Five peak bodies across Australia are urging the ACCC not to greenlight Woolworths Group’s proposed acquisition of PFD Food Services, calling out the retailer’s “track record of anti-competitive behaviour” and citing concern for the potential damage to small businesses in the supply chain.
The industry bodies include: Australasian Convenience and Petroleum Marketers Association (ACAPMA), Council of Small Business Organisations Australia (COSBOA), MGA Independent Retailers, Australasian Convenience and Petroleum Marketers Association (AACS) and Independent Food Distribution Australia (IFDA).
Earlier this week, the Australian Competition and Consumer Commission (ACCC) called for market feedback on the proposed $552 million acquisition of PFD by Woolworths. The retailer and PFD released a draft “behavioural undertaking”, which aims to maintain a “degree of separation and independence” if the retailer’s proposed acquisition of 65 per cent of PFD goes ahead.
IFDA chairman Richard Hinson told Food & Drink Business said the five peak bodies are opposing the proposed acquisition because of the significant damage it will likely cause to small businesses who operate in the food distribution sector.
“These small businesses are typically family-owned, based in regional areas, and most have already been hard hit by the COVID pandemic,” Hinson said.
“If Woolworth’s is allowed to acquire PFD, these small businesses will be placed under further pressure. In the short-term some of them will close and the people they employ will lose their jobs, over the medium term, as competition reduces, grocery prices are likely to rise for all consumers.”
The industry bodies have raised five main concerns around the acquisition:
- It will reduce choice and increase costs for Australia’s food service operators;
- It will significantly reduce distribution choice for suppliers, reducing the route to market for
- the tens of thousands of products our members are responsible for;
- It will increase costs for suppliers;
- It will erode the value chain for suppliers; and
- It will significantly reduce innovation in both food manufacturing and production.
Hinson said none of these concerns have been addressed by the various undertakings that Woolworths and PFD have made in relation to the transaction.
“Woolworths’ proposed undertaking are meaningless – even they have admitted as such in the fine print which outlines all the conditions under which the undertakings can be rolled back,” he told F&DB.
“ACCC Chair Rod Sims has said in the past that behavioural undertakings like those Woolworths has proposed are impossible to police on a day to day basis.”
“The peak bodies believe the potential damage to the small business community is so great that Woolworths’ proposed acquisition of PFD should not be allowed to proceed under any circumstances.
“We do not believe there are any conditions that will preserve competition in the sector if Woolworths’s is allowed to acquire PFD.”
MGA CEO Jos de Bruin said the organisation believes this is another “creeping acquisition” by Woolworths to “further dominate the food and grocery market” and lessen competition.
“MGA’s members have long advocated that Woolworths domination in Australia’s grocery, food distribution and liquor markets is already so strong that the Woolworths Group ought to be considered for divestiture to rekindle consumer choice and to enhance a robust, diverse and competitive food and grocery marketplace,” said de Bruin.
The industry bodies said they will continue to advocate on the behalf of the small businesses they represent and “take every opportunity to highlight the damage this acquisition will do to small businesses and, ultimately, Australian consumers”.
“This includes providing ACCC with evidence of the past anti-competitive behaviour undertaken by Woolworths and the other retail giants, as well as engaging those stakeholders who are interested in small businesses getting a fair go and ensuring that Australian consumers aren’t getting ripped off,” said Hinson.
The ACCC will deliver its decision on 10 June, with submissions for market feedback open until 9am on 19 May.