Competition regulator the ACCC has shown it’s prepared to limit the future expansion prospects for Australia’s major supermarkets, Woolworths and Coles, by announcing it intends to oppose Woolworths’ attempts to buy a supermarket in Queanbeyan, near Canberra.
The decision, announced today, will force Woolworths to start legal action if it wants to buy the Karabar supermarket in the southern area of Queanbeyan.
With grocery prices an issue and currently being probed by an inquiry, and then the shock decision to prosecute Dick Pratt over admissions he allegedly made in connection with the Visy cartel case, the decision to block the Woolies deal, is yet another activist move from ACCC chairman Graeme Samuel ahead of his term expiring on July 31.
If Woolworths bought Karabar that would see it own own three of the five supermarkets operating in the city of about 30,000 people: the two others are owned by Coles and Aldi, which is the smallest of the group. Woolies would have the largest outlet in the centre of the city.
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Woolies had sought to buy the supermarket back in April; the suggested cost is around $4 million.
But the application was made as the ACCC was under pressure through its inquiry into supermarket pricing and growing concern that Woolies and Coles, along with Metcash, had too much power.
Local chain Supabarn wants to buy the Karabar outlet which is a franchise at the moment. If Supabarn purchased it competition in the Queanbeyan area would improve for local consumers and Woolies’ clout would be reduced.
The decision is a way for the Commission to send a message to the supermarkets that infill expansion is off the agenda. That’s the way the purchase and breakup of Foodland was justified three years ago.
Foodland’s NZ stories went to Woolies and it and Metcash were allowed to divide the Australian chain(mainly in Queensland and Western Australia). The ACCC’s decision could mean that if South African-owned Franklins stores came onto the market, there would be little point in Woolies and Coles applying to buy any of them.
“The ACCC concluded that the acquisition by Woolworths would be likely to substantially lessen competition in the local retail supermarket market surrounding the store,” ACCC Chairman, Mr Graeme Samuel, said today.
“The ACCC had strong evidence to suggest that in the absence of the acquisition by Woolworths, the supermarket would instead be acquired by an independent operator, Supabarn, which has intentions to expand the supermarket to operate as a full-line supermarket in strong competition with Woolworths and other supermarket operators.
The ACCC found that Supabarn supermarkets offer a different proposition to existing operators in the local market and considered that this would lead to increased consumer choice, as well as competition between supermarket operators on a number of factors including price, range, service, and product quality and freshness.