AUS | The ACCC has accepted a court-enforceable undertaking from Petstock Pty Ltd (Petstock) to divest a package of sites and assets, including 41 retail stores, following the ACCC's enforcement investigation into past acquisitions by Petstock.
The ACCC will not oppose Woolworths' proposed acquisition of a 55 per cent controlling interest in Petstock and has also accepted a court-enforceable undertaking from Woolworths to support the Petstock divestiture.
Petstock, Australia's second-largest specialty pet retailer, offers a broad range of pet products and services in-store and online.
"Shortly after the ACCC commenced its review of Woolworths' proposed acquisition of a majority interest in Petstock, it emerged that Petstock had completed a large number of acquisitions in the pet industry in recent years that had not been notified to the ACCC. In March 2023, the ACCC began investigating those previous acquisitions," ACCC Chair Gina Cass-Gottlieb said.
As a result of its investigation, the ACCC had significant concerns that Petstock's acquisitions of the Best Friends Pets, Pet City, and Animal Tuckerbox chains and the Pet & Aquarium Warehouse store in Eltham, Victoria, may have contravened the Competition and Consumer Act.
"Petstock's acquisitions removed some of the few remaining chains of specialty pet retail stores that competed against Petstock and Petbarn."
The ACCC also had concerns Petstock had acquired its closest competitors in several local markets in Victoria, Western Australia, New South Wales, the Australian Capital Territory, Queensland and Tasmania.
After the ACCC raised these competition concerns with Petstock and Woolworths, they each offered to provide court-enforceable undertakings to resolve the concerns.
"Under the current informal merger regime in Australia, there is no law requiring merger parties to notify the ACCC of proposed mergers and acquisitions or to wait for clearance before proceeding."
Cass-Gottlieb continued that Petstock's decision to make numerous acquisitions of this scale without notifying the ACCC demonstrates the limitations of Australia's current merger regime. It relies on the goodwill of businesses to voluntarily notify the ACCC and await an outcome. Absent this goodwill, businesses may be able to amass scale through serial and non-notified acquisitions, which may fly under the ACCC's radar.
"The ACCC is particularly concerned that anti-competitive acquisitions may occur without our knowledge under our current voluntary regime."
While, in this case, the ACCC eventually became aware of the past acquisitions, it cannot know how many other acquisitions have taken place without notification to the ACCC, with potential anti-competitive consequences.
"We have secured a divestiture that resolves our concerns in this instance. This is a far less efficient and effective way to maintain the competitiveness of Australia's economy. Seeking to restore the competition lost after the fact is not always possible and is a poor substitute for preventing the loss of competition in the first place."
"The ACCC needs better laws to become aware of and properly scrutinise mergers before they occur and prevent those likely to lessen competition substantially. Consumers ultimately bear the risk that anti-competitive mergers will complete without scrutiny and increase prices, reduce quality or service levels," Ms Cass-Gottlieb said.
Following the resolution of its investigation into Petstock's completed acquisitions, the ACCC will not oppose Woolworths' proposed acquisition of a 55 per cent controlling interest in Petstock.
"After extensive consultation with market participants and a comprehensive review of the parties' internal documents, data and research, we consider Woolworths' proposed acquisition of a 55 per cent interest in Petstock is unlikely to lessen competition substantially," Ms Cass-Gottlieb said.
"Market feedback indicated that specialty pet retail and grocery are distinct channels in the pet industry, and specialty pet retail stores have very different product and service offerings than supermarkets and discount department stores."
The ACCC also concluded it was unlikely that Woolworths could leverage its retail position into the specialty pet industry in an anti-competitive way.
While some market participants were concerned that the proposed acquisition would enable Woolworths to leverage its buyer power and pressure suppliers to stock key specialty products in its supermarkets and Big W, most suppliers supplying Woolworths and Petstock were not concerned.
