ALH and Laundy Hotel Group - proposed acquisition of Caringbah Inn

Acquirer(s)

  • ALH Group Pty Ltd (75% owned by Woolworths Limited)

Target(s)

  • Caringbah Inn

Summary

The ACCC has decided not to oppose the proposed acquisition of the Caringbah Hotel by ALH and the Laundy Hotel Group.

Market definition

The ACCC considered the impact of the proposed acquisition in the following relevant markets:
- the retail sale of packaged liquor for off-premises consumption in the market surrounding the target (the local retail liquor market);
- the retail sale of entertainment and gaming services, and liquor for on-site consumption, in the market surrounding the target (the local hotel market);
- the retail sale of packaged liquor for off-premises consumption in NSW (the NSW retail liquor market); and
- the NSW market for the wholesale acquisition of liquor (the wholesale liquor acquisition market).
In undertaking this review, and recognising that market definition is purposive, the ACCC aimed to identify the sellers and buyers that may constrain the commercial decisions of the merger parties.
In analysing the relevant local retail liquor market, the ACCC took account of the differentiation of retail offering between different types of bottleshops. The ACCC noted that retailers offering a large range and/or lower prices were often referred to as 'destination' stores because consumers may be more willing to undertake a dedicated trip or travel further to visit them than they would be for a smaller 'convenience' oriented alternative.
In identifying the rival sellers that were likely to constrain the commercial decisions of the target store the ACCC took into consideration a range of factors including the:
- physical characteristics of the market - road layouts, natural barriers (rivers, etc), topography;
- willingness of consumers to travel to purchase liquor at bottleshops in the Caringbah area; and
- evidence of competitive reactions of other liquor retailers to the offer of the Caringbah Hotel bottleshop.
The ACCC found that the Caringbah Hotel bottleshop was a 'destination' retailer. As such, consumers would be likely to be willing to travel further to access this type of retailer compared to a convenience oriented alternative for some types of purchases. However, the ACCC did not find it necessary, in reaching a view on the proposed acquisition, to conclude on a precise definition of the geographical extent of the local retail market.

Competition analysis

With regard to the local liquor retail market, the ACCC found:
- compared to its geographically closest competitors, which are mostly smaller 'convenience' oriented retailers, the Caringbah Hotel bottleshop is a vigorous and effective competitor, with a large range and extensive promotional activity;
- the nearest existing Dan Murphy's retailer to the target is at Hurstville, around 12 kilometres away by road. Woolworths reacts regularly to prices at the Caringbah Hotel bottleshop for some products by altering the shelf prices at the Dan Murphy's store in Hurstville, suggesting the two stores are competitors. Following the proposed acquisition, ALH plans to establish a Dan Murphy's outlet (another 'destination' retailer) at the target site, removing that competition. However, given the distance and geographic barriers between them (such as the Georges River) the loss of competition between these two stores would be unlikely to have the effect of substantially lessening competition in any market; and
- while the proposed acquisition would lead to an increase in the presence of Woolworths brands in the Caringbah area, a number of local competitors would remain following the acquisition. These competitors would limit ALH/Woolworths' ability to increase prices or reduce service at either Woolworths' existing stores or the store operating from the Caringbah Hotel site. These competitors include another 'destination' retailer, the 1st Choice Liquor bottleshop at Sylvania (approximately four kilometres from the target).
As a result of these findings, the ACCC considered that the proposed acquisition would be unlikely to have the effect of substantially lessening competition in the local retail liquor market.
In the NSW retail liquor market, the ACCC found that the proposed acquisition would be unlikely to have the effect of substantially lessening competition as the proposed acquisition would result in only a very small transfer of market share, and would not result in a reduction in the number of banner groups or retail chains competing with Woolworths brands on a state-wide level.
In the NSW wholesale liquor acquisition market, the ACCC found that the proposed acquisition would be unlikely to have the effect of substantially lessening competition as the proposed acquisition would result in only a very small transfer of market share of significantly less than one per cent to ALH/Woolworths.
With regard to the local hotel market, the ACCC found that, post acquisition, ALH would continue to be competitively constrained by both a number of hotel venues in the vicinity and the offer of licensed club venues (which provide a similar range of products and services). As such, the ACCC considered that the proposed acquisition would be unlikely to have the effect of substantially lessening competition in this market.

Statement of issues

Timeline

DateEvent
01/03/2012ACCC commenced review under the Merger Review Process Guidelines.
09/03/2012ACCC requested further information from ALH.
19/03/2012ACCC timeline suspended pending receipt of outstanding information requested from ALH. Former proposed decision date of 12 April 2012 delayed.
22/03/2012Closing date for submissions from interested parties.
18/04/2012ACCC received further information from ALH. ACCC timeline recommenced.
11/05/2012ACCC timeline suspended at the request of ALH to allow it to make further submissions. Former proposed decision date of 17 May 2012 delayed.
18/05/2012ACCC received further information from ALH. ACCC timeline recommenced.
31/05/2012ACCC published a Statement of Issues outlining preliminary competition concerns.
14/06/2012Closing date for submissions relating to Statement of Issues.
19/06/2012ACCC requested further information from the merger parties. Former proposed decision date of 28 June 2012 delayed. ACCC timeline suspended pending receipt of further information from the merger parties.
02/07/2012ACCC received further information from the merger parties. ACCC timeline recommenced.
19/07/2012ACCC announced it would not oppose the proposed acquisition.