Progressive takes Privy Council route in bid to buy Woolworths

By Nick Smith

Friday 12th October 2001

ANOTHER LABOUR BUSINESS MUDDLE: Ted van Arkel says the mess is clearly the government's fault

Progressive Enterprises is taking its battle to buy Woolworths NZ all the way to the Privy Council.

The supermarket chain will seek leave on Monday to apply to the London-based court of final appeal to overturn a New Zealand Court of Appeal decision in favour of its competitor Foodstuffs.

Progressive has already spent $1.5 million on two court cases defending its Commerce Commission approval to buy Woolworths and its legal bill is set to soar above the $2 million mark if it goes to the Privy Council.

It is taking the legal action because the commerce select committee left Progressive out of the loop when approving the Commerce (Clearance Validation) Amendment Bill, which is expected to be introduced to Parliament within the next fortnight.

The retrospective legislation will legalise 10 commercial acquisitions, five of which have already proceeded, approved by the commission and worth about $3 billion.

But the Progressive/Woolworths acquisition is left out of the bill because of constitutional concerns about Parliament legislating against an Appeal Court decision and a belief that Foodstuffs should not be denied the fruits of its legal victory.

The legal stoush between Progressive and Foodstuffs - which has threatened the $3 billion deal and prompted the government's bandaid - is all about whether the commission should have used the old rules or new rules relating to commercial acquisition.

The new rules introduced a tougher test of substantially reducing competition, making it harder for Progressive to get commission approval to buy Woolworths.

Progressive's application and the other 10 approved deals were all lodged under the old rules but were approved when the new tougher test was in force.

The government had wanted the commission to use the old rules when assessing applications under these circumstances but did not specifically address the issue in legislation.

Commerce Minister Paul Swain said the issue of transition from old to new was meant to be covered by the Interpretations Act 1999 but the Appeal Court had revealed flaws in this legislation.

The government would eventually have to amend that act to fix the problem, Mr Swain said.

But Progressive managing director Ted van Arkel said the mess was clearly the government's fault for not addressing the issue when framing the legislation that came into force on May 26.

When the commission approved Progressive's bid under the old rules, Foodstuffs took the case to the High Court and lost.

It then appealed the High Court decision and in a split decision won, with the Appeal Court saying the commission should have used the tougher new rules.

Foodstuffs managing director Tony Carter said the company would "vigorously respond to any Privy Council action."

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