The Australian Competition and Consumer Commission is taking a more localised approach to enforcing competition laws, with several reviews of supermarket acquisitions looking at the impact of competition in the local area.
The consumer watchdog released a statement of issues yesterday on the proposed acquisition by Woolworths of a supermarket site at the Glenmore Ridge Village Centre.
The watchdog said the statement of issues seeks further information on certain competition issues which have arisen from the ACCC’s review to date.
“The ACCC’s preliminary view is that the proposed acquisition is likely to result in a substantial lessening of competition in the local Glenmore Park market,” an ACCC spokesperson said in a statement.
The spokesperson said if Woolworths bought the site it would be likely to prevent or hinder competition that may otherwise have been brought to the local market by an alternative supermarket operator.
“This competition is unlikely to be otherwise introduced into the local market because of the lack of other available suitable sites for supermarket development,” said the spokesperson.
This isn’t the first time the ACCC has raised these concerns. The consumer watchdog is scrutinising more than a dozen acquisitions by Woolworths under “creeping acquisition” laws.
Earlier this year, the ACCC also reviewed Woolworths’ acquisition of a retail centre including an IGA supermarket and adjoining land at the corner of North and Albert Streets, at Logan Village in Queensland.
Woolworths property development arm Fabcot planned to buy the site, partially demolish the shopping centre and build a new supermarket and speciality stores, according to The Australian Financial Review.
Rival supermarket chain Metcash claimed the move would reduce competition by increasing Woolworths’ market share in the area to more than 80% and by threatening the future of an IGA retailer in the shopping centre.
If the proposed development proceeded, Metcash said Woolworths would operate four of the six supermarkets in the Logan-Jimboomba area.
Sally Scott, partner at law firm Hall & Willcox, told SmartCompany the ACCC was reacting to a widespread view that the conduct of the big two supermarkets is anti-competitive and that the ACCC is not doing enough to stop them.
“Whilst the big two have been highlighting their lower prices and the public has not been complaining, the concern is about the impact of this in the longer term – whether driving prices down in the short term could have the effect of driving out competitors, which could then ultimately result in less competition and higher prices,” Scott says.
Scott says the same issue arises in relation to Woolworths dominating supply in regional areas.
“Dominance in an area by one chain can be a concern, as it has the potential to interfere with normal competition forces which generally keep prices competitive in the longer term,” she says.
“Earlier the ACCC moved its focus to Woolworths’ apparent acquisition strategy in rural markets.
“Metcash was outspoken in its criticism of the approach by Woolworths in acquiring sites in rural areas and the ACCC is keeping a close eye on Woolworths’ acquisitions.”
Scott says over the past six months or so, Woolworths has appeared to have a current strategy of acquiring sites, particularly in regional areas.
“Whilst many in regional areas publically criticise the move by Woolworths to move into their areas – citing loss of jobs and concern over the impact on independent supermarkets – many probably privately rejoice at the lower prices that are expected to follow,” she says.
“However, the public needs to consider the longer term impact that dominance of big chains could have on prices. Whilst prices may be lower in the short term, if big chains drive out competitors, the long term impact could in fact be higher prices.”
A spokesperson for the ACCC said the watchdog has not adopted a new approach and has reviewed local market acquisitions many times in the past few years.
“When a merger is likely to raise competition concerns, the ACCC will carry out a review of the proposed merger,” the spokesperson said.
“In relation to any acquisition, we must consider the likely effect on competition, based on commercially relevant facts, assessments and evidence.”