The Australian Competition and Consumer Commission (ACCC) has today (17 November) announced it will oppose Pick n Pay’s proposed sale of its Franklins supermarket chain to Metcash.

The deal, worth A$215m (US$203.9m), has been blocked over concerns the planned acquisition would “result in a substantial lessening of competition through the removal of Metcash’s closest and only genuine competitor for the wholesale supply of packaged groceries in NSW,” said ACCC chairman Graeme Samuel.

“Our thorough review found that the proposed acquisition would have reduced the number of players competing to provide these services from two to one, effectively giving Metcash a monopoly on grocery wholesaling to independent supermarkets in NSW. Barriers to entry in this market are already high, making timely new entry of a competitor to Metcash unlikely if this transaction proceeds,” said Samuel.

Responding to the news, both companies expressed “disappointment” with the decsion.

Pick n Pay chairman Gareth Ackerman said: “We are surprised and disappointed by the ACCC’s decision and fail to see how it could view the proposed sale to Metcash Trading as lessening competition. On the contrary we believe the sale is in the best interests of Australian consumers.”

Metcash CEO Andrew Reitzer said: “Metcash is committed to championing independent grocery retailers. This transaction would have resulted in the most competitive outcome for consumers. The NSW market share of IGA retailers would have increased from 11% to 18% leading to greater supply chain efficiencies and more competitive selling prices.”

Additionally, the ACCC said it was aware that other parties, whose bids would not raise the same competition concerns as Metcash’s bid and “indeed may enhance competition, have expressed strong interest in acquiring the whole Franklins business”

However, Ackerman denied claims of an alternate bidder. “We are also very surprised by the ACCC placing any weight in its decision on unnamed parties, who have apparently expressed strong interest to the ACCC in acquiring the Franklins business. Pick n Pay has received no credible offer for the business from any party.”

Both Pick n Pay and Metcash said they would review the decision and consider their options.