Foodstuffs claims one national supermarket cooperative would not substantially reduce competition, because the two divisions do not compete at a retail level. File photo. Photo: RNZ / Simon Rogers
Foodstuffs will continue fighting to merge its North and South Island cooperatives beyond the outcome of its appeal against the decision to block the plan.
The supermarket operator has confirmed it will appeal the Commerce Commission's move to block the merger, saying it was the wrong decision.
The regulator declined the merger in October, because it believed it would harm competition in the grocery sector.
But Foodstuffs said creating one national cooperative would not substantially reduce competition, because the two divisions did not compete at a retail level.
It also said the merger would cut operational costs for Foodstuffs that could be passed on to deliver more competitive prices to consumers.
North Island chief executive Chris Quin said there was an option to apply for a different type of approval with the commission, called an authorisation.
An authorisation application tests if the public benefit of a transaction balances out its effect on competition.
But he said for now the case to get clearance for the merger still stood..
"We've got to be alive to all the possibilities all the time. We've got an open mind on this, and we're just considering the facts as each stage comes we'll redo that and work with our advisors and with our boards and owners about the strategy and how we invest in it.
"But the opportunity and the benefit of this merger is still significant. So it is still worth investing in to get to the right answer."
An uphill battle
Matthews Law partner Alicia Murray said the appeal will likely be an uphill battle for Foodstuffs.
She said the Commission's statement of unresolved issues - which was normally brief - was a record 149 pages in the merger decision.
"That indicates that there were a lot of issues the commission was concerned about, an in particular it was concerned about the increase in buyer power and the reduction of options for suppliers, particularly where it had already been found in the market study, that there was a significant imbalance of of power between suppliers and the major grocery chains."
Murray said authorisation is an option for Foodstuffs, but it would be difficult to argue.
"They would have to show benefit to the public, not just the benefit to Foodstuffs as an entity. Although there will be efficiencies from the transaction, it's not clear whether those will be actually passed on to consumers and whether that will actually have any impact on grocery prices for example."
She said there's no guarantee that a Foodstuffs merger would lead to better prices for customers.
"There's no way that the Commerce Commission can enforce that either. There's no evidence that is the case, it's just what Foodstuffs says it will do, and there's no way that even if it turns out not to be true, that the commission could sort of do anything about it after a clearance is granted."
Murray said other options for the operator are judicial review or going ahead with the merger without approval which would likely expose it to hefty fines.
Foodstuffs has until Thursday 21 November to file its appeal with the High Court, and it expects the process could take 12-18 months.
