Foodstuffs merger ‘no shoo-in’
The Commerce Commission appears to have acknowledged that the proposed merger of Foodstuffs North and South Island co-operatives could have an impact on competition.
The competition watchdog will issue a “statement of issues” on an application by the co-ops for their merger, which is step that it does not always take when assessing such clearance requests.
The two Foodstuffs co-operatives, which own the New World, Pak’nSave and Four Square franchises, applied for clearance to combine in December, arguing that would result in efficacy gains, at least some of which could be passed on to consumers.
The merger was not likely to reduce competition in part because the cooperatives had no physical infrastructure in each other’s territories, they said.
The merger application has run into strong opposition from competition advocates Ernie Newman, Tex Edwards and the Grocery Action Group lobby group, with objections also coming from The Warehouse and the Food and Grocery Council.
A statement by the co-ops that they “provide support and assistance to each other as required in order to optimise their overall competitive proposition” has raised questions over their existing relationship.
Newman submitted in February that a statement by the co-operatives that they did not meaningfully compete to acquire groceries from suppliers had the look of “cartel-like behaviour”, but Foodstuffs NZ has said the co-ops have “no illegal agreement”.
Foodstuffs’ general manager of corporate affairs, Andrew Gaukrodger, said it understood issuing a statement of issues was “part of the commission’s standard process” when considering whether to clear a merger.
“We believe combining how our co-ops are governed and how we support our stores, won’t ‘substantially lessen competition in any market,’ which is what the commission is considering,” Gaukrodger said.
A competition law expert said the Commerce Commission’s latest statement meant it saw the issues involved in the merger as potentially being complex, requiring a further report, which would pave the way for another set of crosssubmissions.
However, it couldn’t be assumed the competition watchdog was now likely to reject the merger, he said.
Another competition expert noted the commission tended to approve about half of all clearance requests it received without publishing a statement of issues, but also approved the majority of mergers for which it did issue such a statement.
The Commerce Commission expects to make a decision on the merger by the end of May.