Woolworths and PFD propose enforceable charter in bid to get ACCC tick of approval

Supermarket giant Woolworths and food distributor PFD Food Services have told the competition watchdog they are prepared to enter into enforceable undertakings to secure clearance for a deal that would see Woolworths take a majority stake in PFD. 

The proposed undertakings to the Australian Competition and Consumer Commission would see both businesses commit to keeping supplier and customer information confidential, and introduce an industry-first charter under which PFD would operate in all dealings with suppliers. 

The charter would be a first in the food service industry, and would reflect key aspects of the voluntary Food and Grocery Code of Conduct, which was introduced in 2015 and amended in October 2020. 

A copy of the proposed charter seen by SmartCompany shows PFD would make commitments in relation to good faith dealings with suppliers, confidentiality protections, and restrictions on making retrospective changes to commercial terms. 

“It is a core value of PFD that we treat our suppliers fairly. Maintaining long-term, collaborative and sustainable relationships with our suppliers is essential to delivering the best outcomes for our customers,” the charter reads. 

The proposed undertakings would also be accompanied by comprehensive audit provisions, including oversight by an independent auditor who would monitor and report on compliance to the ACCC on an ongoing basis. 

The move by Woolworths and PFD comes after the ACCC said in December it had preliminary concerns about the deal, and five food service and retail industry associations last month joined forces in opposition to the acquisition. 

The five groups — the Australian Convenience and Petroleum Marketers Association (ACAPMA), the Council of Small Business Organisations Australia (COSBOA), Master Grocers Association (MGA), the Australasian Association of Convenience Stores (AACS) and Independent Food Distributors Australia (IFDA) — said in a joint letter to the ACCC that the acquisition of PFD would have a “significant adverse impact” on businesses, including growers, manufacturers, distributors, food service retailers and independent grocers. 

A pre-established partnership

The proposed deal was first announced in August 2020, after Woolworths and PFD established a partnership during the pandemic. 

Woolworths is seeking to acquire a 65% stake in PFD for $302 million as well as full ownership of PFD’s freehold properties, including 26 distribution centres, for $249 million. 

PFD’s current owners, the Smith family, would retain 35% of the business, which could then be sold to Woolworths after a period of three years. 

Woolworths and PFD have provided the ACCC with submissions and other materials in recent weeks in response to concerns about competition issues. The proposed undertaking, which may be accepted by the ACCC, was submitted last week. 

In a statement provided to SmartCompany, Woolworths said the undertakings build on the companies’ previous public commitments of confidentiality and “doing the right thing” by suppliers and customers. 

PFD Food Services chief executive Kerry Smith said in the same statement that the charter is “very much in keeping with how we always have and will continue to treat our suppliers, and the undertaking to abide by it is a good fit for us”. 

The ACCC is continuing to seek information from members of the industry before making its final decision by April 22.