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ACCC could spoil startups' exit strategy

'We have to destroy competition in order to save it', whine startups

By Richard Chirgwin, 3 Oct 2016

The favourite exit strategy for Australian retail “disruptors”, get yourself acquired by Woolworths or Coles, is under threat – and startupville isn't happy.

Last Thursday, Australian Competition and Consumer Commission chair Rod Sims pointed out the obvious: online retail startups only present a competitive challenge to traditional retailers if they're not owned by them.

Even in the face of competition from upstart Aldi, Woolworths and Coles hold nearly 80 per cent share of supermarket sales in Australia.

In his speech, summarised here, Sims said: “While all economists welcome competition, of course businesses usually do not … Going forward, our main competition role in retail will be to ensure new entrants are not prevented from competing on their merits. We will, therefore, be alert to the consequences of large firms acquiring promising start ups, we will closely monitor access to data issues, and we will continue to support the proposed Harper changes to section 46”.

(That last point refers to a review of Australian competition law, which recommended revisions to the provisions dealing with misuse of market power.)

Startups whose founders look to the duopoly for their upgrade from a Toyota to a Lexus aren't happy.

Sims' speech was given to an Australian Financial Review conference, and the startups took their gripes to the same august outlet.

Their argument to the AFR (here if you can pass the paywall) is apparently that stopping the duopoly from choking competition by slurping competitors will hurt competition, because nobody will want to compete with Woolworths if there's no hoping of selling out to Woolworths.

Vulture South finds this quote from DealsDirect co-founder Paul Greenberg revealing: “Pure plays are struggling on their commercial models and that sustainable path to profitability … for them to stay in business there will be an inevitable partnership conversation”.

Getting out of business is the only way for a startup to stay in business? Makes perfect sense to us.

(Sims' speech is in full here. His remark about competition occupies just one paragraph, illustrating Oz startupland's hyper-sensitivity to anything it doesn't like.) ®

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