Only limited acceptance by the major supermarket chains of ACCC’s proposed streamlined acquisition assessment protocol

7 December 2012

The Australian Competition and Consumer Commission has agreed with Coles a streamlined assessment protocol for single supermarket acquisitions, including in relation to new supermarket developments, for an initial six month trial period. Agreement was not reached, however, to include in the protocol acquisitions by Coles or Bunnings in liquor or hardware.

No agreement on the protocol was reached in any of the sectors with Woolworths.

This follows the announcement by ACCC Chairman Rod Sims in June 2012 that the ACCC is focusing on incremental small retail acquisitions by the major supermarket chains (MSCs) in light of concerns about the continued expansion of Woolworths and Coles in various sectors. The ACCC was also aware of concerns about the time it takes to review these acquisitions.

The ACCC considered the best way forward was for the ACCC and the MSCs to agree a voluntary streamlined notification and review protocol which would provide benefits for both the ACCC and MSCs.

The ACCC sought agreement from Wesfarmers and Woolworths regarding the types of acquisitions that should be notified and the information that would be provided. In return, the ACCC proposed to expedite pre-assessments and truncate timelines for the first stages of a merger review.

Despite only limited acceptance of the protocol the negotiation process over the last six months has brought some benefits. Bunnings has, for example, agreed to continue its existing practice of notifying the ACCC of all proposed home improvement store acquisitions but outside the protocol. Coles will only notify liquor acquisitions at its discretion.

Woolworths will continue to notify the ACCC of certain types of transactions as it has previously done, primarily acquisitions of existing stores but with expanded up front information, at Woolworths’ discretion.

“While the outcome with Coles in relation to single supermarket acquisitions, including new greenfield supermarket developments, is pleasing and appreciated, the overall outcome is disappointing,” ACCC Chairman Rod Sims said.

“We are particularly disappointed that Woolworths was not willing to reach an agreement with the ACCC in supermarkets, liquor or hardware, particularly given the size of Woolworths existing store network and, most important, its evident growth plans”.

“The protocol was a genuine attempt by the ACCC to significantly expedite the acquisition assessment process. The ACCC completely acknowledges, however, that the proposed protocol was a voluntary arrangement and that the MSCs were perfectly entitled not to participate,” Mr Sims said.

“What needs to be understood, however, is that the ACCC will continue to pay close attention to all acquisitions in the supermarket, liquor, hardware and fuel sectors by the major supermarket chains, including new greenfield store developments.”

“The ACCC will do this not only through notification by the MSCs and the ACCC’s own monitoring activities but, importantly, through information received from the market. Indeed, information received from the public will be important, including particularly in relation to greenfield developments,” Mr Sims said.

While competition concerns with new greenfield developments will arise less frequently, it is important that the ACCC can consider these when so much new store growth is being undertaken.

Acquisitions by Coles and Woolworths not covered by the protocol will be assessed in accordance with the ACCC’s usual merger process and timelines.

The ACCC looks forward to working with Coles during the trial period, which will commence on 1 January 2013, and to continuing constructive engagement with both Coles and Woolworths on acquisitions generally.

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