Thursday, December 20, 2007

Commerce Commission impacts on The Warehouse' bottom line

The future of The Warehouse Group [WHS.NZ] is on hold, after the Commerce Commission announced earlier this week that they are going to appeal the High Court decision to the Court of Appeal to allow Foodstuffs and Woolworths Australia [WOW.ASX] bidding for the retailer.

Unless the Commission can argue new evidence in the higher court or argue on a technicality on a point of law then their appeal is not likely to be a positive one for them.

The Commission also face the distinct possibility that their appeal maybe thrown out before it begins at a preliminary hearing, due to sit on January 29 to decide whether leave to appeal will be granted.

Warehouse management have publicly backed the two bidders so it shows the direction the company wants to go.

The Commerce Commission clearly see the High Court decision to allow the two Warehouse suitors to bid as a watershed decision that must be fought with all their state backed muscle.

Personally, like most state apparatus and workers within those apparatus, there is a little bit of self preservation involved. In the Commission's decision to appeal we have a little job justification going on and any brakes on the growth of a business like The Warehouse, while they have to wait, and they have waited for over a year because of the CC dilly dallying, is purely incidental to those at the Commission.

It is outrageous that the state can take such a lengthy time to make such an important decision over the property rights of Warehouse shareholders. While it is understandable that there will be competition issues in business from time to time and these should be arbitrated, it is even more serious an issue when arbitration of these issues materially affects an important business because of unnecessary delays, not to mention the negative impacts to those individuals and groups who own that business.

The Commerce Commission should take the lay of the land and come to the conclusion that much wiser heads at the High Court did, that the Warehouse and its current owners need to be able to freely sell an asset that is theirs, to two willing buyers that want it.

The millions of dollars that it has cost The Warehouse so far since their business has been on hold is a serious issue and the strangle that the Commission has on its business at present must be let go so the losses don't continue to mount.

Disclosure: I own WHS shares

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