Woolworths shelves ACCC talks on buy ups

THE competition regulator will apply the blowtorch to any Woolworths acquisition after the country's biggest retailer walked out of six months of talks designed to create a streamlined acquisition process.

By InvestSMART · 8 Dec 2012

By InvestSMART ·
8 Dec 2012

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Australian Competition and Consumer Commission chairman Rod Sims did not hide his disappointment on Friday that Woolworths had decided to withdraw from the voluntary protocol the watchdog was trying to formulate with the big supermarket chains, saying he believed Woolworths had sizeable market power and was fixated on growing it.

"Our concerns do centre around their [major supermarkets] acquisitions . . . particularly Woolworths is doing a lot of acquisitions, a hell of a lot."

It comes as the ACCC, Mr Sims and Woolworths chief executive Grant O'Brien continue to knock heads over the company's growth plans, with the regulator recently signalling it will oppose a supermarket acquisition in Canberra.

The ACCC has also this year barred the Woolworths acquisition of hardware stores in Ballarat and a hotel in Tasmania.

In June, Mr Sims proposed a plan where if the big supermarkets, namely Wesfarmers (the owner of Coles) and Woolworths, notified it of intended transactions and gave all the information upfront, in return the regulator would guarantee a quick turnaround in its assessment.

"I thought this was going to be pretty straightforward," Mr Sims said on Friday. "That they would be quite happy with that, because it was a benefit to us and a benefit to them."

It is believed Woolworths began withdrawing from the talks a number of weeks ago.

Opting in, Coles has agreed with the ACCC to participate in a streamlined assessment protocol for single supermarket acquisitions, including in relation to new supermarket developments, for an initial six-month trial period.

Agreement was not reached, however, to include in the protocol acquisitions by Coles or Bunnings in liquor or hardware.

No agreement on the protocol was reached in any of the sectors with Woolworths.

A Woolworths spokesman said yesterday, "Woolworths has notified and co-operated with the ACCC for many years on acquisitions and will continue to do so into the future.

"We agree that acquisition processes need to be streamlined, however, the process should apply to all industry participants."

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Frequently Asked Questions about this Article…

What happened between Woolworths and the ACCC over a streamlined acquisition protocol?

Woolworths walked out of around six months of talks with the Australian Competition and Consumer Commission (ACCC) that aimed to create a voluntary streamlined acquisition protocol. The ACCC wanted a process to speed up assessments if big supermarket chains gave full information up front, but no agreement was reached with Woolworths.

Why is the ACCC concerned about Woolworths’ acquisitions and market power?

ACCC chairman Rod Sims said the regulator is concerned Woolworths has sizeable market power and is aggressively growing through acquisitions. The ACCC has signalled it will closely scrutinise Woolworths deals and has already opposed or blocked some of the company’s recent acquisitions.

What did the ACCC propose with its proposed streamlined acquisition protocol?

The ACCC proposed that major supermarket groups (such as Wesfarmers/Coles and Woolworths) notify the regulator of intended transactions and provide full information up front. In return, the ACCC would guarantee a quicker turnaround on its competition assessment for single supermarket acquisitions and new supermarket developments.

Has Coles agreed to the ACCC’s streamlined assessment trial, and what does that mean?

Yes — Coles opted in and agreed to participate in a streamlined assessment protocol for single supermarket acquisitions and new supermarket developments for an initial six‑month trial. The trial does not cover acquisitions in liquor or hardware by Coles or Bunnings.

Which Woolworths acquisitions has the ACCC recently opposed or blocked?

The ACCC recently signalled it would oppose a supermarket acquisition in Canberra and earlier this year barred Woolworths’ acquisition of hardware stores in Ballarat and the purchase of a hotel in Tasmania.

How did Woolworths respond to the ACCC’s criticism and the failed talks?

A Woolworths spokesman said the company has notified and cooperated with the ACCC on acquisitions for many years and will continue to do so. Woolworths agreed that processes should be streamlined but said any streamlined process should apply to all industry participants.

What does the ACCC mean when it says it will ‘apply the blowtorch’ to Woolworths acquisitions?

That phrase indicates the ACCC intends to subject Woolworths’ future acquisition proposals to tougher scrutiny and is prepared to oppose or more closely investigate deals after Woolworths withdrew from the voluntary protocol talks.

How could this dispute between Woolworths and the ACCC affect everyday investors in supermarket stocks?

For everyday investors, increased regulatory scrutiny could mean some Woolworths acquisitions are slowed, amended or blocked, which may affect the company’s growth plans. The dispute could also influence investor sentiment toward Woolworths and the broader supermarket sector, so investors may want to monitor regulatory developments and company announcements.