Supermarket merger rejected

By SIMON HENDERY

The Commerce Commission last night rejected a proposed merger between the country's second and third largest supermarket groups.

The decision after lengthy consideration is the latest round in a protracted legal tussle between the country's two largest grocery groups, Foodstuffs and Progressive Enterprises.

But the competition watchdog's refusal to allow Australian-owned Progressive to acquire the third group, Woolworths NZ, may not be the end of Progressive's protracted bid to increase its market share in New Zealand.

Progressive's parent company, Perth-based Foodland Associated, has said it is likely to challenge an earlier rejection of its bid through the Privy Council.

Progressive sought permission to buy Woolworths in May, lodging its application a day before competition laws were tightened.

Foodstuffs, which has about 54 per cent of the market share against Progressive and Woolworths' combined 46 per cent, convinced the Court of Appeal that the commission was wrong to approve the acquisition under the old competition test.

Progressive has been granted leave to take an appeal against that decision to the Privy Council.

A fresh Progressive application, considered under the new rules, was declined by the commission last night, a day before its third extension of consideration time expires.

Foodland chief executive Trevor Coates said he was surprised and disappointed at the decision.

"If one's talking about competition, how can you have a competitive market when the major player [Foodstuffs] has 54 per cent of the market?

"As our proposal clearly stated, there is nobody now to compete with Foodstuffs as a major competitor.

"We're still growing, we've got a very good business and we're certainly going to go from strength to strength.

"But this would have given us an extra lever to push forward our business in a major step and the consumer would have benefited."

Foodstuffs (Auckland) managing director Tony Carter said: "We're delighted, obviously. It's not unexpected. We would have been very surprised if they had approved it.

"We've had a strategy of trying to prevent the merger because we didn't think it was in our interest, but we also don't think it's in the consumers' interest and the Consumers' Institute agreed with that."

Woolworths' owner, Hong Kong-based Dairy Farm International, has said it is still to decide whether it will sell its New Zealand business, and has been waiting for an end to the legal action before a decision.

The director of the Commerce Commission's business competition branch, Geoff Thorn, said the commission would give details of its decision next week.

"The decision has been made by the commission and it's quite clear on that, it's not satisfied that there won't be a substantial lessening of competition," Mr Thorn said.

Foodstuffs, comprised of three cooperatives in Auckland, Wellington and Christchurch, owns Pak'N Save, New World, Write Price and Four Square.

Progressive runs the Foodtown, Countdown and 3 Guys chains. Parent company Foodland also owns Farmers department stores.

The 83-store Woolworths group, worth an estimated $600 million, includes Woolworths, Big Fresh and Price Chopper supermarkets.