Business & Investment

ACCC does not interfere with Woolworths’ acquisition of PFD

Woolworths will take a majority share of the PFD after announcing that consumer watchdogs across the country will not oppose the deal.

Today, the Australian Competition & Consumer Commission (ACCC) acquires a 65% stake in Woolworths wholesale food distributor PFD Food Services, but detailed investigations show that competition is unlikely to decline significantly. I decided.

With this acquisition, Woolworths will own 65% of the PFD and the remaining 35% will be owned by the Smiths. The acquisition also gives Woolworths the right to acquire the remaining 35 percent.

“We conducted extensive market research across the industry and conducted a detailed analysis of supplier and competitor data, as well as internal documents of key stakeholders. Finally, our previous evidence. Did not show that the deal could significantly reduce competition, “said ACCC Chair Rod Sims.

Both Woolworths and PFD supply food, but according to the ACCC, the competition with customers is not that great.

PFD currently operates 750 commercial vehicles, primarily selling and selling food products that are not suitable for direct retail sale.

We purchase a wide range of food products from our suppliers and distribute them to restaurants, cafes, hotels, clubs, petrol stores, convenience stores, hospitals and other institutions. PFDs make up about 15% of the wholesale food distribution segment.

Woolworths supplies businesses only to a limited extent and distributes products suitable for retail sale directly through Woolworths at Work and Australian Grocery Wholesalers, which primarily supplies to Ampol service stations.

“Our research focused on the potential impact of transactions on food and grocery suppliers. Market feedback is a competitive alternative to supermarkets in the distribution of their products by some suppliers. I suggested that I was looking at the wholesale food distribution channel as

“While some suppliers have expressed concerns, many have not raised competitive concerns. PFDs account for approximately 2% of overall demand from food suppliers. Was an important factor in the lack of concern from some suppliers. “

The ACCC has scrutinized the potential spillover effects across the wholesale food sector and examined specific segments of the market where supply through PFDs and other wholesalers accounts for the majority of demand.

“Few suppliers have both PFD and Woolworths occupying a significant percentage of the channel to the market. The entire wholesale channel generally buys less than any of the major supermarket chains,” Sims said. Stated.

“Consulting with suppliers of all sizes, we found that many suppliers also have additional alternative channels, such as supply to manufacturing, direct supply or negotiation with customers in institutions and restaurant chains, and exports. “

Nonetheless, many PFD competitors have expressed concern to the ACCC about the potential impact of the acquisition.

Woolworths reportedly has the strongest concerns about the possibility of harnessing the power of supermarket buyers in food distribution, such as aggressively expanding food distribution and selling its own branded products through PFD. was.

Despite market feedback that Woolworths is likely to be a strong competitor in food distribution, ACCC increases its share of PFD in the wholesale segment by lowering prices in restaurants, cafes and other businesses. Recognized the possibility of trying.

“The ACCC acknowledges that the acquisition could change the way the wholesale food distribution industry operates,” Sims said.

“Despite these potential changes, there are several competitors in the wholesale segment that have similar market share to PFD, and non-price aspects of competition such as range, quality and service level are important to competitive dynamics. We conclude that it is likely to remain a part of it .. As a result, it is unlikely that competition will be significantly reduced. “

Rod Sims, ACCC Chair.

In the process of the ACCC merger review, Woolworths was designed to maintain the dynamics of the current market and allow market participants, such as independent suppliers, to continue their business independently of Woolworths and PFD. , Provided a behavioral business with temporary measures.

The ACCC consulted with market participants on the proposed project and the overall feedback received was that the project was not effective.

When a business is offered to the ACCC in the context of a merger, the ACCC will consider whether the business is needed to address the competitive concerns raised by the proposed acquisition. In this case, the ACCC concluded that the proposed acquisition was unlikely to significantly reduce competition, so it was not necessary to ultimately decide whether to accept the business.

To the extent that the business seeks to strengthen the food and grocery code elements, the ACCC needs to address this through improved code regimes rather than imposing additional obligations on one participant in the industry. thinking about.

Although it determined that the business was not needed, the ACCC also considered that the proposed type of business created significant compliance risks that could be unacceptable.

During the course of the investigation, the ACCC has heard many concerns about the effectiveness of food and grocery codes. This included fear of taking action under the norm because the supplier was aware of the risk of retaliation.

According to The Sims, many suppliers believe that the code needs to be strengthened, including including civil penalties.

“Since the code was introduced, supermarket behavior has improved, but bad behavior has continued, and we have consistently received feedback that there remains a significant imbalance in the bargaining position between suppliers and supermarkets,” he said. Said.

Many suppliers have also suggested that the code should include sanctions for violations.

“The ACCC agrees that the code should be mandatory and include civil penalties,” Sims said.

ACCC does not interfere with Woolworths’ acquisition of PFD ACCC does not interfere with Woolworths’ acquisition of PFD

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