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Concerns over effect of Woolworths acquisition on competition

Adrian Flores
Adrian Flores
15 December 2020 1 minute readShare
Woolworths

The proposal from Woolworths to acquire 65 per cent of PFD Food Services is one of concern for the Australian Competition and Consumer Commission, saying it could affect downstream competition.

PFD is a wholesale food distributor, purchasing a wide range of food products from manufacturers and distributing them to food service businesses such as restaurants and cafés, fast food franchises, hotels and clubs.

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

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In response to the proposed acquisition, ACCC chair Rod Sims said he’s concerned that the move seems likely to increase Woolworths’ already substantial bargaining power in its dealings with food manufacturers.

“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.

 

“The dominance of Coles and Woolworths in food retail means that wholesale food distribution is an important alternative customer channel for manufacturers.”

The ACCC said it’s also considering whether the proposed acquisition could affect downstream competition.

“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.

Further, the ACCC said it’s also continuing to consider other issues, including whether Woolworths acquiring a company which supplies its competitors will lead to risks of foreclosure, and the extent to which Woolworths at Work and AGW compete with PFD at the moment or are likely to compete with PFD in the future. 

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Feedback on the ACCC’s statement of issues is due by Monday, 1 February 2021, with the final decision to be announced on 22 April 2021.

Concerns over effect of Woolworths acquisition on competition
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Adrian Flores
Adrian Flores

Adrian Flores is the deputy editor of MyBusiness. Before that, he was the deputy editor for SMSF Adviser as well as features editor for ifa (Independent Financial Adviser), InvestorDaily, Risk Adviser, Fintech Business and Adviser Innovation.

You can email Adrian at [email protected].

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