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The Australian Competition & Consumer Commission will allow Woolworths Group to acquire a 65 per cent stake in PFD Food Services, citing the transaction would not be likely to lessen competition. 

ACCC chair Rod Sims said that while there were concerns expressed by some suppliers, many other suppliers did not raise competition concerns.

“PFD makes up about two per cent of the overall demand from food suppliers, which was a key factor in the lack of concern from some suppliers,” said Sims.

“Our investigation focussed on the potential impact of the transaction on suppliers of food and grocery products. 

“Market feedback suggested that some suppliers see the wholesale food distribution channel as a competitive alternative to supermarkets in distributing their products.”

In May, five peak bodies across Australia urged the commission not to greenlight the acquisition because of the “significant damage it will likely cause to small businesses who operate in the food distribution sector”.

Commenting on the ACCC's announcement, chairman of Independent Food Distributors of Australia (IFDA) Richard Hinson said Woolworth’s acquisition of PFD had united small business who will be disadvantaged by the ACCC’s decision to wave through the acquisition. 

“While we acknowledge the ACCC’s efforts in investigating this proposed acquisition, we are incredibly disappointed by the decision to allow Woolworths’ to acquire PFD, one of the most significant players in the food distribution services sector,” said Hinson.

“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.” 

Woolworths had also proposed a behavioural undertaking of in response to the concerns, outlining a degree of separation and independence between the two companies for three years after the acquisition, however, the ACCC has now concluded “the proposed acquisition was not likely to substantially lessen competition, so ultimately it was not necessary to decide whether to accept the undertaking”.

“Although it had determined that the undertaking was not necessary, the ACCC also considered that an undertaking of the type proposed raised considerable compliance risks that would likely have made it unacceptable,” the commission said.

During its investigation, the ACCC said the strongest concerns relating to the acquisition were connected to the potential for Woolworths to “aggressively expand in food distribution and leverage its buyer power in supermarkets into food distribution”, including through selling private-label products through PFD. 

“The ACCC acknowledges that the acquisition will likely lead to changes in the way the wholesale food distribution industry operates,” Mr Sims said.

“Despite these potential changes, we concluded that there are several competitors in the wholesale segment with similar market share to PFD and non-price aspects of competition, such as range, quality and service levels are likely to remain an important part of the competitive dynamics. Consequently there is not likely to be a substantial lessening of competition.”

PFD will continue to operate independently under CEO Kerry Smith. A separate board and governance structure will now be implemented.

PFD Food Services CEO Kerry Smith, said: “At PFD, we pride ourselves on the strength of our customer and supplier relationships and that will remain unchanged as a result of this investment. We look forward to continuing to drive innovation in the industry and serving the evolving needs of our customers, suppliers and the broader community.”

The transaction is expected to be complete by the end of June.

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