Walmart and Massmart resumed their merger battle against three government departments and a union in the Competition Appeal Court in Cape Town on Friday.

The court is considering an appeal brought by the South African Commercial, Catering and Allied Workers Union (Saccawu) and the departments of economic development; trade and industry; and agriculture, forestry and fisheries opposing the R16bn merger.

The parties are arguing for the merger to be overturned as they say the Competition Tribunal had not given enough consideration to the effect of the sale.

Friday's proceedings started with Judge Dennis Davis grilling advocate Paul Kennedy, acting for Saccawu, over whether it was at all possible for the merged company to have information about the effect the R16,5bn transaction would have on manufacturers in South Africa.

"In a case of this kind, who bears what burden?" Judge Davis asked. "One has to be realistic about this. There are issues that they wouldn't know anything about."

He said much of the information on the impact of the merger on the manufacturing sector fell outside what the merged company could know.

Judge Davis asked Mr Kennedy about the possibility that the merger could lead to job losses, a concern that was raised by Saccawu and the Congress of South African Trade Unions.

"If both of you (the unions and Walmart/Massmart) are right, what do I do then?" he asked. "If they were able to show me that probably [there were] not going to be job losses, then where does that leave you?"

The judge said that in South Africa, manufacturers often could not respond to demand quick enough. "It is all about ensuring you can marry supply with the demand. It is not just about them getting volume. The real point is not to have stock on the shelf for too long."

REMEDIES

On Thursday, Judge Davis objected to the government using the Competition Appeal Court to angle for more conditions to be attached to the merger, but urged all parties to consider remedies that would avoid the matter having to be sent back to the Competition Tribunal.

"There is no need to send it back to the tribunal if we can find a solution," he said. "What remedy would be most expeditious? What relief can we bring about that will meet everyone's interest?"

Advocate Wim Trengove, representing the government, told the court that Walmart and Massmart had made no effort to quantify the negative effects of the deal and that the tribunal had not properly catered for such effects.

"We seek a thorough enquiry into public interest concerns," Mr Trengove said. "Government should have been allowed more time. It was in the interests of Walmart to have this tied up at breakneck speed.

"The tribunal erred in its discovery and scheduling decisions. This made the merger hearing procedurally unfair."

Judge Davis responded: "If you are right, it causes me anxiety. If you are right, we will need to send it back to the tribunal and we risk getting stuck in the mud. It will take another year to make it back to this court. What more do you want? It appears you do not oppose the merger but are seeking more conditions - this pulls the rug from under me."

TRIBUNAL PROCESS

Mr Trengove took issue with the tribunal's process of discovery of documents. "Without the information sought by the ministers, the tribunal was unable to properly assess the extent of import substitution and its impact on employment," he said.

Judge Davis also hinted that the tribunal could have done a better job. "It should have demanded a better explanation on public interest issues and the 'locally produced' label ... This is not only about this case. We get this wrong it has far-reaching consequences," he said.

Prof Richard Levin, director-general in the Department of Economic Development, said after the hearing that the government sought a proportionate remedy, considering the size of Walmart and the scale of the transaction. "The key issue is the discovery of documents that show what is imported currently and helped us come to an appropriate figure (on which to attach conditions)," he said.

Judge Davis's instruction to seek a remedy to the dispute may lead Massmart back to the drawing board after Grant Pattison, its chief executive, had said the group was not willing to negotiate conditions with the government.

Mark Garden, Massmart's legal representative, repeated Mr Pattison's sentiment after Thursday's hearing. "We volunteered conditions we were comfortable with and are willing to live with. We oppose the additional conditions proposed by government. If there are new conditions, they wish to bring to the table then we will consider them."

Heather Irvine, attorney for the government departments, said: "Now both parties will have to give some thought to the matter and debate the conditions."

valliea@bdfm.co.za