In an unprecedented move, Australia’s consumer watchdog has used new powers to block the opening of a Coles supermarket on the grounds it could crowd out smaller rivals in the surrounding region.
Coles wanted to open a second supermarket and Liquorland in the country’s largest outback town of Kalgoorlie in WA.
The town already has Coles, Woolworths, two franchised IGA supermarkets and two independent grocers.
The Australian Competition and Consumer Commission (ACCC) has been assessing Coles’ acquisition of the site near Kalgoorlie Airport over the past six months, under new notice and assessment powers it was given to monitor supermarket competition.
The ACCC’s deputy chairman described the investigation into the deal as “extensive”.
“Independent supermarkets are an important competitive constraint on large supermarket chains. They provide consumers with meaningful choice, competition in service, quality and range, and competition in prices on some products,” said Mick Keogh.
“We found that while the new Coles supermarket will offer benefits to some consumers, there is a real prospect that the acquisition will result in the exit of an effective independent competitor and its assets from the market.
“The new entry into the market will not be sufficiently timely or sufficient to offset the loss of competition that may result from the acquisition.”
Why is this decision important?
The ACCC has previously rejected supermarket acquisitions, most recently when it opposed the 2023 takeover of Woolworths IGA in the regional NSW town of Queanbeyan.
But today’s ruling against the Kalgoorlie supermarket is the watchdog’s first failure since it was given new oversight powers earlier this year.
Site of the proposed Coles development in West Kalgoorlie, adjacent to a children’s centre, FIFO housing village and industrial estate. (ABC Goldfields: Jarrod Lucas)
Under the new regime, supermarkets must notify the ACCC whenever they intend to acquire another supermarket, take on an empty building or even build a new site.
It means all major supermarket deals now undergo a competition assessment, with proposals moving to stage two if they raise red flags with the regulator.
That’s what happened for the second Coles in Kalgoorlie, with the ACCC’s initial public assessment in March raising serious concerns.
“Coles and Woolworths together represent a significant market share and the ACCC has previously found that Coles and Woolworths have limited incentive to actively compete with each other on price,” the March assessment noted.
Coles claims ACCC ‘underestimates’ Kalgoorlie’s growth
Coles has hit back, with the ASX-listed company saying it was considering “next steps”.
Under the new oversight powers, Coles could lodge an ACCC appeal with the Australian Competition Tribunal, overseen by an economist, a businessman and a judge.
“We disagree with the ACCC’s decision,” a Coles spokesman said.
“Blocking the construction of a new supermarket on an empty site is not conducive to competition. It deprives Kalgoorlie shoppers of greater choice and convenience.”
Famous for the discovery of gold in 1893, the historic mining town of Kalgoorlie-Boulder, about 600 kilometers east of Perth, has a larger population than Alice Springs, Mount Isa and Broken Hill.
“The ACCC underestimated Kalgoorlie’s future growth and demand,” Coles said on Wednesday.
O’Connor Fresh IGA is just 2.6km from the site of the proposed Coles supermarket. (ABC Goldfields: Jarrod Lucas)
The supermarket giant said the city “has significant industrial activity, planned residential growth and a significant FIFO workforce, all of which is increasing demand for supermarket capacity across the region.”
“As we have demonstrated to the ACCC based on extensive evidence, Coles’ business case for this store is not based on the exit of any existing operator from the market. Rather, it assumes continued growth among competitors over time,” Coles said.
Coles previously had two stores in Kalgoorlie.
Kalgoorlie already has several supermarkets, including the existing Coles. (ABC News)
The ACCC’s assessment found there were already four supermarkets or grocery stores within a 6-minute drive of Coles’ proposed new site, and a further two within a 9-minute drive.
Owner of one competitor, Lionel St. The IGA told ABC News today that it “100 per cent” supported the ACCC’s decision.
Nitendra Raj said his franchised supermarket was already struggling to recruit staff and he was concerned Coles would require more workers.
Lionel Street IGA owner Nitendra Raj is against the construction of a second Coles supermarket in Kalgoorlie-Boulder. (ABC Goldfields: Jarrod Lucas)
“Our purchases will be reduced. We will have more problems with cargo transportation,” he says.
“Coles shouldn’t come. We have enough retail stores in the city.”
Coles previously operated two supermarkets in Kalgoorlie-Boulder, which has a population of about 30,000 people.
Until June 2021, when Coles opened a new $16 million store in the Kalgoorlie CBD on Egan Street, the supermarket giant operated a store on Brookman Street in the CBD, as well as a store in the north-west corner of the city at the Hannans Boulevard shopping centre.
The future of the former Coles site on Brookman Street also remains controversial for residents.
It was originally earmarked for the demolition and construction of a new Aldi supermarket and residential apartments to regenerate the central business district.
But after purchasing the 6,829 square meter site, German chain Aldi officially pulled out of the project in June 2023 due to inflated costs.
The City of Kalgoorlie-Boulder has since purchased the site, which had remained vacant and had been heavily criticized for anti-social behavior in the empty car park.