Category Archives: Supermarket competition

ACCC approves Coles acquisition of five Supabarn supermarkets

The competition regulator has given the green light to the acquisition by Coles of five Supabarn supermarkets across the ACT and New South Wales.  The grocery giant had originally proposed to take over nine of Supabarn’s 11 stores, however the plan was slammed by consumer groups concerned about the impact the move would have on competition.

The ACCC also expressed concern the purchase of nine stores would likely substantially lessen competition.  A restructured deal that would see Coles acquire the Supabarn stores at the Canberra Centre, Kaleen and Wanniassa, as well as the Five Dock and Sutherland supermarkets in New South Wales was today approved by the regulator.

The ACCC said the decision removed the most controversial stores from the deal.  “The ACCC’s review focussed on two main issues,” ACCC Chairman Rod Sims said.  “These were the effect of the acquisition upon competition between supermarket chains in the Canberra region and the effect upon each of the individual local markets in which the Supabarn stores operate.

Mr Sims said the stores that were barred from sale were already close to operating Coles stores.  “We were also concerned that the proposed acquisition, as originally structured, would have led to significant competitive harm in some of the local markets in the ACT and NSW,” Mr Sims said.  “In these areas, Coles and Supabarn stores are located close together, and there is limited competition from other supermarkets.”

One current store at Crace, and two under development in Casey and Kingston, as well as three in New South Wales will now remain in Supabarn’s hands..

Supabarn to continue operating remaining stores

A statement released by Supabarn said the company disagreed with the ACCC on the move.  “Notwithstanding the ACCC’s decision, Supabarn continues to maintain that its original plan to sell nine stores to Coles would not have substantially lessened competition,” it said.

Supabarn managing director Theo Koundouris said he would continue to operate the stores that were barred from sale.  “We will be repositioning and refreshing the Supabarn brand,” he said.

Coles Property general manager Sam Pinchbeck said the supermarket chain would invest $22 million in the five new stores.  “Coles is a major employer both in Sydney and the ACT,” he said.  “We will invest more than $22 million on improvements at these five stores and will offer all existing Supabarn store employees an opportunity to continue working in their store for Coles.”

ACT Chief Minister Andrew Barr said he was “philosophical” about the decision, but believed the deal would lessen competition in the ACT.  “Given the balance in the duopoly between Woolworths and Coles, it’s probably better that it’s Coles acquiring than Woolworths,” he said.  “But it’s hard to see how this isn’t a lessening of competition to a certain extent.”

Four stores that operate under the SupaExpress banner were not affected by the deal.


Competition Policy Review

Friends of Hawker Village lodged a submission to this enquiry which closed on 10 June.  Our focus was on supermarket policy – in particular, the lack of rigour in the legislation governing the power of the Australian Competition and Consumer Commission to examine ‘creeping acquisition’ by any company.  Submissions to this enquiry have now been made public and are available on the enquiry website   Our submission can be read here:  Friends of Hawker Village Competition Review.   This submission was forwarded to the ACCC on 21 July 2014 as an attachment to our submission to the ACCC enquiry into the proposed purchase by Coles of four SupaIGA supermarkets in Western Australia (see our Submissions page).

Another one bites the dust!

On 4 July, the ACCC announced (Media – news release – Hawker Supa IGA) that it had concluded that “the proposed acquisition would not result in a substantial lessening of competition in any market”.   FoHV issued its own media release immediately.  The ACCC acknowledged that “the loss of this differentiated offer from the local market will involve the loss of some competition” but this would no involve “a substantial lessening of competition (as) required under s.50 of the
Competition and Consumer Act”.  This decision was based on the fact that the majority of responses to the survey showed that “Most customers used the Hawker Supa IGA as a limited part of their overall grocery shopping”.  The opinion of those who do most of their shopping at the Hawker Supa IGA appears to have been outweighed by the opinion of those who only do convenience shopping there.

Competition – simply a popularity contest?

On 26 June, representatives from FoHV attended a meeting with the ACCC to express concerns about the likely loss of product and service variety and choice should Woolworths proposed purchase of the Hawker IGA go ahead.   Contrary to expectation, they were advised that closure of small businesses at Hawker would not be a competition issue as new businesses might open up and operate more successfully;  loss of a single store would not, by itself, affect local suppliers and the ACCC does not have the authority to monitor and consider the overall impact of successive closures;  possible construction of a larger supermarket on the car park was not a consideration as the issues would be the same as for the current store;  creeping acquisition by Woolworths of independent supermarkets at Kippax, Charnwood and now, possibly, Hawker is only significant in that there are already four Woolworths stores in Belconnen, with a fifth to be built in Giralang.   The ACCC is waiting on analysis of the survey results to ascertain whether the product and service choice provided by Supa IGA is valued by a sufficient percentage of the population to warrant preserving it.

All things must come

After further postponing their decision on Woolworths’ proposed purchase of the Hawker IGA, the ACCC commissioned Roy Morgan to conduct a shoppers’ survey by telephone and on-site at the Hawker shops.  The ACCC has now announced that their decision on whether the purchase would be anti-competitive will be released on 4 July – Independence Day (USA).  Is this significant?

Hawker SupaIGA – statement of issues

After examining submissions made to its enquiry into the competition effects of the possible takeover of the Hawker IGA by Woolworths, the ACCC has released a Statement of Issues.  This provides an opportunity for all interested parties (including customers, competitors, shareholders and other stakeholders) to ascertain and consider the primary issues identified by the ACCC.  It is also intended to provide the merger parties and other interested parties with the basis for making further submissions should they consider it necessary.  The ACCC considers that the proposed acquisition might have the effect of substantially lessening, preventing or hindering competition in the local market by removing Hawker Supa IGA as an independent rival in the market but will not make a final decision until 7 February 2013.  A  supplementary submission was lodged to address the issues raised.  At the request of Woolworths, on 18 January, an extension of time was granted for further submission.  The date for the ACCC’s final decision was eventually changed to 23 May 2013.

Competition – good or bad?

In August 2012, reports started coming in that Woolworths had bought the Hawker IGA for $5.4 million.  One report was quite definite that the purchase involved the adjoining car park as well.  Queries to both the Chief Minister and local representative, Mary Porter, elicited responses to the effect that the Government knew nothing about the sale and would not be able  to do anything about a private sale anyway.  On 17 October,  the Australian Financial Review announced that the ACCC was tackling Woolworths over its plan to purchase the Hawker IGA.  On 22 October, the Australian Competition and Consumer Commission advised the FoHV that it was conducting market inquiries into Woolworths Limited’s proposed acquisition of the Supa IGA supermarket located in Hawker, under section 50 of the Competition and Consumer Act 2010 which prohibits acquisitions that substantially lessen competition in the market or are likely to do so.  As an interested party, FoHV was invited to lodge a submission, which it did on 25 October.  Individual  members of the association also lodged personal submissions.  See  our submissions page.