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Woolworths Australia has accused Foodstuffs of planning to "cannibalise" The Warehouse Group's Red Sheds to develop its grocery business.
Woolworths applied for Commerce Commission clearance to buy the Warehouse on Wednesday, matching a move by local co-operative Foodstuffs in December.
In its application, the Australian retail giant says
Foodstuffs is interested in The Warehouse to obtain "unassailable control" of the wholesale food, liquor and grocery market.
"Woolworths believes Foodstuffs have no true commitment to general merchandising and Foodstuffs application is a clear demonstration of an intention to cannibalise the Warehouse sites in order to grow its business," the application says.
Foodstuffs chief executive Tony Carter dismissed Woolworths' claims, saying the Australian company had no way of knowing Foodstuffs' plans.
And he pointed to Woolworths' application, which says Foodstuffs supermarkets have a price advantage over its stores.
"They spend a lot of money on advertising telling people they have the lowest prices." he said.
The two players in the grocery duopoly have taken the gloves off as they each seek approval to buy up to 100 per cent of The Warehouse.
Both insist that, despite their applications, they are not committed to making a formal offer.
But Woolworths' move signals the fight is on for control in any bidding war, with the prize being dominance of the grocery and general merchandise markets.
And while that continues, it will keep interest in the Warehouse share price strong - the shares closed up 22 cents yesterday at $7.26. Overall, the price has risen 27 cents since Woolworths' application was made.
Woolworths says in the application that if it buys The Warehouse it will reduce prices to customers by procuring products jointly for the Australian and New Zealand markets.
It will expand the range of products by bringing in merchandise from its Big W chain in Australia.
Woolworths downplayed the potential impact of the Warehouse Extra grocery offering, saying it would not be able to establish a sustainable competitive food, liquor and grocery model due to its limited presence.
It talked down the The Warehouse's plans to expand its Extra stores to 15, a move seen by Foodstuffs as delivering only a 2.78 per cent share of the grocery market even if all were successful.
While the commission is focused on issues of market dominance, the battle for The Warehouse will include a public relations component as well.
Founder and controlling shareholder Stephen Tindall has a reputation as a nationalistic investor.
Although Tindall has never said as much, his admirers believe he would prefer selling his stake to a co-operative like Foodstuffs over an Australian corporate bid.
Woolworths has sought to turn the tables by portraying itself as the underdog against Foodstuffs in the wider grocery sector.
Foodstuffs, with its New World and Pak'n Save supermarkets, has 56 per cent share of the grocery sector while Woolworths holds the rest through its local subsidiary, Progressive Enterprises, involving the Foodtown, Woolworths and Countdown chains.
It said the commission should take into account the role of Foodstuffs' wholesale operations and its role in servicing the Four Square stores, which are also members of the co-operative.
"In Woolworths' view, the true motivation for an acquisition of the Warehouse by Foodstuffs would be to generate an unreasonable position of wholesale food, liquor and grocery market control," the application said.
