Peak industry bodies rally against Woolworths’ PFD acquisition

Five peak industry bodies representing the needs of the retail and food service sectors have reiterated their stance against Woolworths’ proposed acquisition of PFD Food Services.

They say that the behavioural undertaking proposed by Woolworths and PFD to the ACCC, does nothing to address the key issues that they have previously raised about the acquisition.

The group consists of the Australasian Association of Convenience Stores (ACCS), Independent Food Distributors Australia (IFDA), Australian Convenience and Petroleum Marketers Association (ACAPMA), Council of Small Business Organisations Australia (COSBOA), and the Master Grocers Association (MGA).

They have highlighted their five key concerns:

  • The acquisition will reduce choice and increase costs for Australia’s food service operators.
  • It will significantly reduce distribution choice for suppliers, reducing the route to market for the tens of thousands of products our members are responsible for.
  • It will increase costs for suppliers.
  • It will erode the value chain for suppliers.
  • It will significantly reduce innovation in both food manufacturing and production.

Richard Hinson, Chairman of Independent Food Distributors Australia (IFDA), said it was concerning that Woolworths’ latest undertakings were subject to significant caveats.

“If the consequences of this transaction weren’t so serious, it would be laughable that Woolworths has proposed undertakings it says will preserve competition while in the next breath admitting they could be rolled back within three years subject to fine print.

“ACCC Chair Rod Sims has already admitted that behavioural undertakings can’t be policed on a daily basis. The reality of this has been demonstrated over and over again through the track record of anti-competitive behaviour that Woolworths and the other retail giants have displayed across a range of sectors including hardware, petrol and liquor.”

Theo Foukkare, CEO of AACS has said Woolworths’ latest undertakings were nothing more than a smokescreen.

“Both sets of Woolworths’ undertakings do absolutely nothing to reduce their significant market power in Australia and should be viewed for exactly what they are, a smokescreen to try and divert attention away from the five key concerns we have raised which remain unaddressed.

If allowed, Woolworth’s acquisition of PFD will have a major negative impact all the way through the supply chain from farms through to suppliers, distributors and consumers,” Foukkare said.

COSBOA Chief Executive Peter Strong said the ACCC held the fate of hundreds of small businesses in its hands.

“We’ve previously described this transaction as a watershed moment for Australia’s retail sector and it is important the ACCC understands the consequences of getting this decision wrong,” he said.

“Our members, particularly those in regional Australia, have already been hard hit by the COVID-19 pandemic and, if allowed, this transaction will destroy many small businesses and cost thousands of jobs within our $11 billion industry.”

MGA CEO Jos de Bruin said: “Regardless of any so-called undertakings that Woolworths may propose to the ACCC to secure the PFD acquisition, MGA believes this is just another ‘creeping acquisition’ to further dominate the food and grocery market and lessen competition.

“Clearly Woolworths have very deep pockets and resources to be able to drive their agenda to acquire PFD. Once acquired that will be the end of robust competition and choice in the Food Service and Grocery distributor market as we know it to be today.

“MGA’s members have long advocated that Woolworths domination in Australia’s grocery, food distribution and liquor markets is already so strong that the Woolworths Group ought to be considered for divestiture to rekindle consumer choice and to enhance a robust, diverse and competitive food and grocery marketplace.”

In response, a Woolworths spokesperson, told C&I: “We’re seeking to invest in PFD alongside the Smith family for the benefit of the business and its customers.

“The proposed investment offers us an opportunity to participate in the competitive and diversified food services sector, in which we have no involvement today.

“After extensive analysis and engagement with the ACCC, we see no substantive competition concerns arising from an interest in PFD.

“We’ve made public commitments to our suppliers that trading terms and confidential information won’t be shared between PFD and Woolworths Supermarkets.

“We stand by the integrity of those commitments and will continue to honour them.

“Additionally, we have, in good faith, offered the enforceable undertaking to reiterate our public commitments and provide further assurance to suppliers and the ACCC ahead of its decision.

“The undertaking contains commitments and operational elements, which are similar in character to those accepted by the ACCC over many years in other industries. It also includes comprehensive auditing provisions, which require an independent auditor to monitor and report to the ACCC on our compliance with the undertaking on an ongoing basis.

“A specific time frame is required in the undertaking because it’s a legal document, however, our broader public commitments to suppliers are not time-bound and will endure.”

The ACCC has been investigating Woolworths’s proposal to acquire PFD, a significant player in the food distribution services sector, for nearly six months with its decision about whether the acquisition can proceed now expected to be handed down in June 2021.

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