The Australian Consumer and Competition Commission (ACCC) says a $552 million acquisition by Woolworths of privately owned PFD Food Services could give the supermarket giant too much bargaining power and reduce consumer choice.

Woolworths has been trying to acquire a 65 per cent stake in PFD, and its 26 distribution centres, since August.

PFD is a wholesale food distributor that purchases a wide range of food products from manufacturers and distributes them to businesses such as restaurants, fast food franchises, hotels, and petrol stations.

ACCC chair Rod Sims said the watchdog was concerned the proposed acquisition would increase Woolworths’ “already substantial bargaining power in its dealings with food manufacturers”.

Woolworths and PFD both acquire food and groceries from suppliers such as frozen food manufacturers, dairy processors and manufacturers of pasta and sauces.

“The ACCC is concerned that the proposed acquisition would remove PFD as an important alternative customer in the food sector, reducing the number of buyers and increasing Woolworths’ relative size as a customer of food manufacturers and suppliers,” Mr Sims said.

Mr Sims said the dominance of Coles and Woolworths meant companies like PFD offered an important alternative for manufacturers.

PFD supplies Woolworths’ competitors and the ACCC is concerned an acquisition may lessen competition.

The ACCC said it was also considering if the proposed acquisition could affect competition downstream.

“If Woolworths was able to use its existing bargaining power as a retail buyer to gain better supply prices for PFD than PFD could obtain on its own, in the medium term this could have serious consequences for the structure of the wholesale food distribution sector, such as reduced range, choice, and service levels,” Mr Sims said.

The Australian Small Business and Family Enterprise Ombudsman Kate Carnell wrote to the commission in October to formally oppose the acquisition.

Ms Carnell urged the regulator to block the proposal, saying the deal would be detrimental to small businesses in the food distribution space and the broader economy.

“Woolworths has described its push into the food services sector as a ‘strategic investment’ but the timing is opportunistic at best,” Ms Carnell said.

She said while Woolworths had benefitted from COVID-19 restrictions, independent food distributors had struggled.

“Now that Woolworths has exhausted opportunities in the large supermarket space, it is moving into the smaller supermarket arena. Allowing Woolworths to buy PFD would significantly improve its competitive position against other smaller supermarket operators.”

Ms Carnell is also concerned the deal will put smaller distributors out of business, costing thousands of jobs.

Woolworths chief executive Brad Banducci told the ASX on Tuesday morning the company was working through the ACCC’s concerns.

“We see no reduction in competition, in any relevant markets, from our proposed partnership with PFD,” he said.

Independent Food Distributors Australia spokesperson Richard Forbes said the decision by the ACCC was “a great win for small businesses and a great win for the little guy against major supermarket Woolworths”.

“Independent family-owned food distributors and suppliers much be protected from the large supermarkets,” he said.

“Woolworths’ move to acquire PFD Foods is nothing less than predatory and opportunistic behaviour to control the entire food chain in Australia at a time when small business have been surely impacted by COVID-19 lockdowns.”

A final decision on the merger will be decided by the ACCC on April 22, 2021.Posted 2hhours ago, updated 1hhour ago

Extracted in full from: https://www.abc.net.au/news/2020-12-15/wooloworths-merger-pfd-concerns-from-accc/12984506

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