Watchdog backed in landmark rejection of regional Coles

A business group has backed an unprecedented move to block supermarket giant Coles' bid to set up a second store in a regional mining town.

Australia's second-largest supermarket chain wants to acquire the lease for a vacant lot near the airport in the Goldfields town of Kalgoorlie-Boulder in Western Australia.

It proposed to develop the site into a liquor store and full-line supermarket, which would be the second Coles in a town serving a regional population of about 30,000 people.

Following months of deliberations, the Australian Competition and Consumer Commission on Wednesday announced it had blocked the proposal.

Allowing the acquisition would likely force an independent competitor to exit the market and detract from consumer choice, it found.

The supermarket giant argued shoppers and the local economy would be well-served by having access to another outlet.

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

The supermarket has not said whether it plans to appeal the decision to a tribunal, which could lead to the rejection being overturned.

But the Kalgoorlie-Boulder Chamber of Commerce and Industry backed the ACCC position, noting there was an IGA supermarket in the same area.

"We've got six supermarkets here and we've also just recently had Spudshed open up, which would have invested heavily into Kalgoorlie-Boulder," chief executive Simone de Been told AAP.

"If Coles were to open up an additional Coles, that would close one of the smaller supermarkets."

The chamber has been working hard to reactivate Kalgoorlie's central business district and a Coles near the airport would have dragged people away from the town centre, she said.

WA Premier Roger Cook said his government would scrutinise the watchdog's decision.

"We want to balance the needs of the community to be able to access a local supermarket with the needs of small businesses that don't want to see predatory market behaviour from larger players," he said.

Kalgoorlie-Boulder has a Woolworths among its six supermarkets.

The regulator's decision is the first under rules that came into effect at the start of the year and required major supermarket chains to notify the ACCC of certain acquisitions before proceeding.

The proposed development would deliver some immediate benefits but ultimately leave shoppers worse off, ACCC deputy chair Mick Keogh said.

"There is a real prospect that the acquisition would lead to the exit of an effective independent competitor, and its assets leaving the market," he said.

Kalgoorlie's isolated location and modest population growth meant the market could be unable to support another large supermarket without forcing an existing rival to close, ACCC said.

The watchdog concluded the likely exit of an independent provider would reduce consumer choice and weaken competition.

Coles argued the new store would provide local jobs, improve access to a wider range of competitively priced products and not require an existing competitor to exit the market.

It argued the decision underestimated Kalgoorlie's growth prospects, including demand from the mining industry's fly-in, fly-out workforce.

"We will review the ACCC's decision and consider our next steps," a spokesperson said.