Competition Commission approves Massmart-Shoprite deal

The Competition Commission has recommended the approval of a 1.36 billion rand deal that forms part of Massmart's new turnaround strategy. The retailer, known for its Game and Makro stores, aims to sell more than 50 of its various stores to Shoprite. This sale is a crucial part of a turnaround plan led by former Walmart executive and CEO Mitchell Slape. Slape's goal is to bring the ailing group back to profitability after three consecutive annual losses of over 1 billion rand. The Competition Commission had a critical role in this process, conducting an investigation and making a recommendation to the competition tribunal. The focus of the assessment was on the impact of the merger on competition in the retail market, particularly in the supply of groceries. The commission identified that the merger would increase concentration in the market, as there are only a few major players in the sector. With Shoprite being a dominant national chain, the merger would result in the market shrinking from four players to three. When evaluating mergers, the commission is required to consider not only competition but also public interest. In this case, the parties involved made commitments to address competition concerns, such as sponsoring new independent black-owned retailers to enter and compete in local markets identified as problematic. These commitments were crucial in balancing the competition harms with the public interest benefits. One of the key considerations in approving the deal was the potential impact on jobs. The businesses being sold were under financial distress, and without the merger, there was a significant risk of store closures and job losses. The commission weighed the proposed remedies and commitments from the parties against the potential negative consequences of not proceeding with the merger. In addition to job preservation, the commitments included measures to support skills development, localize procurement, and continue supply relationships. Overall, the commission believes that approving the deal with these conditions is the best outcome for both competition and job preservation. By introducing new players and ensuring ongoing support for smaller retailers and suppliers, the commission aims to mitigate the competition harm while also benefiting the wider economy. The decision to approve the deal was made with careful consideration of both competition concerns and public interest implications.