposed “competition test” due to its size and scale – has notably contested those measures.
Elsewhere in the United States, Walmart has conceded to conditions applicable to it alone in its quest to set up outlets in major cities as it struggles with stagnant like-for- like sales. Professor Nelson Lichtenstein, of the University of California – who has written extensively on Walmart and who is one of the witnesses lined-up by Saccawu – says Walmart agreed to conditions, such as building its stores with union labour, paying higher wages to its workers and increasing its medical aid contribution for its employees to open outlets in big cities, such as New York and Chicago.
Walmart and Massmart have been reluctant to sign a binding pledge committing Massmart to a minimum percentage of South African procurement after the acquisition, saying such a pledge would disadvantage the merged entity because it would have conditions that don’t apply to its competitors.
Walmart says there are no similarities between the Asda and Massmart cases. In a statement it says: “Keeping in mind that in the UK a planning system essentially operates a rationing system via ‘permits to trade’ in local markets, Asda acknowledged it is not in anybody’s interest for most or all of these permits to be grabbed by one player in a local market…
“This situation is therefore different to SA, in that there have been no conditions placed on Asda specifically or exclusively; but Asda has supported the introduction of the competition assessment, which it believes is a proportionate measure that will assist the UK economy to further embed – in a sensible way – the foundations for further competition and choice for consumers.”
SA’s Competition Commission recommended in February this year the transaction be approved, with no conditions attached. The deal is likely to get the final nod from SA’s Competition Tribunal.
However, latest ructions between the merging parties and interest groups suggest an approval without conditions is likely to be contested at the Competition Appeals Court. Analysts have warned the commitment to a minimum percentage of local procurement could sink the deal, saying it would put Massmart in an “untenable situation” because it would be fighting with one hand tied behind its back.
Bride says the conditions sought wouldn’t be in perpetuity, but should regulate the manner in which Walmart deals with South African suppliers. “We believe that would create an incentive for Walmart to work with those local suppliers to help them become efficient and sustainable.”
Lichtenstein says in many countries where Walmart operates detrimental effects have far outweighed the benefit of cheap prices. “SA would be wise to treat this merger with great caution.”