Woolworths' proposed acquisition of the Supa IGA in Karabar is likely to "substantially lessen competition in the supply of local groceries in the area", the consumer watchdog says.
The supermarket chain wants to acquire Supa IGA Karabar and Liquor Boss, owned by Canberra developer John Krnc, who also owns the Karabar Shopping Mall in which the stores are located.
The Australian Competition and Consumer Commission opposes the acquisition, saying there are benefits of an independent and locally owned supermarket amongst the others.
Woolworths already operates two supermarkets in Queanbeyan and Jerrabomberra - within 5km of this IGA - and the addition of a third would leave customers with only Coles and Aldi as alternatives, commission chair Gina Cass-Gottlieb said.
The IGA is the only independent supermarket in the area.
"The more supermarkets or grocery stores there are, the better outcomes for local consumers, who can change where they shop based on the most competitive offerings for their particular needs," Ms Cass-Gottlieb said.
An analysis conducted by ACCC found the IGA offers a different shopping experience, which generates competition between the different supermarkets and grocery stores.
It said the acquisition would mean various suppliers that provide products exclusively to the IGA would lose sales.
"Supermarkets compete not just on the price you pay at the checkout, but the frequency and types of promotions they run, the range of products they sell, the quality of these products and the level of service delivered at the store," Ms Cass-Gottlieb said.
"The local Supa IGA competes with its different product mix, service offering and store amenity, and different promotional cycles.
"It also has the ability to make decisions locally, and to dynamically adapt and respond to changes in tastes and preferences of local customers."
The ACCC said its decision was informed by data analysis of the spending habits of local consumers, and engagement with a range of businesses and industry bodies.
A spokesperson from Woolworths said the commission's opposition to the acquisition is saddening.
"We had been working closely with the current owner of the site and are disappointed that our plan to bring a renewed retail experience to the residents of Karabar has been opposed by the ACCC," they said.
"We will be taking time to review the ACCC's decision."
Supa IGA in Karabah was also contacted for comment.
In 2018, the ACCC raised concerns about the sale of the independent chain Supabarn to Coles.
The deal went ahead, but faced backlash from shoppers and other independent retailers.
