The competition watchdog says it will closely monitor any attempt by Coles or Woolworths to buy Franklins stores and block any sales that lessen competition.

The Australian Competition and Consumer Commission (ACCC) announced on Friday it will appeal a Federal Court judgment paving the way for grocery wholesaler Metcash to buy the Franklins supermarket business.

The watchdog took court action after Metcash said it would continue with the takeover of the Franklins supermarket business from Pick `n Pay Stores of South Africa, despite the ACCC’s objections.

ACCC chairman Rod Sims said if the merger did not go ahead, an offer would most likely come from a consortium of independent retailers who were very keen to buy the Franklins business.

“If that hypothetical eventuates we’ll be looking case by case,” Mr Sims told ABC’s Insiders program on Sunday.

“Where we judge there’s any lessening of competition, we will block it.”

He said the commission would closely examine any lessening of competition in local markets after trying to stop the proposed $215 million takeover.

“We will be vigilant generally about what Coles and Woolworths do, but particularly if any of those supermarkets end up for sale, we will be watching it very closely.

“Clearly, some of them aren’t that close to a Coles Woolworths business so there may not be a problem but I can imagine for many of them there would be and we would take action.”

The ACCC believes the federal court made legal and factual errors in dismissing its application to stop the proposed acquisition.

It will appeal the court’s decision on two grounds after receiving submissions from independent retailers that claimed competition to Metcash at the wholesale level was necessary for them to control the cost of their goods.