The Australian Competition and Consumer Commission (ACCC) is appealing against the Federal Court’s decision to dismiss its application to prevent Metcash from acquiring the Franklins supermarket business.

ACCC chairman Rodd Sims said the Commission is appealing the case for two reasons.

"First, because of the adverse effect of the proposed acquisition on independent supermarket retailers, consumers and competition in the NSW and ACT grocery sector. Metcash, with this proposed acquisition, will have an ability to increase prices and/or reduce service to independent supermarket retailers,” he said.

"Second, the ACCC is appealing because, if left unchallenged, the Court’s interpretation of some fundamental principles of merger analysis could have serious implications for the ACCC’s ability to block anti-competitive mergers and so protect consumers in the future.”

In late August, the federal court had dismissed the case on the basis that it did not see how the acquisition would lessen competition in the wholesale supply of packaged groceries in NSW and ACT. The ACCC had sought an injunction in December last year.

According to the ACCC, the federal court made a “number of significant legal and factual errors”.

It notes that based on its examination of the grocery industry over the years – including the role of Coles and Woolworths, who are by far the largest players – there is an immediate competitive constraint on Metcash, particularly as direct competition at wholesale level.

“The acquisition of Franklins would remove the only option for independent retailers who are unhappy with what Metcash offers them,” the ACCC said in a statement.

Sims also highlights the ACCC’s concern of the court’s interpretation of some fundamental principles of merger analysis.

"Another important issue in merger analysis is that the ACCC has an obligation to examine the competition effects of alternative outcomes. A fundamental question is how certain do these alternative outcomes need to be before being accepted as the relevant benchmark against which to measure any anti-competitive effects of the merger," Sims said. 

From this, Metcash has expressed its disappointment of the ACCC’s decision.

“The ACCC’s decision to appeal further delays a transaction that was first announced in July 2010 and which the Federal Court concluded was likely to enhance the ability of independent IGA retailers to compete with the major supermarket chains,” Metcash said.

Metcash has also notified the ACCC that after the expiry of the five clear business days from September 11, it will consider itself free to agree with Pick n Pay to waive the condition requiring the ACC approval and to complete the acquisition of Interfrank Group Holdings