December 14, 2020
The Australian Competition and Consumer Commission has been urged to stop Woolworths acquiring PFD Food Services, with claims it will reduce thousands of businesses and jobs in the food services and distribution sector.
Council of Small Business Organisations of Australia (COSBOA) CEO Peter Strong said the likely effect would be the removal of smaller food producers and manufacturers (suppliers), and their distributors.
“Eventually consumers will see a reduction in choice and an increase in price; by that time, it will be too late,” he said.
“The merger is predatory and opportunistic, and if it proceeds Woolworths will have a large share of the domestic food supply chain in Australia, from the farmer to the end user.
“This market power gives Woolworths the ability to compete unfairly with small businesses across the country. The government supports competition, as we all do, but supporting complete market dominance by one player is not how competition policy should operate”.
Independent Food Distributors Australia (IFDA) chair Richard Hinson said Woolworths wanted to expand its food service and distribution market to more than $3 billion in the next two years.
PFD Food Services describes itself as Australia’s largest, family-owned foodservice distributor.
It distributes dry goods, frozen and chilled products, fresh seafood and meat, confectionery, paper products and cleaning items.
According to its website, PFD’s customers include pubs and clubs, cafés, airlines, hotels, restaurants, aged care and retirement villages, resorts and theme parks, convenience outlets, caterers, fast food outlets, schools and kindergartens, and sporting, child care and correctional facilities.
The two peak business organisations claim the proposed acquisition by Woolworths would:
- Reduce choice and increase cost for consumers.
- Reduce distribution choice for some suppliers, and completely remove the route to market for many.
- Increase cost for suppliers by leveraging both retail and wholesale trading terms to significantly reduce their market pricing and profitability.
- Force suppliers to reduce food manufacturing and production innovation due to a reduction in profitability, further eroding choice and variety for consumers.
- Further the already unfair market power held by Woolworths, which will enable it to pursue its self-interest without regard to consumers, other businesses, or the overall needs of communities, especially in regional areas.
- Signal the end of a vibrant and diverse distribution eco-system that services a vibrant and diverse production and manufacturing sector.
COSBOA is calling for a Statement of Issues to be prepared by ACCC which would allow further analysis of the merger and its implications for small business.