A Tale of Two Cities : From Davids Holdings to Metcash

In 1994, the Full Federal Court upheld the decision of the trial judge to prevent the hostile acquisition of a majority shareholding in QIW Retailers Ltd (QIW) by Davids Holdings (Davids), on the grounds that, as a result of the proposed merger, the merged company would be in a position to dominate a market defined as the supply of grocery products by independent wholesalers to independent retailers in Queensland and northern New South Wales. The basic claim of the Applicants was that, as a result of the merger, Davids would be the only supplier of groceries to independent retailers in the geographic market and would, as a result, be in a position to exercise monopoly power. While the independent retailers faced significant competition in the downstream (retail) business from the integrated retail chains (such as Coles and Woolworths), the Court found that such competition would not be sufficient to prevent the exercise of monopoly power in the upstream (wholesale) business. In 2011, the Full Federal Court upheld the decision of the trial judge not to prevent the acquisition by Metcash Trading Limited (Metcash) of Interfrank Group Holdings Pty Limited (Franklins). The acquisition had been opposed by the Australian Competition and Consumer Commission (ACCC) on the grounds that it would leave Metcash as (effectively) the only wholesale supplier of packaged groceries to independent retailers in New South Wales. The Court rejected the Commission's claim, finding that the merged firm would not be able to exercise market power due to the constraining presence downstream of the integrated retail chains (primarily Coles and Woolworths).So we have two cases with, on the surface at least, very similar facts. Yet the outcomes in the two cases were 180 degrees apart. What explains the different outcomes? In this article, we try to identify a critical analytical difference in the way that the cases were presented to the Court and will suggest that this difference may have had a significant influence on the outcomes