ALH Group Pty Ltd (75% owned by Woolworths Limited) - proposed acquisition of Hotels and takeaway liquor stores in NSW

Acquirer(s)

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

Target(s)

  • Hotels and takeaway liquor stores in NSW

Summary

In December 2011, ALH Group Pty Ltd (ALH) informed the ACCC that it proposed to acquire 31 hotels and two takeaway packaged liquor retailers in New South Wales from the Laundy, Waugh and De Angelis groups. ALH is owned by Woolworths Limited (Woolworths) (75 per cent) and the Bruce Mathieson Group (25 per cent). ALH owns and operates 294 hotels and approximately 12 000 gaming machines nationally.

Following a public review, on 28 June 2012 the ACCC announced that it would oppose the acquisition of five sites subject to the proposed acquisition and that it would not oppose the acquisition of the remaining sites. The sites the ACCC opposed were:

- the Chittaway Bay Tavern
- Umina Foodtown
- the Ocean Beach Hotel
- the Ocean Beach Cellars
- Albion Park Hotel.

Following the ACCC's decision to oppose the acquisition of the Ocean Beach Hotel, Ocean Beach Cellars and Umina Foodtown in the Umina area; ALH/Woolworths sought an informal review by the ACCC of a revised proposal to acquire only the Ocean Beach Hotel and the Ocean Beach Cellars in this area. Under the revised proposal, the Laundy Hotel Group (LHG) would retain ownership of the Umina Foodtown. LHG would also continue to own Westside Cellars in Umina.

On 17 August 2012 the ACCC announced that it would not oppose this revised proposal for the Umina area. The ACCC considered it had sufficient information to review the revised proposal without the need to make further public market inquiries.

Market definition

The ACCC assessed the competition effects of the proposed acquisition in the following markets:

- The retail sale of packaged liquor for off-premises consumption in the local area surrounding each of the target sites (the local retail liquor markets).

- The retail sale of packaged liquor for off-premises consumption in New South Wales (the NSW retail liquor market).

- The market for the wholesale acquisition of liquor in New South Wales (the NSW wholesale liquor market).

- The retail sale of packaged liquor for on-premises consumption, entertainment and gaming in the local area surrounding each of the target sites (the local hotel markets).

In relation to the sites which the ACCC initially opposed, the ACCC defined local markets for the retail sale of packaged liquor for off-premises consumption:

- In the Chittaway Bay area, including the suburbs of Chittaway Bay, Chittaway Point, Berkeley Vale and Tuggerah (the Chittaway Bay market).

- In the Albion Park area, including the suburbs of Albion Park, Albion Park Rail and Oak Flats (the Albion Park market).

- In the Umina Beach area, including the suburbs of Umina Beach and Ettalong Beach (the Umina Beach market).

Competition analysis

The Chittaway Bay market

The ACCC considered that the proposed acquisition of the Chittaway Bay Tavern was likely to substantially lessen competition in the local retail liquor market as:

- the proposed acquisition would result in ALH and Woolworths operating three of the four substantial liquor retailers in the market. The remaining liquor retailer (Berkeley Vale Cellars) would be unlikely to be seen as a close substitute by consumers due to its inferior location (it is not located near main commuting routes and it is not co-located with a supermarket like other liquor outlets in the area) and limited size and range when compared to ALH/Woolworths' liquor retail outlets in the area

- the ACCC did not consider liquor retailers attached to clubs to be a close substitute for consumers due to their limited range and licensing laws which only allow a club to sell liquor to its members

- the ACCC did not consider that liquor retailers located in Wyong were likely to be seen as a close substitute by consumers. Information available to the ACCC indicated that consumers from the Chittaway Bay area would not be willing to travel to Wyong in order to purchase liquor in the event of an increase in prices in Chittaway Bay.

