ACCC blocks Woolworths expansion plan
Thursday, June 26, 2008/
The Australian Competition and Consumer Commission announced yesterday that it will use its power to prevent businesses acquiring excessive market power to oppose plans by Woolworths to purchase the Karabar supermarket in the central NSW town of Queanbeya
The competition watchdog’s move to oppose Woolworths’ purchase of a supermarket in regional NSW foreshadows a new tougher approach to “creeping” acquisitions by dominant market players, the independent grocers’ industry group says.
The Australian Competition and Consumer Commission announced yesterday that it will use its power to prevent businesses acquiring excessive market power to oppose plans by Woolworths to purchase the Karabar supermarket in the central NSW town of Queanbeyan.
Woolworths and independent grocery chain Supabarn both want to purchase the small Karabar store and expand it into a full-line supermarket. Woolworths currently owns two of the four supermarkets in the town.
ACCC commissioner Stephen King says the already strong competitive position of Woolworths in the town, and the different offering a Supabarn owned store would bring, were key factors in the decision.
“Because of its smaller size, Supabarn can have a focus on local products that Coles and Woolworths, as national chains, can’t,” King says. “We also felt Supabarn puts a strong emphasis on service. Of course there were differing opinions on how that compares to Woolworths, but it was a factor.”
The National Association of Retail Grocers of Australia today welcomed the ACCC decision and says it reflects a new approach to stricter approach to creeping acquisitions being considered by the Government.
“We see this as the ACCC moving in anticipation of Government plans to tighten up these provisions,” NARGA chief executive Ken Henrick says. “Competition Minister Chris Bowen has said he will move on these creeping acquisition rules and certainly this decision reflects the indication the Minister gave to us.”
Henrick says yesterday’s move is in stark contrast with the ACCC’s earlier this year to approve Woolworths’ acquisition of the only supermarket in the NSW highlands town of Jindabyne.
“That decision took Woolworths’ market share in that region from 70% to 90%, so people in Jindabyne haven’t been left with much of an option – it’s a virtual monopoly there,” Henrick says.
But the ACCC’s King says that very different circumstances in each case warranted the different decisions.
“In Jindabyne there was little scope for expansion of the store and we didn’t feel there would be the competition tension between those stores that there is in Queanbeyan,” he says “We made substantial market inquiries in each case, and in Jindabyne we formed the view there wouldn’t be a substantial lessening in competition.”
The decision follows a speech by ACCC chairman Graeme Samuel yesterday in which he strongly defended the organisation’s independence and rejected criticism that he had been too involved in last week’s move to prosecute Visy boss Richard Pratt.
“I think it is time we did a reality check on commentary on how decisions are made at the ACCC,” Samuel said. “There has been too much talk in recent months of ‘Graeme Samuel’s ACCC’, and of decisions having been made in pursuit of personal motives. Let me make it clear – all decisions of the ACCC are made by all seven commissioners and over the past five years almost every decision has been unanimous.”