Industry associations slam Woolworths’ Charter undertakings

Industry associations have slammed Charter undertakings provided by Woolworths to the ACCC in a bid to get approval for its proposed PFD Food Services acquisition.

The united group of five key retail and food service associations include Australian Convenience and Petroleum Marketers Association (ACAPMA), Council of Small Business Organisations Australia (COSBOA), the Master Grocers Association (MGA), the Australasian Association of Convenience Stores (AACS) and Independent Food Distributors Australia (IFDA). They have joined forces to block what they describe as “aggressive and opportunistic” behaviour from Woolworths.

They have described the proposed $552m acquisition of PFD Food Services as a “watershed moment for Australia’s retail sector” and say that Woolworths’ confidentiality undertaking to the ACCC does nothing to address the major concerns of small businesses and food distributors.

Woolworths has proposed that PFD would commit to operating under a strict Charter, which picks up the fundamental obligations of the Food and Grocery Code of Conduct in relation to good faith dealings with suppliers, protections of confidentiality, and no retrospective changes to commercial terms.

PFD would be the only player in the food service industry to operate under such a strict Charter, which would be accompanied by comprehensive audit provisions by an independent auditor to monitor and report to the ACCC on compliance on an ongoing basis.

The PFD Charter, which was obtained by C&I, states: “It is a core value of PFD that we treat our suppliers fairly. Maintaining long-term, collaborative and sustainable relationships with our suppliers is essential to delivering the best outcomes for our customers.”

In December, the ACCC expressed that it had preliminary competition concerns about the deal, with Chair Rod Sims, saying: “The proposed acquisition seems likely to increase Woolworths’ already substantial bargaining power in its dealings with food manufacturers.”

COSBOA CEO Peter Strong has described the Charter undertakings as a “smokescreen” and has urged the ACCC to listen to the concerns of small food businesses.

“Woolworths latest undertakings to the ACCC to keep supplier and customer information confidential, as part of its bid to acquire PFD Foods, are yet another smokescreen to steamroll both small business and the ACCC,” said Strong.

“We remain extremely concerned about the inevitable negative impact of this proposed merger on businesses in the food supply chain, from growers, to manufacturers, distributors, food service retailers and independent grocers and ultimately Australian consumers.

“The undertakings by Woolworths address none of the major issues raised by our members who jointly represent over 1.3m small and family-owned businesses. The undertakings do not address the concerns of the five industry peak bodies, led by COSBOA and reinforced by hundreds of interested industry stakeholders who have made submissions to the ACCC over recent weeks.”

The main concerns are that the acquisition would increase costs for food service operators, reduce distribution choice and increase costs for suppliers, erode the value chain for suppliers, and reduce innovation in both food manufacturing and production.

IFDA Chairman Richard Hinson believes that Woolworths‘ ability to dramatically impact price through cross-subsidisation on key ranges or products to rapidly gain market share will be to the detriment of many SMEs in Australia.

“Keeping supplier information confidential is fine however the small suppliers who are not their route to market will be severely impacted by this acquisition,” says Hinson.

MGA Independent Retailers CEO Jos de Bruin said: “There is no doubt in the minds of industry peak bodies that Woolworths has a clear strategy to further pressure suppliers, cross-subsidise operational and technology investment, commercialise customer data and savagely reduce costs in order to streamline PFD’s existing supply chain”.

The ACCC’s final decision on the acquisition will be announced on 22 April 2021.

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