Woolies takeover could lead to hangover for drinkers

One competition expert says the decision allows Woolworths to concentrate its power and produce its own home brand wine leading to a bad mix for consumers. Only last week Woolworths announced the liquor arm of its business, which includes the Dan Murphy's and BWS chains, helped boost its $13 billion quarterly sales total.

The Australian Competition and Consumer Commission's acting chairman Michael Schaper was unavailable for interview but the ACCC released a statement on its reasons behind the decision. "The proposed acquisition would be unlikely to substantially lessen competition given the presence of several significant competitors in wine retailing, production and associated services," it said. "Woolworths and Cellarmasters are both retailers of wine but with minimal overlap in their retail channels.

"Woolworths has an extensive network of bricks-and-mortar liquor retail stores but negligible existing online liquor sales. "Cellarmasters operates an online and direct wine sales business, with no bricks and mortar retail operations."

Competition and fair trade law expert Associate Professor Frank Zumbo from the University of New South Wales says today's decision is disappointing because it will adversely affect consumers over time. "[This is] for the simple reason that it will allow Woolworths to vertically integrate," he said.

"It will allow Woolworths to extend its market power through the wine supply chain. "It will lead to increased concentration in the liquor market, and we see that when there is increased concentration there are fewer players and prices go up."Professor Zumbo says it allows Woolworths to have not only retail shops and an online presence but also the ability to produce its own branded wine. "Clearly the strategy is for Woolworths to increase its presence in home brand wines," he said.

"All this together spells danger for competition and consumers. "The concern with Woolworths increasing its share of the home brand market is that it will reduce product choice for consumers over time. "We've seen it on the supermarket shelves - as the home brand products have increased their presence in supermarket shelves - the branded products are pushed off the shelf and we will see that also in the liquor market with home brand wine pushing branded wine off the market.

"Over time that will reduce product choice for consumers and the real danger is that prices will go up as that competition from branded wines falls."The ACCC's public competition assessment has not yet been released. A spokeswoman for the watchdog says it will be issued in due course.