KEY POINTS:
The Commerce Commission says that if Woolworths or Foodstuffs bought The Warehouse Group it would give more power to an existing supermarket duopoly.
Last night commission chairwoman Paula Rebstock finally released details explaining why the purchase had been ruled out for both groups.
It would harm competition and there was no other new player likely to enter the supermarket sector in the foreseeable future, she said.
If either Foodstuffs or Woolworths bought The Warehouse, there would be less incentive to increase quality, service and innovation in the grocery sector, Rebstock said.
Foodstuffs owns the New World and Pak N' Save chains. Woolworths Australia owns Woolworths, Foodtown and Countdown.
Rebstock said that until The Warehouse started its grocery offering - The Warehouse Extra - there had been no new entrant in the supermarket business for 20 years.
This illustrated the high barriers for entry into the market.
"Before The Warehouse ... Woolworths and Foodstuffs had operated in duopoly.
"The purchase of The Warehouse by either company would return the markets to that state," she said.
The Warehouse was "uniquely placed" to compete with Woolworths and Foodstuffs because of its property portfolio, extensive distribution networks and established brand, Rebstock said.
Overseas experience showed that the type of super centres planned by The Warehouse had been successful and had increased competition and benefited consumers.
Foodstuffs and Woolworths are expected to question the level of competition offered by The Warehouse Extra.
The Warehouse is only committed to 15 Warehouse Extra outlets at its stores.
Both supermarket groups have already lodged High Court appeals challenging the commission's decision - which was released on June 8.
The first court hearing is set down for October.
The publication of reasons for the ruling comes seven months after Foodstuffs and then Woolworths sought commission approval in advance for the purchase.
While awaiting decisions, both have worked behind the scenes to convince Warehouse founder Stephen Tindall to sell his majority stake.
