Supermarket giant Coles has been banned from opening a new store by Australia’s consumer cop, the ACCC.
The extraordinary decision from the Australian Competition and Consumer Commission has sent shockwaves through Australia’s retail and property development sectors.
The ACCC – which is Australia’s national competition, consumer, fair trading and product safety regulator – has used its new powers to block the opening of a second Coles store in the Western Australian mining town of Kalgoorlie.
It is the first time the ACCC has used its new merger control powers to prevent a new store being opened by either Coles or their fellow supermarket giant Woolworths, who have long been the subject of consumer complaints.
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Coles has been banned from opening a new supermarket in the WA mining epicentre of Kalgoorlie.
With the issue the market hold the two supermarket giants have, becoming a political football.
“ACCC opposes Coles’ acquisition of a supermarket and liquor site in Kalgoorlie,” the consumer body said in a media statement released on Wednesday.
“The ACCC has decided that Coles must not put into effect a proposed acquisition of a leasehold interest over a new supermarket and liquor site in Kalgoorlie-Boulder, Western Australia.
“Having concluded its assessment, the ACCC is satisfied that Coles’ proposed acquisition would likely have the effect of substantially lessening competition in the retail supply of groceries by supermarkets in Kalgoorlie.
“Consumers in Kalgoorlie are served by four large, full-line supermarkets – Coles, Woolworths and two independent stores (plus two smaller independent supermarkets). The ACCC considers it is likely the acquisition would lead to the exit of an effective independent full-line competitor, and its assets, from Kalgoorlie and result in a reduction in the competitive constraints on the major supermarket chains.”
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Coles wanted to return to having two outlets in the regional town. Picture: NewsWire
The decision is effectively the ACCC deciding when a business can or cannot expand. It is sure to add more economic uncertainty for Aussies retail businesses and also unsettle property developers who rely on businesses such as Coles and Woolworths to be anchor tenants at their developments and as such make them financially viable.
Understandably Cole isn’t happy with the decision. Coles previously had two locations in Kalgoorlie in WA’s southeast, it consolidated into one and was planning expanding again to what it initially had.
Coles said the ACCC has underestimated the population growth of the mining epicentre, which is currently around 30,000 and which has a significant number of fly-in-ly-out workers who used it as a base.
Coles said the demand is there for supermarkets and that locals would benefit with affordable prices with the opening of another store.
“We disagree with the ACCC’s decision,” a Coles spokesman told The Australian.
“Blocking the development of a new supermarket on a vacant site does not promote competition. It denies Kalgoorlie shoppers greater choice and convenience.
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The Fimiston Open Pit, the largest open pit gold mine of Australia, in Kalgoorlie. The town is hosts a large contingent of FIFO workers.
“This proposal would have delivered clear benefits for South Kalgoorlie customers, including easier access to more than 24,000 products, improved store amenities, and increased online home delivery capacity at a time when more customers are choosing to shop online.”
Coles is planning to review the decision.
“Kalgoorlie is experiencing significant industrial activity, planned residential growth and comprises a substantial FIFO workforce, all of which are increasing demand for supermarket capacity across the region, the Coles spokesperson continued.
“As we demonstrated to the ACCC through extensive evidence, Coles’ business case for this store does not rely on any existing operator leaving the market. Rather, it assumes continued growth among competitors over time.”
However the ACCC is sticking to their guns.
“We conducted extensive inquiries and analysis of material provided by Coles and third parties, and assessed the likely competitive effects of the acquisition on competition in the retail supply of groceries in Kalgoorlie,” ACCC Deputy Chair Mick Keogh said.
Mick Keogh, Deputy Chair, ACCC Picture: Nikki Short
“Independent supermarkets are an important competitive constraint on the major supermarket chains. They provide consumers with meaningful choice, competition on service, quality and range, and competition on price for some products.”
“We found that while a new Coles supermarket will offer benefits to some consumers, there is a real prospect that the acquisition would lead to the exit of an effective independent competitor, and its assets leaving the market. New entry would not be timely enough and sufficient to offset the loss of competition likely to result from the acquisition.”
“Based on our assessment of all of the material before us, we are satisfied that there is a real commercial likelihood that Coles’ proposed acquisition would substantially lessen competition in Kalgoorlie in the longer-term, to the overall detriment of consumers.”
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