The Albion Park market

The ACCC considered that the proposed acquisition of the Albion Park Hotel was likely to substantially lessen competition in the local retail liquor market as:

- information available to the ACCC indicated that consumers would not be willing to travel further than 3-5km from the Albion Park area in order to purchase liquor in the event of an increase in prices in Albion Park

- the proposed acquisition would result in Woolworths operating two of the four substantial liquor retailers within this area

- the ACCC considered that clubs in the area were unlikely to be seen by consumers as a close substitute, due to their limited range and licensing laws which restrict the sale of liquor to members only

- market inquiries indicated that the Albion Park Cellars had a particularly competitive range of specials provided under the Bottlemart banner. There were no other Bottlemart branded outlets within the market and the proposed acquisition would have removed this promotional offer from the market.

The Umina Beach market

As noted above, the ACCC initially considered that the proposed acquisition of Umina Foodtown, the Ocean Beach Hotel and the Ocean Beach Cellars by ALH/Woolworths was likely to substantially lessen competition in the local retail liquor market as:

- information available to the ACCC indicated that consumers would be unlikely to travel from Umina Beach to Woy Woy in order to purchase liquor in the event of an increase in prices in Umina Beach due to the distance between the two locations

- the ACCC considered that clubs in the area were unlikely to be seen by consumers as a close substitute, due to their limited range and licensing laws which restrict the sale of liquor to members only

- the proposed acquisition would have left only the Westside Cellars, the Ettalong Hotel and Liquorland Umina as competitors to the ALH/Woolworths liquor outlets. The ACCC considered that the Westside Cellars and the Ettalong Hotel were unlikely to be seen as close substitutes for consumers, due to their limited floorspace, range and opening hours. As a result, the ACCC considered that the initial acquisition proposal would result in ALH/Woolworths operating three of the four substantial liquor retailers in the local market.

ALH/Woolworths subsequently made a further submission proposing to acquire only the Ocean Beach Hotel and Ocean Beach Cellars. Under this revised proposal LHG would retain ownership of the Westside Cellars and Umina Foodtown. This revised proposal left the Umina Beach market with three substantial liquor retailers (ALH/Woolworths, Wesfarmers and LHG) which the ACCC considered in this particular circumstance would not result in a substantial lessening of competition. The ACCC subsequently decided not to oppose this revised proposal.

Other markets

The ACCC considered that the proposed acquisition was unlikely to substantially lessen competition in any of the other relevant markets. In relation to the NSW retail liquor market and the NSW wholesale liquor market, the ACCC considered that the proposed acquisition would be unlikely to substantially lessen competition as it would result in only a small increase in market share for ALH/Woolworths.
In each of the other local hotel and retail liquor markets, the ACCC considered that ALH/Woolworths would still face a significant constraint from alternative retailers.

Timeline

DateEvent
22/12/2011ACCC commenced review under the Merger Review Process Guidelines.
20/01/2012Closing date for submissions from interested parties.
13/02/2012ACCC requested further information from ALH. Former proposed decision date of 23 February 2012 delayed. ACCC timeline suspended pending receipt of further information from ALH.
21/02/2012ACCC received further information from ALH. ACCC timeline recommenced.
29/02/2012ACCC requested further information from ALH. Former proposed decision date of 1 March 2012 delayed. ACCC timeline suspended pending receipt of further information from ALH.
05/03/2012ACCC received further information from ALH. ACCC timeline recommenced.
22/03/2012Closing date for submissions relating to Statement of Issues.
04/04/2012Former proposed decision date of 5 April 2012 delayed pending further information request to the merger parties.
12/04/2012ACCC requested further information from the merger parties.
04/05/2012ACCC received further information from the merger parties. ACCC timeline recommenced.
28/06/2012The ACCC announced that it opposed the acquisition of five takeaway packaged liquor retailers in NSW (three of which are attached to hotels), and that it did not oppose the acquisition of the remaining 28 hotels.
17/08/2012The ACCC announced that it would not oppose the acquisition by ALH of the Ocean Beach Hotel and the Ocean Beach Cellars in Umina, subject to ALH's revised proposal not to acquire Umina Foodtown.