Already tense relations between the ACCC and supermarket giant Woolworths, have reached new heights. On 6 June 2013, the ACCC announced that it would oppose Woolworths' acquisition of a single undeveloped supermarket site in the Western Sydney suburb of Glenmore Park. This decision is important both for the ACCC and the supermarket chains as it is the first time the ACCC has opposed the acquisition of an undeveloped site.
Why did the ACCC Block Woolworths' Acquisition?
The ACCC determined that Woolworths' acquisition would be anti-competitive in eliminating the only opportunity for a competing supermarket to open in the local suburb of Glenmore Park. The ACCC determined that if Woolworths did not acquire the site at Glenmore Park, another supermarket operator would be likely to open at the site and stimulate local competition.
Looking at the facts and the ACCC's decision more closely, the only other supermarket in Glenmore Park is a Woolworths' supermarket, a new Aldi store will open in Glenmore Park but not until 2014, the next closest supermarket is another Woolworths' supermarket in South Penrith, and a 10 to 15 minute drive away in Penrith, there are various supermarkets including a Woolworths, a Coles, two Franklins, an ALDI, and a Foodworks supermarket.
Interestingly, the ACCC departed from its traditional approach that supermarkets within a radius of 3 to 5 km of the target site are in the same local market. Instead, the ACCC determined that the supermarkets located in South Penrith and Penrith (which are within a 5km radius) did not provide sufficient constraint to be in the same local market as the supermarkets in Glenmore Park. The ACCC justified this because it is harder for consumers to shop in neighbouring suburbs as Glenmore Park is bound by the M4 Motorway and non-residential areas.
Why is this Decision Significant?
Tensions between Woolworths and the ACCC are already high given the ACCC's continuing enquiry into the grocery sector – this decision is likely to add to this tension. Woolworths has refused to agree to notify the ACCC upfront of its store acquisition and development plans and is reportedly critical of the ACCC for allegedly taking too long to make decisions. In response, the ACCC took the rare step in relation to this matter to publicly comment that it had, in effect, completed its review of Woolworths' proposal to acquire the Glenmore Ridge site by October 2012 but had suspended its investigation timeline on a number of occasions at Woolworths' request.
For Woolworths, being unable to acquire a single supermarket site at Glenmore Ridge will not significantly impact an aggressive expansion plan it has in place. (Woolworths plans to open 34 new supermarkets in the financial year to 30 June 2013 and already operates 872 Woolworths stores across Australia. ) However, this decision is important because it may set an important precedent for future competition assessments by the ACCC. It is now plausible for instance that the ACCC would oppose Woolworths opening a second supermarket in a suburb that has only one other operator. Woolworths is also likely to be concerned about the narrower approach to defining the boundary of local markets that the ACCC has taken on this occasion.
Woolworths is reportedly considering challenging the ACCC's decision in the Federal Court.
The assistance of Fadi Metanios, Solicitor, of Addisons in the preparation of this article is noted and greatly appreciated.
Footnotes
1Woolworths Limited, Company Results Half Year
Ended 30 December 2012 Presentation, p.4.
2Per Woolworths Limited. See:
http://www.woolworthslimited.com.au/page/Who_We_Are/Our_Brands/Supermarkets/Woolworths/
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