The competition watchdog says it will not oppose Westfield's proposed buyout of the Karrinyup Shopping Centre provided the retail property giant agrees to sell the nearby Innaloo Shopping Centre.
Westfield had flagged the sale of the Innaloo centre last year when announcing its plans to buy out the remaining 66 per cent of Karrinyup it did not already own from UniSuper.
The Australian Competition and Consumer Commission expressed concern that Westfield would own two shopping centres within 3.5km kilometres of one another, potentially giving it unfair market power.
ACCC chairman Rod Sims said the ACCC had focused on whether the proposed acquisition would be likely to result in Westfield and Westfield Retail Trust extracting higher rents from retailers seeking to lease retail space in north-west metropolitan Perth.
"In particular, the ACCC considered how the proposed acquisition would affect retailers relying on comparison shopping such as clothing, footwear, jewellery and gift stores," he said.
The ACCC found there was limited alternative retail space available in north-west metropolitan Perth, and retail space at Westfield Innaloo and Karrinyup Shopping Centre were close alternatives.
While Westfield Innaloo is currently a sub-regional shopping centre and does not benefit from a department store, Westfield Innaloo has been able to successfully attract retailers which rely on comparison shopping.
The ACCC also found that neighbourhood shopping centres do not provide an effective alternative for retailers especially those relying on comparison shopping.
The ACCC said it was concerned that if the proposed acquisition proceeded, the ownership by Westfield and WRT of these two competing shopping centres might result in a substantial lessening of competition, by reducing the options available to retailers and customers in the area.
"The ACCC has therefore accepted a court enforceable undertaking, which will require the divestiture by Westfield and WRT of Westfield Innaloo to a purchaser approved by the ACCC - in the event that the proposed acquisition proceeds," the watchdog said in a statement.
"Taking into account the court enforceable undertaking, the ACCC is satisfied that the proposed acquisition is unlikely to substantially lessen competition in north-west metropolitan Perth."The ACCC said it would issue a public competition assessment in due course.