Friday, January 25, 2008

Warehouse Court of Appeal case could be dismissed next week,0.jpg
The Commerce Commission will need new evidence to
prove their claims of lessened competition in supermarkets
in the Court of Appeal.

Foodstuffs, the owner of the Pak 'n Save Supermarket chain, has just been given approval to open an outlet on Auckland's North Shore after 17 years of trying. Opposition to the company's plans were put up by Woolworths Australia [WOW.ASX] Foodstuffs opposition in New Zealand.

The battle by Foodstuffs to get this market up and running has been intense, sometimes underhanded and cruel. It has cost Foodstuffs and the North Shore millions of dollars in lost revenue and wages from the 300 hundred jobs that the supermarket will bring to the shore.

Woolworths as a foe has been a hard nut right to the end.

Foodstuffs and Woolworths are currently in a fight to win control of The Warehouse Group [WHS.NZ] and the High Court in November overturned a ruling by the Commerce Commission which prevented Woolworths and Foodstuffs bidding for The Warehouse.

The court will hold a hearing on Jan. 29 to decide whether the regulator is allowed to challenge the ruling in the Court of Appeal.

The obvious link to the two battles is clear.

None of these two retail chains are going to give up the fight for the Warehouse until all resources are exhausted.

The battle for control or to buy the Warehouse has been going for almost 2 years. There have been endless appeals by the two companies (as well as the Warehouse itself) and a denial by the Commerce Commission for a deal to go ahead. There will be more legal challenges if there is first a Court of Appeal case after the Jan 29 decision, and these will go as far as New Zealand's new Supreme Court, if the two appellants don't get their way and are not allowed to bid for The Warehouse.

In order for the Appeal Court to accept the Appeal by the Commerce Commission, they will have to furnish new information to the case to prove their point that if either of the two supermarket companies buy the Warehouse, competition or potential competition in the supermarket sector will be severely diminished.

This was the CC argument in the High Court and they lost on that point, so on that basis alone the Court of Appeal shouldn't hear the case.

If a case is to be heard with new evidence furnished, I cant figure out what that evidence could possibly be.

Given the preponderance of fact that seems to be on the side of the defendants, at this stage, I don't see the Court of Appeal giving approval for a hearing before their court on Jan 29.

Disclosure: I own WHS shares

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