Wellington - New Zealand's Court of Appeal on Thursday vetoed a takeover bid that would have restricted competition in the country's chain store retail trade.

The court overturned a High Court decision to allow either the locally owned Foodstuffs supermarket chain or Australia's Woolworths group to take over 128 variety and discount stationery stores of The Warehouse.

Both Woolworths and Foodstuffs have been vying to take over The Warehouse chain since each bought 10 per cent stakes in 2006.

The competition watchdog Commerce Commission rejected takeover applications by both groups in June 2007, but the High Court overruled that decision in November.

The commission appealed the ruling to the Court of Appeal in April, and Commerce Commission Chairwoman Paula Rebstock welcomed Thursday's decision as a "victory for supermarket consumers and competition in markets."

The Foodstuffs group has more than 450 stores and about 57 per cent of supermarket trade, while Woolworths has more than 150 stores and 43 per cent.

The Warehouse had begun building hypermarkets and diversifying into food sales, and Rebstock said, "The commission considered that the presence of an innovative third party - such as The Warehouse - had the potential to increase the level of competition in this important market.

"New Zealand consumers know that more competition is needed in the supermarket sector," she said.

The Warehouse, which is 52-per-cent owned by its founder, businessman Stephen Tindall, withheld comment on the ruling until it had studied the court's judgment. (dpa)