Introduction
When does the potential exit of a smaller rival caused by the new entry of a larger player constitute a breach of competition law?
This issue is currently the subject of two separate Australian cases – one a private litigation by a smaller hardware chain alleging misuse of market power by the dominant hardware chain and the other a merger review of the regulator’s decision to block an acquisition of a new site to construct a new supermarket by a large retailer on the basis that it is likely to cause the exit of a smaller independent.
Traditionally, new entry, new expansion and adding capacity to the market have been considered pro-competitive unless the conduct is predatory – driving competitors out of the market and recouping costs incurred with higher prices.
But these cases are examining whether there is a breach of competition law without predation. A summary of the current status of play is below.
Australian legal framework
Section 46 of the Competition and Consumer Act 2010 (Cth) (Act) prohibits corporations with a substantial degree of market power from engaging in conduct that has the purpose, effect or likely effect of substantially lessening competition.
Section 50 of the Act prohibits acquisitions of shares or assets that would have the effect, or be likely to have the effect, of substantially lessening competition in any market in Australia. Under the Australian mandatory merger regime, where notification thresholds are met, parties must notify the ACCC and obtain approval before completing the transaction. The review involves notification by the parties, a competition assessment by the ACCC (including market enquiries where appropriate), and a decision to either approve, approve subject to remedies, or oppose the transaction.
Woodman v Bunnings - Hardware stores
Facts
Woodman is a family-owned operator of two Mitre 10 hardware stores near Brisbane. Mitre 10 is a smaller hardware chain in Australia. Bunnings, the dominant hardware chain in Australia, plans to open a large hardware store directly adjacent to one of Woodman’s Mitre 10 stores.
Bunnings runs over 300 stores in Australia.1 It had revenue of $19.6 billion in FY2025.2 It supplies about 300,000 products and has exclusive supply arrangements with around 38 suppliers.3
Bunnings announced it would spend about $36 million on a 15,000 m² store in Jimboomba. Development approval was granted in September 2020, and construction was expected to finish in 2026.4 Bunnings also maintains a 'Lowest Price Policy', under which it will beat a competitor's lower price on the same in-stock item by 10%. Woodman alleges that, because of Bunnings' exclusive supply agreements with leading brands, the policy does not apply to a significant proportion of its range.5
Mitre 10 Jimboomba is about 1,770 m² and stocks around 17,000 products.6 It price-matches on products Bunnings stocks and claims it sets itself apart through personalised service.7 Its FY2025 gross sales were about $6.1 million.8
Allegations
Woodman alleges that if Bunnings enters the market in close proximity to Woodman’s Mitre 10 store, that store will exit the market. Woodman alleges that Bunnings has a substantial degree of market power as an acquirer in a national wholesale market for the supply of hardware products, and that the opening of the new store, and the likely exit of Mitre 10 Jimboomba, will have the effect or likely effect of substantially lessening competition in a local retail hardware market around Jimboomba.9
Evidence indicates that 119 hardware stores associated with the Hardware Group (which operates the Mitre 10 banner) had closed between June 2017 and July 2025, 89 of which are argued to have a Bunnings store located nearby.10
Woodman alleges two theories of harm, one being that Bunnings’ conduct deterred it from carrying out a planned expansion of Mitre 10 Jimboomba.11 The second is that the new store opening will cause Mitre 10 Jimboomba to exit the market in the future, because Bunnings will “deprive Mitre 10 Jimboomba of sufficient sales volume so it would no longer be rational for Woodman to operate the store.”12 Woodman (at this stage) makes no allegation of predatory intent or purpose.13
Defence
Bunnings argues, relying on the conception of competition articulated in Queensland Wire Industries v BHP Co Ltd (1989) 167 CLR 177, Boral Besser Masonry Ltd v ACCC [2003] HCA 5, and Re QCMA (1976) 25 FLR 169, that the opening of a new store is nothing more than the ordinary workings of the competitive process being that competition damages competitors, and if damage is sufficiently serious, it may eliminate a competitor14 but that of itself is not a breach of competition law.
Woodman argues that characterising Bunnings' conduct as bearing the hallmarks of competition on the merits "does not necessarily foreclose a finding that it substantially lessens competition under s 46."15
Decision
While the case is yet to go to trial, in a pre-trial hearing, Bromwich J observed:
Competition law in general, and the concept of misuse of market power specifically, acknowledge that sometimes conduct which might otherwise be part of the ordinary competitive process can ultimately result in damage to that process. To that end, one of the important features of s 46 is that the conduct by one competitor without substantial market power may be viewed differently from like conduct engaged in by a competitor who does have substantial market power.
