The ACCC will not oppose Woolworths Group’s plan to acquire food distributor PFD Food Services following a detailed investigation.
The consumer watchdog ultimately decided the acquisition is not likely to substantially lessen competition in the wholesale food distribution sector, as the two companies do not compete for a majority of their customers.
“PFD primarily sells and distributes food products that are not suitable for direct retail sales [and] Woolworths only supplies business to a limited extent, distributing products suitable for direct retail sales through ‘Woolworths at Work’ and ‘Australian Grocery Wholesalers’,” the ACCC said in its decision.
“[And] while there were concerns expressed by some suppliers, many suppliers did not raise competition concerns.”
During the course of the ACCC’s investigation Woolworths put forward a number of temporary measures it could put in place as a behavioural undertaking. However, since the ACCC has decided competition won’t be lessened, Woolworths will not be held to any of the temporary measures.
In any case, the ACCC said the measures would likely have been unacceptable, given that they raised “considerable compliance risks“.
Small business ombudsman Bruce Billson said he plans on closely monitoring the acquisition and its impact on the small business sector, and said he is “disappointed” in the decision.
“The deal is an example of another creeping acquisition by an already dominant player in the food and grocery sector, eating away at the competitive landscape and the footprint of independent businesses,” Billson said.
“My office has made our concerns about this transaction clear to the ACCC and we note the evidence was not sufficient to support ACCC intervention as it has concluded the deal will not substantially lessen competition.
“Given that much of the concern about this acquisition relates to Woolworths’ influence on the wholesale distribution channel and the impact on food and grocery producers who are already concerned about having too few customer options, I hope the ACCC will join me in keeping a close eye on how this plays out.
Independent Food Distributors Australia chairman Richard Hinson said he is also upset about the ACCC’s decision.
“Given its track record in other sectors, we know that Woolworths will inevitably misuse its increased market power, and this will ultimately cost hundreds of jobs in the food distribution sectors, many of which will be in regional Australia,” Hinson said.
The IFDA has been part of a larger push by a group of five food distributors to block the merger, aided by the Australasian Association of Convenience Stores, the Australasian Convenience and Petroleum Marketers Association, COSBOA, and the Master Grocers Association. And according to MGA CEO Jos de Briun, their fight isn’t over.
“Every time another small business in our sector is forced to close; jobs have to be cut; suppliers have fewer distribution choices; or prices go up because of Woolworths’ strongarm tactics, we will highlight it to the ACCC and other interested parties such as local members of Parliament,” said de Bruin.
“Based on the retail giants’ previous behaviour in other industries, we know that the damage to our sector because of this acquisition will be a matter of when, not if.”
Woolworths is understandably pleased with the outcome, stating the 65 per cent equity interest in PFD will support its evolution of the wider Woolworths Group into a ‘food and everyday needs ecosystem’.
“We are pleased to have approval to invest alongside the Smith family in PFD Food Services,” Woolworths Group chief executive Brad Banducci said.
“They are a great Australian success story and a well respected business with both suppliers and customers in the food service industry.”
Once the acquisition takes place, PFD CEO Kerry Smith will continue to lead the business, with a separate board and governance structure.