ACCC inquiry’s interim report another blow to reputation of supermarket giants
The competition regulator has labelled supermarket giants Woolworths and Coles oligopolists and warned it will now scrutinise whether the twin chains are misusing market power to ratchet up prices.
Business
Don't miss out on the headlines from Business. Followed categories will be added to My News.
The competition regulator has labelled supermarket giants Woolworths and Coles oligopolists and warned it will now scrutinise whether the twin chains are misusing market power to ratchet up prices, which are pinching low-income families.
Shoppers and grocery suppliers have reported to the regulator that Woolworths and Coles have considerable power and are using that to overcharge at the checkout while squeezing suppliers on what they are paid, while the murky practice of “land banking” could be keeping rivals such as Aldi out of regions to cede more power to the incumbents.
In a scathing interim report into the $120bn supermarket sector, the Australian Competition and Consumer Commission has accused Woolworths and Coles of operating within an oligopoly in the Australian supermarket sector through their combined 67 per cent share of supermarket retail sales nationally.
The damning assessment of the alleged behaviour of Woolworths and Coles is the competition watchdog’s second salvo against the supermarket industry in the past week, with the chains also facing court proceedings launched by ACCC chair Gina Cass-Gottlieb, who labelled the stores’ alleged fake discounts “illusory”.
The ACCC said on Thursday consumers and grocery suppliers had told it as part of its inquiry they are concerned some of Australia’s supermarket retailers have considerable market power and are engaging in practices that disadvantage them.
And following a gruelling appearance before the Greens-led supermarket Senate inquiry earlier this year – during which combative Woolworths boss Brad Banducci was threatened with contempt and jail – the ACCC has advised it will drag supermarket executives before its own public inquiry in November.
This is likely to concern Woolworths and Coles executives, with both chains viewing the ACCC as the “adults in the room” when it came to scrutinising the industry, as opposed to the expected anti-business vitriol from the Greens and an ACTU-sponsored supermarkets inquiry previously published.
The watchdog, which this week launched unprecedented legal action against Woolworths and Coles, accusing them both of using fake discounts and misleading price claims to entice shoppers, has now ramped up its scrutiny and will conduct a forensic investigation into a basket of 14 common grocery items to discover any improper or illegal behaviour by the retailers.
These items include chicken, pork, apples, bananas, strawberries, eggs, milk, pet food and dishwashing tablets, and the ACCC has warned it will use its powerful information gathering powers to obtain further information, including detailed pricing and margins data, from the retailers.
The 266-page interim ACCC report has now labelled supermarket retailing in Australia an oligopoly.
Woolworths and Coles account for 67 per cent of supermarket retail sales nationally, Aldi accounts for 9 per cent and Metcash-supplied independent supermarkets 7 per cent.
“Oligopolistic market structures can limit incentives to compete vigorously on price,” ACCC deputy chair Mick Keogh said.
“We see Woolworths and Coles providing a broadly similar experience to customers through largely undifferentiated product ranges, pricing at similar levels and similar non-price offerings, including loyalty programs.
“So far during this inquiry we have heard in detail about many aspects of Australia’s grocery markets.
“Increasing grocery prices are one key contributor to the rising cost of living and are front of mind for consumers, given how often people shop at supermarkets and how much of their incomes people spend there.
“We have observed that food price growth in the last five years is largely in line with inflation in other goods and services, and that food price inflation is lower in Australia than in most OECD countries.
“However, we will look very closely at the extent to which any market power held by the supermarkets has a role in increasing prices to consumers or decreasing prices to suppliers.”
Mr Keogh said during the remaining five months of the ACCC inquiry the regulator will scrutinise whether the supermarkets are using market power – and if so, how – and the economic implications this has for Australian consumers and suppliers.
An ACCC consumer survey received 21,481 responses, more than any other survey the regulator has conducted, with shoppers saying they were losing trust in sale price claims by supermarkets.
“These difficulties reportedly arise from some of the pricing practices of some supermarkets, such as frequent specials, short-term lowered prices, bulk-buy promotions, member-only prices and bundled prices,” Mr Keogh said.
Originally published as ACCC inquiry’s interim report another blow to reputation of supermarket giants