His Honour also noted that the test under the law enables:
a more holistic assessment of the interaction of impugned conduct with the competitive process, beyond its mere characterisation as pro-competitive or anti-competitive, especially at a single point in time.”17
Tribunal review of Coles proposed acquisition in Kalgoorlie under merger regime
Facts
On 30 June 2026, the ACCC issued its Phase 2 Determination blocking Coles’ proposed acquisition of a leasehold interest over land in Kalgoorlie, Western Australia, on which it intended to construct a new supermarket and an associated Liquorland store.
Kalgoorlie is a remote city of approximately 30,000 people that is currently serviced by six supermarkets - one Coles, one Woolworths (both of which are major retailers), Spudshed (independent), O’Connor Fresh IGA (independent) and two smaller-format independents.
Coles was not proposing to acquire a rival but rather was seeking to build a new facility on vacant and undeveloped land.
ACCC concerns
The ACCC acknowledged that investment in new supermarket capacity “can be expected to contribute to competition in a market,”18 and Coles’ proposed supermarket would at least in the short term, increase competitive intensity as the incumbent supermarkets respond to the new entrant.19 However the ACCC concluded that Kalgoorlie’s remote geography, concentrated market structure and low population growth (below 1 per cent) meant that the introduction of another Coles would likely force the exit of an independent competitor being a supermarket that the ACCC identified as offering a “differentiated offering valued by consumers.”20
The ACCC found that the smaller independent that would be likely to exit provides consumers with local products, longer trading hours, higher-touch customer service and locally responsive pricing and product ranging attributes that the major supermarket chains (which generally set prices and product ranges on a state-wide or national basis), were unlikely to replicate.21
The ACCC assessed that this represented a loss of non-price competitive rivalry, reducing pressure on supermarkets to maintain or improve their product, service and store quality.22
Coles' submissions
Coles argued that even if a competitor were to exit, such an outcome would reflect “competition on the merits”, being that more efficient firms would displace less efficient rivals and not substantially lessen competition.23 Coles’ economic expert argued that absent exclusionary conduct or deliberately erected barriers, expansion reflects the normal competitive process, with outcomes driven by relative efficiency and the ability to meet consumer preferences.24 Coles advocated for a “profit sacrifice test”, under which investment would only be anti-competitive if the acquirer’s profitability materially depended on the induced exit of a rival.25
ACCC decision
The ACCC demonstrated that an expansion-and-exit scenario need not exhibit the dynamic pattern of predatory behaviour; a combination of demand and cost conditions suffices to determine the number of viable stores under normal competition, and where the investment involves irreversible sunk costs, exit may occur at the point the new store becomes operational, in which case no profit sacrifice is involved.26 The ACCC’s analysis emphasised that exit can lower overall consumer welfare if consumers lose access to the price-quality mix offered by the exiting retailer and lose the rivalry that retailer contributed to the market, even where the entry decision was commercially rational.
The ACCC accepted that the profit sacrifice test was a "valid test"27 but considered it insufficient to capture all conduct that might have the effect of lessening competition. The ACCC weighed the short-term competitive benefits of additional capacity against the longer-term competitive harm arising from the loss of differentiated rivalry. The ACCC concluded that "simply categorising the acquisition as 'competition on the merits' does not remove the requirement for the ACCC to consider whether overall the effect is likely to substantially lessening competition."28
The decision is notable not just because it was the ACCC’s first blocked transaction under the new merger regime, but because of its reasoning.
Next steps
Woodman
On 27 August 2026 the Court made a no adverse costs order. This means Woodman will not be liable for Bunnings' costs whatever the outcome of the trial. Bunnings was ordered to pay Woodman’s costs of the application, and the case now goes towards trial.29
Coles
On 9 November 2026, the Australian Competition Tribunal will conduct its review of the Kalgoorlie decision. The hearing is scheduled to run for two weeks.
Conclusion
While the Woodman v Bunnings case and review of the Coles proposed acquisition in Kalgoorlie are yet to be determined, they represent a significant inflection point in Australian competition law.
They may challenge the long-held assumption that greenfield investments are inherently pro-competitive. The message to large incumbents is that the construction of new facilities which force the likely exit of a differentiated competitor may be a misuse of market power or may attract regulatory scrutiny under the merger regime.
