PFD purchase green lit

The Australian Competition and Consumer Commission will not oppose Woolworths’ acquisition of 65 per cent of the shares in wholesale food distributor PFD Food Services.

The corporate watchdog said the decision came after a detailed investigation that found the transaction was not likely to substantially lessen competition.

ACCC chair Rod Sims said the investigation focused on the potential impact on suppliers.

“Market feedback suggested that some suppliers see the wholesale food distribution channel as a competitive alternative to supermarkets in distributing their products,” Mr Sims said.

“While there were concerns expressed by some suppliers, many suppliers did not raise competition concerns.

“PFD makes up about two per cent of the overall demand from food suppliers, which was a key factor in the lack of concern from some suppliers.

“There are very few suppliers for whom both PFD and Woolworths make up a significant proportion of their channels to market.

“The entire wholesale channel generally purchases less than either of the major supermarket chains.”

Yet many of PFD’s competitors expressed ‘‘very strong concerns’’, the ACCC said.

The strongest concerns related to the potential for Woolworths to aggressively expand in food distribution and leverage its buyer power in supermarkets into food distribution, including through selling private-label products through PFD.

“The ACCC acknowledges that the acquisition will likely lead to changes in the way the wholesale

food distribution industry operates,” Mr Sims said.

“Despite these potential changes, we concluded that there are several competitors in the wholesale segment with similar market share to PFD and non-price aspects of competition, such as range, quality and service levels are likely to remain an important part of the competitive dynamics.

“Consequently there is not likely to be a substantial lessening of competition.”

The Australian Small Business and Family Enterprise Ombudsman Bruce Billson said his office would closely monitor the acquisition,

labelling the decision ‘‘disappointing’’.

“The deal is an example of another creeping acquisition by an already dominant player in the food and grocery sector, eating away at the competitive landscape and the footprint of independent businesses,” Mr Billson said.

“Food and grocery suppliers are concerned about the likely further narrowing of alternatives to supermarkets for their products with the transaction expected to result in Woolworths significantly increasing its presence and influence in wholesale food distribution channels.”

PFD is a wholesale food distributor, purchasing a wide range of food products from suppliers and distributing them to businesses such as restaurants, cafes, hotels and clubs, petrol and convenience stores and institutions such as hospitals.

PFD has about 15 per cent of the wholesale food distribution segment.

Although Woolworths and PFD both supply food products, the ACCC said they did not compete to a significant extent for customers.

PFD primarily sells and distributes food products that are not suitable for direct retail sale.