The Australian Competition and Consumer Commission (ACCC) has appealed the Federal Court’s judgment dismissing its application to prevent Metcash, one of Australia’s largest grocery and liquor wholesaler, from acquiring the Franklins supermarket business.

ACCC Chairman Rod Sims said the Commission carefully considered the ruling and believes the Court made a number of significant legal and factual errors in dismissing the application.

"We are appealing this case...because of the adverse effect of the proposed acquisition on independent supermarket retailers, consumers and competition in the NSW and ACT grocery sector. Metcash, with this proposed acquisition, will have an ability to increase prices and/or reduce service to independent supermarket retailer," ACCC Chairman Rod Sims said.

"Second, the ACCC is appealing because, if left unchallenged, the Court’s interpretation of some fundamental principles of merger analysis could have serious implications for the ACCC’s ability to block anti-competitive mergers and so protect consumers in the future," Sims added.

Metcash is hoping to conclude its $215 million acquisition of Franklins by the end of September.

ACCC sought an injunction in the Federal Court December last year to prevent Metcash's proposed acquisition from proceeding.

ACCC said it took a legal action because it considered that the proposed acquisition would substantially lessen competition through the removal of Metcash's only real competitor for the wholesale supply of packaged groceries to independent retailers in NSW and the ACT.

"We remain concerned that the proposed acquisition would remove any future ability for those independent retailers to choose from whom they get their grocery supplies,"

"We have had a number of submissions from independent retailers and others that competition to Metcash at the wholesale level is necessary for them to control the cost of their goods," Sims continues.

ACCC said it closely examined the grocery industry over the years, including the role of Coles and Woolworths, who are by far the largest players.

It noted that the acquisition of Franklins would remove the only option for independent retailers who are unhappy with what Metcash offers them.

ACCC said the decision taken by the Court in the Metcash case is "at odds" with the Full Federal Court’s decision in the 1994 Davids Holdings case wherein the Court affirmed that there was a market for the wholesale supply of packaged groceries to independent retailers.

"The key question in relation to market definition is ‘what product is supplied to independent retailers, and where could they turn for alternatives?’ The answer is clear: the product is the wholesale supply of packaged groceries to independent retailers, and unhappy Metcash customers in NSW and the ACT can only turn to Franklins and in rare cases Spar for alternative supply," Sims said.