ACCC weighs into Woolworths’ Action deal

THE Australian Competition and Consumer Commission has outlined its preliminary view regarding the proposed acqui-sition of Action Supermarkets by Woolworths, raising concerns it has with respect to competition over eight of the 22 stores to be purchased. Six of the eight stores mentioned in the ACCC’s Statement of Issues surrounding the Woolworths transaction lie in Western Australia, with the regulator forming the view that the proposed acquisition is likely to "substantially lessen" competition in retail markets in the local areas of Willetton, Spearwood, Noranda, Maddington, Woodvale and Kalgoorlie, along with two areas in Queensland. In May, Foodland, the owner of Action Supermarkets, Metcash Trading and Woolworths announced they had agreed to the acquisition of Foodland by Woolworths and Metcash. The proposed transaction would result in the acquisition by Metcash of Foodland’s franchise and supply operations and 60 Action stores, and the acquisition by Woolworths of the Foodland New Zealand business and 22 Action stores and development sites. The ACCC has invited market participants to provide further information to it by September 15 as to whether or not there are competition concerns in the areas identified in the statement. The competition regulator will finalise its decision on the competition issues after it considers the industry submissions. Woolworths reacted optimistically to the ACCC statement, acknow-ledging the next phase of the investigation process. Without revealing details, Woolworths said it had "significant independent data and analysis to address the issues raised for further consideration”. "Woolworths is confident that it can address these issues and reach resolution with the ACCC," Woolworths told the market. In January this year, the ACCC indicated that it would not challenge the proposed acquisition of Foodland assets by Metcash but has not revealed its view on the Woolworths side of the transaction proposal until now.The State Government welcomed the ACCC view, with Small Business Minister John D’Orazio saying the preliminary decision was good news for small business and the community. "The Government will certainly be writing to the ACCC chairman supporting this decision and urging him to stand by it in the commission’s final ruling," Mr D’Orazio said. There is speculation that a final ruling against Woolworths would open the door for a bid by Coles Myer for the eight stores in question. In arriving at its assessment, the ACCC said it had undertaken a thorough assessment of specific retail markets in which there is a five-kilometre overlap between Wool-worths and Action stores. Competition in the procurement of food and grocery products from suppliers by integrated super-markets and independent wholesalers was deemed by the watchdog to raise issues in the context of perishable products, which are not easily exported from or imported to WA. However there was insufficient evidence, the ACCC statement said, to support the proposition that the acquisition was likely to substantially lessen competition in any procurement markets. The ACCC also evaluated the Woolworths proposal from the wholesale side of the equation as it related to a possible decrease in Metcash’s competitive bargaining position, indicating it would not pursue the matter.


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