KEY POINTS:
Competition lawyers say there is plenty of room for Woolworths and Foodstuffs to challenge the Commerce Commission ruling that they cannot take over The Warehouse Group.
The commission on Friday released its reasons for blocking the takeover, saying consumers would miss out on the potential for a "maverick"
competitor in the grocery sector if either supermarket group bought the Red Sheds.
Foodstuffs and Woolworths are both appealing against the ruling.
Competition lawyers Tony Dellow of Buddle Findlay and Shelley Cave of Simpson Grierson said there were no surprises in the way the commission had reached its decisions.
But Dellow said the decision was "eminently appealable" and rested on the degree to which The Warehouse Extra - the grocery offering initially planned for 15 Red Sheds - could be seen as a threat.
Dellow said the appeals , set to start in October, would go back to the basic issues considered by the commission over its seven months of deliberations.
Cave said those who saw few prospects for the applications to be rejected were not being optimistic.
"The analysis could have gone either way," she said.
Both said the commission decision and the outcome of appeals affected Woolworths and Foodstuffs.
They did not rule out other changes by the The Warehouse Group or its majority shareholder, Stephen Tindall.
The decisions released last week said if Woolworths or Foodstuffs bought the Red Sheds New Zealanders would miss out on the cost savings from hypermarket-style stores.
Dellow said: "Clearly the commission has taken the view that The Warehouse Extra concept is going to expand ... that the market needs The Warehouse in independent hands.
"Woolworths and Foodstuffs have taken the view that The Warehouse Extra is a damp squib and that as a concept it is not sustainable.
"The case will stand or fall on that."
The Warehouse has been in the middle of potential takeover plays for nearly nine months since Tindall made his ill-fated privatisation bid with Pacific Equity Partners.
That fell through but Woolworths has said it wants to buy the Red Sheds.
There has also been speculation that Tindall has been involved in a resurrected privatisation bid with Pacific Equity Partners and alongside Foodstuffs.
Industry players have questioned The Warehouse's commitment to The Warehouse Extra concept given its lack of synergies, aiming initially at only the 15 outlets.
Dellow said the commission had relied on the fact that the development of The Warehouse Extra had been inhibited by the Commerce Commission clearance process.
Cave said the commission did not want to close the door on the potential for The Warehouse to be used as a springboard for a new competitor.
Another competition lawyer said there had been speculation that The Warehouse could withdraw from The Warehouse Extra offering - which could remove impediments to its being sold.
Cave said The Warehouse decision was based on the fact that The Warehouse had said it was going to trial the Extra stores for quite some time.
Dellow questioned whether the loss of a grocery offering would remove the competition issues identified by the commission.
He said the commission had raised issues that went beyond Extra and whether or not The Warehouse moved into groceries.
The Warehouse Group share price rose 5c to $6.08 yesterday.
FOOD FIGHT
* The Commerce Commission revealed why it had not cleared Woolworths Australia or Foodstuffs to take over The Warehouse.
* Its decisions are to be challenged in High Court appeals by the two companies, starting in October.
* The two supermarket groups have until August 3 to provide details about grounds for their appeals.
* Woolworths Australia owns the Woolworths, Foodtown and Countdown chains.
* Foodstuffs is a co-operative that owns Pak'nSave and New World.
* Both supermarket companies own 10 per cent of The Warehouse Group.
