Australia's Consumer Watchdog Blocks New Coles Supermarket Opening in Kalgoorlie

In an unprecedented move, Australia's consumer watchdog has exercised new powers to block the opening of a Coles supermarket, on the grounds it could knock out smaller competitors in the surrounding region.

Coles has been wanting to open a second supermarket and a Liquorland in the nation's biggest outback city, Kalgoorlie in WA.

The city already has a Coles, Woolworths, two franchised IGA supermarkets, and two independent grocers.

The Australian Competition and Consumer Commission (ACCC) has been assessing Coles' acquisition of a site near Kalgoorlie's airport for the last six months, under new notification and assessment powers it has been given to monitor supermarket competition.

The ACCC's deputy chair described the watchdog's investigation into the acquisition as "extensive".

"Independent supermarkets are an important competitive constraint on the major supermarket chains. They provide consumers with meaningful choice, competition on service, quality and range, and competition on price for some products," Mick Keogh said.

"New entry would not be timely enough and sufficient to offset the loss of competition likely to result from the acquisition."

Why is the decision significant?

The ACCC has previously knocked back supermarket acquisitions, most recently when it opposed Woolworths taking over an IGA in regional NSW city Queanbeyan in 2023.

However, today's Kalgoorlie supermarket ruling is the watchdog's first refusal since it got new oversight powers this year.

Under the new regime, supermarkets must notify the ACCC whenever they intend to take over another supermarket, take out a lease in an empty building or even develop a greenfields site.

This means all major supermarket transactions now go through competition evaluation, with proposals put into a second phase if they raise alarm bells for the regulator.

That is what happened regarding a second Coles in Kalgoorlie, with the ACCC's initial public assessment in March raising significant concerns.

"Coles and Woolworths, each and combined, account for a significant proportion of the market and the ACCC has previously found Coles and Woolworths have limited incentive to compete vigorously with each other on price," the March assessment noted.

Coles argues ACCC 'underestimates' Kalgoorlie's growth

Coles has hit back, with the ASX-listed company saying it is considering "next steps".

Under the new oversight powers, Coles could take the ACCC to the Australian Competition Tribunal for an appeal overseen by an economist, a businessperson, and a judge.

"We disagree with the ACCC's decision," a Coles spokesperson said.

Famous for the discovery of gold in 1893, the historic mining city of Kalgoorlie-Boulder, about 600 kilometres east of Perth, has a bigger population than Alice Springs, Mount Isa and Broken Hill.

"The ACCC has underestimated Kalgoorlie's future growth and demand," Coles said on Wednesday.

The supermarket giant said the city was "experiencing significant industrial activity, planned residential growth and comprises a substantial FIFO workforce, all of which are increasing demand for supermarket capacity across the region".

"As we demonstrated to the ACCC through extensive evidence, Coles' business case for this store does not rely on any existing operator leaving the market. Rather, it assumes continued growth among competitors over time," Coles said.

Coles previously had two Kalgoorlie stores

Coles previously operated two supermarkets in Kalgoorlie-Boulder, which is home to about 30,000 people.

Until June 2021, when Coles opened the new $16 million store in the Kalgoorlie CBD on Egan Street, the supermarket giant operated a Brookman Street location in the CBD, as well as a store in the city's north-west corner at the Hannans Boulevard Shopping Centre.

The future of Coles's former site on Brookman Street also remains contentious for residents.

It was initially earmarked for demolition and construction of a new Aldi supermarket and residential apartments to rejuvenate the CBD.

But after purchasing the 6,829-square-metre-site, the German-owned chain Aldi officially withdrew from the project in June 2023 because of cost blowouts.

The City of Kalgoorlie-Boulder has since acquired the site, which has remained vacant and been heavily criticised for attracting antisocial behaviour in the empty car park.