1 Woodman Beenleigh Pty Ltd v Bunnings Group Limited (No Adverse Costs Order) [2026] FCA 1231 at [16].
2 Woodman Beenleigh Pty Ltd v Bunnings Group Limited (No Adverse Costs Order) [2026] FCA 1231 at [16(b)].
3 Woodman Beenleigh Pty Ltd v Bunnings Group Limited (No Adverse Costs Order) [2026] FCA 1231 at [17].
4 Woodman Beenleigh Pty Ltd v Bunnings Group Limited (No Adverse Costs Order) [2026] FCA 1231 at [25(a)]–[25(c)].
5 Woodman Beenleigh Pty Ltd v Bunnings Group Limited (No Adverse Costs Order) [2026] FCA 1231 at [19].
6 Woodman Beenleigh Pty Ltd v Bunnings Group Limited (No Adverse Costs Order) [2026] FCA 1231 at [23].
7 Woodman Beenleigh Pty Ltd v Bunnings Group Limited (No Adverse Costs Order) [2026] FCA 1231 at [23].
8 Woodman Beenleigh Pty Ltd v Bunnings Group Limited (No Adverse Costs Order) [2026] FCA 1231 at [23].
9 Woodman Beenleigh Pty Ltd v Bunnings Group Limited (No Adverse Costs Order) [2026] FCA 1231 at [3], [36].
10 Woodman Beenleigh Pty Ltd v Bunnings Group Limited (No Adverse Costs Order) [2026] FCA 1231 at [119].
11 Woodman Beenleigh Pty Ltd v Bunnings Group Limited (No Adverse Costs Order) [2026] FCA 1231 at [36].
12 Woodman Beenleigh Pty Ltd v Bunnings Group Limited (No Adverse Costs Order) [2026] FCA 1231 at [37].
13 Woodman Beenleigh Pty Ltd v Bunnings Group Limited (No Adverse Costs Order) [2026] FCA 1231 at [37], [107].
14 Woodman Beenleigh Pty Ltd v Bunnings Group Limited (No Adverse Costs Order) [2026] FCA 1231 at [96]–[100], citing Re Queensland Co-operative Milling Association Ltd (1976) 25 FLR 169 at 187–188; Queensland Wire Industries v Broken Hill Proprietary Co Ltd (1989) 167 CLR 177 at 191 (Mason CJ and Wilson J); Boral Besser Masonry Ltd v Australian Competition and Consumer Commission [2003] HCA 5; 215 CLR 374 at [87] (Gleeson CJ and Callinan J)
15 Woodman Beenleigh Pty Ltd v Bunnings Group Limited (No Adverse Costs Order) [2026] FCA 1231 at [104].
16 Woodman Beenleigh Pty Ltd v Bunnings Group Limited (No Adverse Costs Order) [2026] FCA 1231 at [104].
17 Woodman Beenleigh Pty Ltd v Bunnings Group Limited (No Adverse Costs Order) [2026] FCA 1231 at [104].
18 Australian Competition and Consumer Commission: Phase 2 determination Coles – supermarket and liquor site in Kalgoorlie, WA 30 June 2026 [1.6].
19 Australian Competition and Consumer Commission: Phase 2 determination Coles – supermarket and liquor site in Kalgoorlie, WA 30 June 2026 [1.11].
20 Australian Competition and Consumer Commission: Phase 2 determination Coles – supermarket and liquor site in Kalgoorlie, WA 30 June 2026 [1.8].
21 Australian Competition and Consumer Commission: Phase 2 determination Coles – supermarket and liquor site in Kalgoorlie, WA 30 June 2026 [8.9]
22 Australian Competition and Consumer Commission: Phase 2 determination Coles – supermarket and liquor site in Kalgoorlie, WA 30 June 2026 [1.15].
23 Australian Competition and Consumer Commission: Phase 2 determination Coles – supermarket and liquor site in Kalgoorlie, WA 30 June 2026 [6.186].
24 Australian Competition and Consumer Commission: Phase 2 determination Coles – supermarket and liquor site in Kalgoorlie, WA 30 June 2026 [6.186].
25 Australian Competition and Consumer Commission: Phase 2 determination Coles – supermarket and liquor site in Kalgoorlie, WA 30 June 2026 [6.203].
26 Australian Competition and Consumer Commission: Phase 2 determination Coles – supermarket and liquor site in Kalgoorlie, WA 30 June 2026 [6.207].
27 Australian Competition and Consumer Commission: Phase 2 determination Coles – supermarket and liquor site in Kalgoorlie, WA 30 June 2026 [6.207].
28 Australian Competition and Consumer Commission: Phase 2 determination Coles – supermarket and liquor site in Kalgoorlie, WA 30 June 2026 [6.192].
29 Woodman Beenleigh Pty Ltd v Bunnings Group Limited (No Adverse Costs Order) [2026] FCA 1231, Order 1 and 2.