ACCC to investigate Coles bid to buy nine Supabarn stores

The competition watchdog will soon call on the public’s help to determine whether a takeover of nine Supabarn stores by supermarket giant Coles will lessen competition in the grocery sector.

Coles announced its plans to acquire the nine stores in the Australian Capital Territory and New South Wales late last week.

The deal includes four Supabarn stores in Civic, Wanniassa, Kaleen and Crace in the ACT, as well as a store under construction in Casey. The four NSW stores included in the deal are located in the Sydney suburbs of Annandale, Five Dock, Sans Souci and Sutherland.

Supabarn will retain a presence in the ACT with a store in Kingston, which has yet to be built, and will keep its store at Gymea in Sydney.

The chain, which was founded by the Koundouris family in 1991, will also keep its SupaExpress stores. The ABC reports the company’s directors have chosen to scale back their business for family reasons.

Coles said in a statement on Friday it plans to invest around $15 million in store improvements and create around 100 new jobs in Canberra if the acquisition goes through. It will also offer all existing Supabarn workers employment.

The supermarket giant will invest the same amount again to improve the four stores in Sydney, as well as creating 80 new jobs and offering employment to existing Supabarn staff.

Starting next week, the Australian Competition and Consumer Commission will launch a public review into the proposed deal, and will accept submissions from consumers, suppliers, supermarket operators and other interested parties from mid-July.

ACCC chairman Rod Sims said in a statement on Friday, Supabarn is a “significant independent supermarket chain” and therefore the ACCC will seek to find out if “its removal as a competitor would substantially lessen competition between supermarket chains”.

“The review will also examine each of the individual local markets in which the Supabarn stores operate, and any effect on grocery wholesaling and supply markets,” Sims said.

Sims said the legal test the ACCC will apply to the proposed acquisition is Section 50 of the Competition and Consumer Act.

“Section 50 prohibits acquisitions that substantially lessen competition in a market, or are likely to do so,” Sims said.

“The main indicator of a substantial lessening of competition is whether the acquisition would enable firms in the market to raise prices or reduce product quality (including service and choice) or innovation following the acquisition.”

“Section 50 does not allow the ACCC to consider factors other than those related to competition. In particular, the ACCC cannot oppose a proposed acquisition because of its potential to impact on the character of a local area.”

But Peter Strong, executive director of the Council of Small Business of Australia and a Canberra resident, told SmartCompany this morning if the deal goes through, he knows “exactly what it will mean for Canberra”.

“Prices will go up and choice will go down,” Strong says.

“Coles and Woolies are the only big supermarkets we have to go to. We have some really good little supermarkets, including IGAs, but they are mostly in the suburbs.”

Strong says the lack of differentiation between Coles and Woolworths is a major concern but he says he doesn’t know “what the ACCC can do about it”.

“It’s the problem with market dominance,” Strong says.

“The ACCC should go out and see if anyone else wants to buy the chain.”