Supermarket company, Woolworths, has offered to maintain a degree of separation as part of its proposed acquisition of 65 per cent of PFD Food Services for an estimated $52 million amid competition concerns within industry.
The Australian Competition & Consumer Commission (ACCC) has sought consultation on a proposed undertaking offered by Woolworths and PFD Food Services whereby the two companies would “maintain a degree of separation and indepedence” for three years after completion of the acquisition although the duration could be shorter in certain circumstances.
“The release of an undertaking for public consultation should not be viewed as a sign that we will ultimately accept it, or any other form of undertaking,” ACCC Chair Rod Sims said in a recent statement.
The companies have indicated that the temporary measures in the draft undertaking are 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.
This will allow, according to the proposal, the market to adjust to Woolworths and PFD ceasing to be independent of each other.
“We are seeking feedback from market participants about whether the proposed behavioural undertaking is likely to address competition concerns raised by Woolworths’ acquisition of PFD,” Sims said.
The proposed undertaking would place obligations on PFD’s board and governance structure and impose confidentiality protocols regarding certain supplier information.
These obligations are intended to last three years, unless certain early termination clauses are triggered. These early termination clauses are generally dependent on PFD’s CEO.
For example, if PFD’s CEO ceases to be involved in the day to day management of PFD on a full time basis the three year period could end earlier.
PFD would also be required to implement a charter in dealing with suppliers which reflects certain principles of the Food and Grocery Code of Conduct and which would be in place for five years.
Any changes to the charter would need to be approved by the ACCC and PFD would be required to provide suppliers with advanced notice of any changes.
“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.