Woolworths and PFD Food Services have released a draft “behavioural undertaking”, which aims to maintain a “degree of separation and independence” if the retailer’s proposed acquisition of 65 per cent of PFD goes ahead. The Australian Competition and Consumer Commission is now calling for market feedback.
The Commission outlined its preliminary competition concerns in September 2020. The proposed $552 million deal was announced in August, with $302 million for the 65 per cent equity interest and the distribution centres purchased for $249 million and leased back to PFD.
Woolworths and PFD have released its initial draft of the undertaking in response to the concerns, outlining a degree of separation and independence between the two companies for three years after the acquisition, however, the duration may be shorter in certain circumstances.
Both companies have suggested the draft is designed to “preserve the current market dynamics and enable market participants, such as independent suppliers, to continue to do business with Woolworths and PFD independently”.
The objective for this is to allow the market to adjust to Woolworths and PFD ceasing to be independent of each other.
ACCC chair Rod Sims said undertaking for public consultation “should not be viewed as a sign that we will ultimately accept it, or any other form of undertaking”.
“The undertaking is behavioural in nature and imposes obligations on the companies to act in certain ways and not undertake certain actions. It will be important to get feedback from market participants on whether the undertaking provides a sufficient remedy to address the competition concerns,” said Sims.
As part of the undertaking, PFD’s board and governance structure will be imposed with certain obligations, as well as confidentiality protocols in terms of certain supplier information, which is intended to last three years. If an early termination clause is triggered, usually dependent on PFD’s CEO, then there is potential the three-year period could end earlier.
The implementation of a new charter reflecting specific principles of the Food and Grocery Code of Conduct to deal with suppliers would also be required by PFD and would be in place for five years. The ACCC would need to approve any changes made to this charter while PFD must provide suppliers with advances notice of any changes.
The ACCC is asking for those in the industry to provide submissions by 9am on 19 May, and the proposed date for the final decision on 10 June.
