The small business ombudsman has called the ACCC’s decision to allow Woolworths to acquire a majority stake in the wholesale food distributor PFD Food Services “disappointing”.
Australian Small Business and Family Enterprise Ombudsman Bruce Billson said the competition regulator’s support for Woolworth’s proposed acquisition of 65% of shares in PFD would undermine competition in the food and grocery sector.
“The ACCC’s decision not to intervene or impose any conditions on Woolworths’ proposed acquisition of a majority stake in PFD is disappointing,” Billson said in a statement on Thursday.
Billson said food and grocery suppliers are concerned that the deal will limit the opportunities they have to sell their products across Australia.
“Small and family business food and grocery suppliers will understandably feel one of the truly open doors for their products closed a little today,” he said.
PFD is a wholesale distributor that buys food products from suppliers and distributes them to restaurants, cafes, hotels and convenience stores. It has a 15% market share of the wholesale food distribution segment. Woolworths, on the other hand, mainly distributes products for direct retail sale.
Woolworths announced its plans to acquire the majority stake in PFD mid-last year, which was subject to ACCC approval.
The ACCC’s merger review, which involved an industry-wide analysis of supplier and competitor data, found that despite the concern of PFD’s competitors, the deal would not greatly lessen competition.
Other players in wholesale food distribution were concerned Woolworths would aggressively expand and leverage its buyer power in supermarkets into food distribution, including through selling private-label products through PFD, the ACCC found.
While the competition regular admitted Woolworths will be “a strong competitor” in food distribution and could even try to expand PFD’s share of the wholesale segment by bringing down prices, there weren’t strong enough grounds to block the deal.
“The ACCC acknowledges that the acquisition will likely lead to changes in the way the wholesale food distribution industry operates,” ACCC chair Rod Sims said in a statement.
“Despite these potential changes, we concluded that there are several competitors in the wholesale segment with similar market share to PFD,” Sims said.
“Consequently, there is not likely to be a substantial lessening of competition.”
The ACCC’s decision comes after five business groups representing convenience stores, as well as food and grocery businesses put forward a letter to the regulator in January.
The Council for Small Business Organisations Australia (COSBOA), the Australasian Convenience and Petroleum Marketers Association (ACAPMA) and Master Grocers Association (MGA), who signed on to the letter, wrote that the acquisition would have a “significant adverse impact on businesses in the Australian food supply chain”.
Woolworths is Australia’s largest food and grocery distributor in the $12 billion sector, while PFD is the second-largest wholesale food distributor.