ACCC goes local as it blocks Woolworths’ acquisition of Ballarat hardware stores

The chairman of the Australian Competition and Consumer Commission has confirmed the watchdog is taking a new approach to competition law by looking at competition in a localised way.

The new tack comes after the corporate regulator moved to oppose Woolworths’ proposed acquisition of an independent chain of three hardware stores owned by G Gay & Co in Ballarat, Victoria.

Woolworths has secured a site and has plans to open a Masters store in the Ballarat area in 2013.

The competition regulator said the proposed acquisition is likely to result in a substantial lessening of competition through the removal of what will be one of Woolworths’ two closest competitors in the Ballarat area, with Bunnings remaining as the other competitor.

ACCC chairman Rod Sims told SmartCompany the ACCC is concerned about the removal of a key independent competitor from the market to the detriment of competition and local consumers.

“G Gay & Co is a vigorous and effective competitor in terms of price, product range and service and is likely to provide a strong competitive constraint on Masters in the Ballarat area,” he says.

Sims said the ACCC’s opposition to the acquisition is part of the watchdog’s more localised approach, especially regarding the large number of acquisitions by the major supermarket chains.

“We are not looking when a butcher shop changes hands, but we are noticing a lot of acquisitions by the big supermarket chains and greenfields sites as well,” Sims says.

He says the ACCC had two options: to look at competition issues at a local level or to do nothing.

“Our concern was we would wake up in five years’ time and have a market structure that was different to what we think is appropriate. The supermarkets are already concentrated and we want to make sure it doesn’t happen in alcohol and hardware as well,” Sims says.

“If we can make sure there is not a substantial lessening of competition in local markets, we can make sure competition remains at a national level.”

Sims says the ACCC’s local focus is “something we have been doing for a few months now”.

He first signalled the watchdog’s new approach with an announcement in June that the ACCC is keeping an eye on Coles and Woolworths’ moves to increase their participation in the liquor, grocery and home improvement sectors, particularly through many small acquisitions.

“That really signals a desire to look at quite a number of these transactions and see if they amount to a substantial lessening of competition in a local market,” says Sims.

The new approach is evident in its recent reviews of supermarket acquisitions, which have raised concerns at the impact on competition in the local area.

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