ACCC raises concerns over Woolworths grab for pets business

The retailer’s move to expand into the fast-growing pets sector via its $586m purchase of a controlling stake in pets business PETstock has hit a regulatory snag.

The ambitions of Woolworths chief executive Brad Banducci to expand into the fast-growing pets sector through the $586m purchase of a controlling stake in leading pets business PETstock has hit a snag after the competition regulator raised concerns about the deal.

On Thursday the Australian Competition & Consumer Commission said it was seeking views on a proposed divestiture offered by PETstock in relation to its completed acquisitions of Best Friends Pets, Pet City, Animal Tuckerbox and Pet and Aquarium Warehouse in Eltham, Victoria.

It appears many of these acquisitions were made by PETstock and not notified to the ACCC despite the company’s growing dominance of the pet industry.

These acquisitions, which the ACCC considers raised significant competition concerns, only came to light during its current review into the proposed acquisition by Woolworths of a 55 per cent interest in PETstock, the regulator said.

PETstock is Australia’s second-largest speciality pet retailer and offers a broad range of pet products and services in-store and online. The PETstock banner has 276 stores, 65 vet clinics and 162 grooming ­salons – and is viewed by Woolworths and its CEO as an opportunity to branch into the $10bn specialty pets sector while also fleshing out a new, larger and more profitable retail ecosystem for Woolworths.

Woolworths’ move to expand into the fast-growing pets sector via its $586m purchase of a controlling stake in pets business PETstock has hit a regulatory snag. Picture: Alex Coppel

Woolworths unveiled the acquisition in December to buy the stake in PETstock. It offers everything pet-related from food to grooming, with Mr Banducci pointing to its “impressive growth trajectory” and that, while pet ownership spiked during pandemic lockdowns, there was no sign of a slowdown as consumers devoted more time and money to pets, and companion animals.

“During the current Woolworths, PETstock merger review, market participants expressed concerns about the already significant consolidation that had occurred within specialty pet retail in recent years,” ACCC commissioner Stephen Ridgeway said on Thursday.

PETstock completed numerous acquisitions between 2017 and 2022 that were not notified to the ACCC. The fact that the transactions have taken place does not preclude the ACCC from investigating and, if necessary, taking legal action.

Under the Competition and Consumer Act, the ACCC can seek court-ordered divestiture of shares or assets acquired in breach of the merger law for a period of three years after completion of a transaction, and can also seek penalties orders for a period of six years, the regulator said.

“Our investigation so far has identified significant concerns with these four transactions in particular because of their impact on national and state-wide chain-on-chain competition, as well as competition in multiple local areas,” Mr Ridgeway said.

“While there is currently no mandatory requirement for merger parties to notify the ACCC, the decision taken here to proceed with acquisitions of this scale without seeking ACCC clearance demonstrates the limitations of the current informal merger regime in Australia.”

PETstock and Woolworths have now each offered to provide court-enforceable undertakings to resolve the ACCC’s concerns with these completed acquisitions and enable Woolworths to complete its proposed acquisition of a controlling interest in PETstock.

PETstock has offered to divest a package of sites and assets it acquired in these completed acquisitions. Woolworths has also offered to provide a court-enforceable undertaking relating to various matters that would support the divestment, the ACCC said.

In a statement, Woolworths said it acknowledged the ACCC’s current consultation on a proposed divestiture package of stores.

“Woolworths Group remains focused on working with the PETstock Group founders to complete the proposed acquisition and will engage with the ACCC as part of this consultation to ensure all regulatory approvals are in place prior to completion.”

A PETstock spokesman said it noted the ACCC’s consultation on a proposed divestment package of stores and assets which were previously acquired by PETstock Group.

“We are continuing to work with the ACCC on this matter, and during this time all sites will continue to operate with our ongoing support. We remain committed to the care of all stores and each and every team member.”