After initially raising concerns, the ACCC has cleared the proposed acquisition of hardware wholesaler Danks Holdings Limited (Danks) by a joint venture (JV) comprising Woolworths Limited and United States home improvement retailer, Lowe's Companies Incorporated (Lowe’s). The ACCC cleared the merger after accepting court enforceable undertakings from Woolworths and the JV (under section 87B of the TPA).

The acquisition was proposed by the JV as part of a plan to enter the hardware sector by developing a network of 'big box' home improvement stores to compete with other retailers including hardware powerhouse, Bunnings. Danks is a wholesale distributor of hardware products and related services to independent retailers.

The ACCC had raised concerns related to the effect of the proposed acquisition on competition in certain local markets for the supply of hardware and home improvement products by hardware retailers.

In particular, the ACCC was concerned that the JV could discriminate against some of its wholesale customers, namely hardware retailers supplied by Danks, who would also be its retail competitors. Another concern related to the potential for retailers supplied by Danks which are located in close proximity to JV big box stores being treated less favourably than other stores.

The ACCC decision to clear the merger came after it accepted a court enforceable undertaking from Woolworths and the JV, focused on ensuring non-discriminatory conduct for 10 years. In essence, the undertaking imposes ‘no less favourable supply terms’ obligations for stores within a five kilometre radius of a JV store (with a costs related exception) and also requires the appointment of an ACCC approved, independent auditor to assess compliance.

The ACCC’s decision is interesting in light of its general caution about accepting behavioural undertakings. According to the ACCC’s own 2008 Merger Guidelines, behavioural type remedies designed to modify or constrain the behaviour of the merged firms are considered ‘rarely appropriate on their own to address competition concerns’. As such, behavioural undertakings are usually seen as appropriate, ‘on occasion’ as an adjunct to the preferred ‘structural’ undertaking (for example, divestitures).

A copy of the undertaking is available from the ACCC website, and the ACCC is expected to issue its Public Competition Assessment explaining the reasons for its decision in the near future.