Graham Samuel & ACCC: A toothless and friendly watchdog!

My previous post on Woolworths acquisition of Macro stores and their conversion to "Thomas Dux" has attracted an excellent response amongst readers interested in retailing issues. Voting on the Web Poll is open until October 31st.

I would like to present this post as a sumpplement to the Thomas Dux, and quot from a AFR article titled: (Sat 24th Oct 2009, page 13)

"Can Woolworths become too big for AAA?"

Based on the figures quoted in the article, the clear answer is A big "No!"

The Chairman of ACCC, Graham Samuel's persistent dismissal of lessening of competition and misuse of market power by the two retailing giants in Australia (Woolworths & Wesfarmers) is no longer surprising anyone familiar with his track record at ACCC.

In the past three years, ACCC has scrutinised 40 acquisitions by Woolworths & has given the go ahead in 38 out of the 40 acquisitions! These included Supermarkets, Liquor Stores, Discount Stores & Organic Food Stores (see my previous post).

Of course, ACCC grants an approval once it determines there will be no lessening of competition as a result of an acquisition. For example, ACCC is of the opinion that Woolworths will increase competition by entering the big box hardware market to directly compete with Bunnings (Wesfarmers owns Coles & Bunnings) because Bunnings currently controls aaround 50% of the hardware Retail Sales in Australia & has no direct big box competitor. At the same time, ACCC is investigating the proposed $88m acquisition of hardware Wholesaler Danks by Woolworths. Danks supplies to 1500 independently owned hardware stores in Australia.

However, most small business observers almost take it for granted that whilst Graham Samuel is at the helm of ACCC most such acquisitions will be approved. Samuel & ACCC claim the perception is due to the fact that most armchair critics (such as myself) do not understand the scope of various sections of the Trade Practices Act. Whilst this is undoubtedly true, it does seem that ACCC puts more emphasise on protecting competition than worrying about misuse of market power of major players in the future or the potential lessening of competition & price rises as a result of formation of virtual duopolies in most markets in Australia.

For example, does ACCC worry about the medium to long term lessening of competition when many smaller hardware stores go out of business as a result of direct competition with two big box operators?

A brief look at the following details demonstrates why Graham Samuel & ACCCC have such difficulty convincing Small Business of their effectiveness:

• Woolworths intends to open 150 large box hardware stores to compete with Bunnings. At the same time, it also intends to control wholesale supply to 1500 small independent hardware stores.


• Last fiscal year Woolworths opened 25 new Supermarkets, 77 Liquor Stores, 51 Consumer Electronic Stores (Dick Smith)


• 138 Stores were refurbished (refer to my blog post on Consumer Shopping Experience)


• The new Qantas affiliated Customer Loyalty Program is estimated to raise sales by 1% or approximately $370m in teh first year.


• Amongst many brands Woolworths owns: Woolworths & Safeway Supermarkets, Pay4Less Supermarkets, Big W, Woolworths Liquor, Dan Murphy's, BWS Liquor, Dick Smith & Tandy Electronics (being converted to Dick Smith), Thomas Dux Grocer, Woolworths Petrol Stations & their Retail shops,
• It will be interesting to see what the medium to long term effect of Woolworths foray into the big box hardware market will be and whether it results in lower prices and/or increased competition, or the usual duopoly and subsequent increase in prices as observed previously in case of Supermarkets, Discount Variety Stores, Petrol &; Liquor.
  

Regardless of the outcome one thing is almost certain: If Graham Samuel is still around by then, he will find a way of justifying his toothless and friendly dealings with the big players!