ACCC may find chilled meal deal hard to swallow

JOHN DURIE
AUGUST 6, 2019

The Australian

The fast-growing $660 million prepared-meal market is in a state of flux as the country’s top producer, B&J, 23 per cent controlled by Woolworths, tries to take over its nearest competitor, Jewel Fine Foods.

The ACCC is investigating the deal and other retailers are expected to object to the combination of what are effectively the only two suppliers in the so-called chilled ready meal market.

Jewel went into liquidation this year after failing to offset the costs of a major expansion and the building of a new facility in the suburb of Banksmeadow, in Sydney’s south.

Chilled prepared meals are popular but they are also expensive to make because unlike frozen or canned foods, it is difficult to ensure they are 100 per cent safe.

Woolworths and Beak & Johnston control B&J, which is trying to buy Jewel from administration.

This would obviously be a perfect solution for the administrators, the KPMG-owned Ferrier Hodgson, because, as the nearest competitor, B&J would pay the highest price.

But the so-called failed company defence from a competitor that buys a rival that is going under rarely wins the day before the ACCC.

It argues that the administrator should look for another buyer.

In this case the Jewel factory is said to be only 60 per cent filled, which is itself an issue because new production is unlikely to enter the market when there is so much spare ­capacity.

Mere mention of the names Woolworths or Wesfarmers and the ACCC’s ears prick up, which can explain the regulator’s decision to appeal a Federal Court ­ruling that squashed its attempt to pin a misleading claims label on Woolworths over its sale of a range of “eco-friendly” picnic ware.

Separately, as expected, the ACCC cleared Wesfarmers’ acquisition of the Catch Group.

The $230m deal by Wesfarmers boss Rob Scott was aimed at improving the conglomerate’s ­online capability, even if the talent walks out the door each night.

Catch was on the market for some time so Scott was seen as something of a saviour.

The tricky one is the appeal lodged yesterday against the Federal Court’s dismissal of a case the consumer watchdog has lodged against Woolworths over claims about the biodegradability of certain plastic products.

It appears the products are only biodegradable when handled in a very ­selective matter; if you dump them in your rubbish bin then they have none of the claimed qualities.

The court threw out the case on technical grounds because the question of whether it was com­postable would only be decided in the future when the products were being dumped.

The court said the plastic forks and other products were eventually biodegradable, just not in the time frame the ACCC was talking about.

Woolworths was not making future claims so therefore had no case to answer.

That is plainly a nonsense ­argument that explains why the ACCC is appealing.

In a statement, the ACCC said: “These claims were about future matters and that Woolworths did not have reasonable grounds to make them.

“The trial judge found that the likely performance of Woolworths’ picnic products was not a ‘future matter’ because the reference to ‘biodegradable and compostable’ was about the ­inherent characteristics of the product rather than a prediction, forecast, promise or opinion of a future event. Accordingly, the court was not required to consider whether Woolworths had reasonable grounds for making the claims.

“The court did, however, find that if Woolworths had made the claims in the terms alleged by the ACCC, it would not have had reasonable grounds to do so.”

The ACCC is not having a great time in the environment sector, as shown by its separate appeal in the Kimberly-Clark flushable wipe case. The ACCC said the claims that the Kleenex Cottonelle wipes were flushable was misleading ­because they were not. The court had required evidence of harm.

There are some who wonder whether the ACCC has bigger ­issues to engage in, to which the answer is “of course”, but there are important issues of principle ­involved. The ACCC is a con­sumer regulator and if big companies are making false claims about their products, they should be held to account.