Woolworths' acquisition of the Supa IGA supermarket at Hawker Shopping Centre would lessen competition in the marketplace, according to the consumer watchdog.
But Australian Competition and Consumer Commission chairman Rod Sims said there was such little impact the supermarket giant could buy the business from IGA operators John Krnc and his family.
Mr Sims met residents' group Friends of Hawker recently and heard their concerns about loss of parking and the closure of small businesses.
According to some at the meeting Mr Sims had said these were planning issues unrelated to competition.
The ACCC was confined by legislation and had to ensure its decisions were legally defensible. Friends of Hawker Village convenor Bill Kearney said Woolworths already operated two other supermarkets within a few kilometres of Hawker.
''The local community is understandably concerned about the demise of yet another independent grocery outlet that offered competition and choice of products and service,'' Mr Kearney said.
"There are also important concerns about the potential adverse impact on the centre's small, independent retailers as well as on future parking arrangements.
''Business analysts have predicted that the future growth of the two big national supermarket retailers - and especially Woolworths - will involve squeezing out small speciality retailers. These are the retailers who bring loyal customers to the centre and give suburban centres like Hawker so much of their character.''
In December 2011, the ACT government released a masterplan which proposed to relocate the IGA to the car park, with basement parking and a travelator to the ground level. It was a central plank of the new masterplan, after the Hawker community lashed previous plans that surfaced when ''for sale'' signs appeared on car parks in 2009 to signal a major redevelopment.
A backlash from irate traders and residents cooled only when a reference group - representing business, community and the government - was appointed. But after the masterplan, including shifting the supermarket, failed to win support a three-year moratorium was placed on government-sponsored development at the centre. This will expire in February 2015.
Mr Krnc and his family decided to sell. In a statement they said they were pleased with the ACCC's decision and they could move forward with the sale.
Mr Sims said the local market included several supermarket offerings. Within this market, the Hawker Supa IGA's closest competitor was a Coles supermarket at the nearby Jamison Centre, which also has an ALDI. The Woolworths supermarkets are more distant competitors.
The ACCC commissioned customer surveys which showed that while non-price aspects of the Hawker Supa IGA offer were valued by consumers, only a small number said its range, service and pricing were the most important reason they shopped there.
Despite its product differentiation, the Hawker IGA drew few customers from outside the suburbs immediately surrounding it, Mr Sims said.
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