KEY POINTS:
The Warehouse says it will oppose any further action by the Commerce Commission to halt the potential sale of the company.
Warehouse shares plunged yesterday as the Commerce Commission declared it would challenge a High Court decision overturning its ban on a takeover of the company.
The prospect
of a lucrative takeover battle for the company - already hanging over the stock for more than a year - now faces months of further delays.
In an announcement yesterday, the Commission said it would seek leave to appeal the High Court's decision last month that cleared the way for either the Foodstuffs supermarket co-operative or Australian-owned Woolworths taking control of The Warehouse.
"Appealing the judgment is important given the precedence it sets for the application of competition law in New Zealand and the implications this has for the long-term interests of supermarket consumers," said Commission chair Paula Rebstock.
The Commerce Commission in June halted attempts by the Australasian supermarket chains to buy Stephen Tindall's company because it would "substantially reduce competition" in the New Zealand retail market.
The Commission said it was seeking a stay of execution on the High Court judgment and to have the leave to appeal dealt with urgently.
Warehouse chairman Keith Smith said the board was concerned at the impact of the Commission's decision to appeal.
"The board is of the view that should the application for appeal be granted, a further lengthy period of uncertainty is likely to result, which is not in the best interests of the business, employees or shareholders," said Smith.
Foodstuffs managing director Tony Carter said the company continued to hold the view that The Warehouse does not constitute a competitive threat to its business.
Both Foodstuffs and Woolworths contend that The Warehouse's entry into the grocery market - currently only operating in three locations - had any real chance of introducing competition.
Carter said that while he understands the Commission is exercising its legal right to appeal the High Court decision, the company was disappointed by the move and would oppose the application.
Woolworths said it too would oppose the Commission's court action.
The grocery company, which sought clearance to buy The Warehouse in January, said that should the appeal be granted it would result in further delay and uncertainty for shareholders.
Simon Botherway of Brook Asset Management said he was disappointed by the antitrust regulator's move and "fanciful" views but believes the chances of succeeding were slim.
The Commerce Commission "is grasping at credibility straws", Botherway told the Business Herald.
"We don't think it's going to be successful. We think the [High Court] judgment was comprehensive and consistent."
Warehouse shares fell 73 cents yesterday, closing down 11.8 per cent at $5.47. In contrast, the shares jumped $1.16 the day of the High Court decision last month.
In a article published last week on the High Court decision, Simpson Grierson partner Peter Hinton said issues raised by the judgment needed to be tested on appeal.
He indicated it was unusual for evidence presented by applicants with a vested interest to not be treated with "even a scintilla of scepticism".
"Overseas, it is generally accepted that evidence put forward by direct stakeholders should generally be discounted as self-serving," said Hinton.
"Many will consider it extremely unlikely that the incumbents would have shot themselves in the foot by providing evidence of competition when they were seeking clearance."
The process
* The Commerce Commission applied yesterday to the High Court for leave to appeal a decision allowing either Foodstuffs or Woolworths to acquire The Warehouse.
* The application by the Commission will be heard in closed chambers by Justice Jill Mallon, the judge who presided over the original trial.
* If Justice Mallon agrees the appeal can proceed, fresh documents and a statement of claim will be filed with the Court of Appeal.
* If Justice Mallon turns down the application for appeal, the commission can apply directly to the Court of Appeal for special leave to appeal.
