ACCC raises concerns over Metcash's takeover plans

ACCC has raised concerns over what effect Metcash’s takeover of supermarket rival Franklins will have on competition

By Rob McKay | September 23, 2010

A reduction in supermarket competition is at the centre of Australian Competition and Consumer Commission (ACCC) concerns surrounding the proposed Metcash purchase of Interfrank-owned Franklins.

The ACCC released its statement of issues yesterday, noting that these concerns related to NSW specifically.

"In light of the limited competitive constraints on Metcash post-acquisition and the height of barriers to entry, the ACCC is concerned that the proposed acquisition would remove the only alternative wholesale supplier able to supply full-line retailers and Metcash’s closest competitor in NSW," the ACCC says.

"The proposed acquisition may also prevent enhanced competition by denying any other party the opportunity of utilising the effective wholesale distribution operations developed by Franklins and the large volumes accounted for by the existing Franklins stores as part of a strategy to enter the market as a competing wholesaler."

Its inquiries so far had shown Franklins was "a vigorous competitor and real alternative to Metcash" for independent retailers in NSW.

While it did not consider any issue related to transport services, the ACCC did define its approach to supermarket matters in infrastructure terms.

"In previous matters the ACCC has generally considered, as a starting point, the geographic scope of local supermarket markets to be the area within a 3-5km radius surrounding the supermarket to be acquired," it says.

"However, in assessing the relevant market in any supermarket acquisition the ACCC will consider geographic factors, such as the layout of roads in the area or the rural location of stores, which are potentially important when defining the geographic scope of a local market."

The ACCC is seeking feedback from the market and will defer its final decision on the proposed takeover until November 11.

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