ACCC supermarket inquiry sidesteps calls for divestiture, despite the Coalition, Greens

A landmark probe into Australia’s supermarket giants made 20 recommendations to improve competition, but did not include one key measure.

The consumer watchdog’s probe into Australia’s supermarket monopoly has ignored a key policy, put forward by the Coalition, which would split up grocery giants for unscrupulous behaviour.

Although divestiture was not part of the terms of reference for the report commissioned by the Albanese government, the consumer watchdog did make recommendations for improving competition which fall well short of a big stick approach.

In an major cost-of-living election pitch to voters, Peter Dutton has promised to equip the Australian Competition and Consumer Commission with “last resort” powers to break up major players in the supermarket and hardware sectors if they are found to be abusing their market dominance, should he be elected.

This could be through price gouging customers, while driving down prices paid to suppliers and farmers.

The landmark ACCC inquiry into supermarkets made 20 recommendations, however it did not support divestiture policies to split up supermarket giants. Picture: NewsWire/ Sharon Smith

As detailed in the ACCC’s final report into its Supermarket Inquiry, Coles and Woolworths disproportionately dominate the sector, with Woolworths holding 38 per cent of the market share and Coles holding 29 per cent.

The remaining 33 per cent is held by Aldi (9 per cent) and Metcash, the parent company behind IGA stores (7 per cent) and other independent grocers making up the remaining 17 per cent.

However, the ACCC’s 441-page report did not recommend divestiture as a way to boost competition, lower prices for customers and ensure fairer outcomes for farmers.

Instead the 20 recommendations, which have received in-principle support from the Albanese government, called for more transparent and uniform rules on pricing, measures to stop landbanking and increase choice in remote areas.

The ACCC did not consider divestiture laws in its report, but made 20 other recommendations to reduce grocery prices. Picture: Newswire

Strategies to ensure suppliers, farmers and producers are fairly treated by supermarkets when negotiating sale volumes and prices also made up half of the recommendations.

In addition to divestiture policies, the Coalition has promised to install a Supermarket Commissioner to confidentially mediate disputes between farmers and supermarkets if elected.

Making the announcement in July last year, the Opposition Leader said the policy would target abuses of market share.

“There are complaints, understandably, from farmers and suppliers and many others in the supply chain, but equally, there are many complaints and validly made by consumers who are worried about what it means when they go to the checkout with ever increasing prices,” he said at the time.

The Coalition have promised to give the ACCC divestiture powers to split up misbehaving supermarket giants if it wins government. Picture: NewsWire/ David Crosling

While backed by the Greens, Labor rejected the Coalition’s proposed divestiture laws on the premise it would not lower prices.

Separately Labor has already passed legislation to penalise supermarket giants with fines of up to $10m, or 10 per cent of their annual turnover, for breaching the Food and grocery Code of Conduct.

The code will come into affect from April 1 and apply to businesses with more than $5bn of turnover, which includes Woolworths, Coles, Aldi and Metcash, the parent company of IGA.

Coles said the company “welcomes any recommendations that improve transparency for suppliers and customers but cautions against measures that will increase red tape and drive up costs”.

In a statement to the ASX, Woolworths chief executive Amanda Bardwell said the supermarket giant had worked constructively with the ACCC and has already implemented many of the recommendations handed down over the last 18-months.

“We have taken steps to improve the experiences customers and suppliers have with us, and continue to listen carefully to all of them,” Ms Bardwell said.

“We fully understand that customers want us to make it easier to find value, especially as the cost of living remains their major concern.”

Treasurer Jim Chalmers said the government was committing to “all of the recommendations in principle” and was already implementing some measures related to unit pricing and competition.

“We’re also funding the supplier groups to empower them, to strengthen their arm in the negotiations with the big supermarkets,” Mr Chalmers told ABC on Friday morning.

“This is all about cracking down on the supermarkets.

“We know that people are still under pressure and a lot of that pressure is felt at the checkout.

“We are doing what we can to keep the supermarkets in check at the checkout and this ACCC report will help us go about it.”

Treasurer Jim Chalmers said the government was committing to all recommendations in principle. Picture: NewsWire/Tertius Pickard

In a statement, Coles said the company held less than 30 per cent of the market share and was increasingly competing with other supermarkets and retail chains who had evolved their range, meaning “Coles must compete vigorously for a share of consumers’ grocery baskets”.

Responding to the increased cost of grocery prices, the supermarket giant said they, as well as suppliers, were facing “significant increases” in a number of costs including wages, electricity and rent.

“We do not control these inflationary costs in the economy – but they contribute to higher grocery prices for Australian households,” Coles said.

“Coles has worked hard to keep grocery prices low, with grocery inflation of just 1 per cent – excluding tobacco – for the first half of this financial year.

“While of no comfort to households and families, the ACCC’s own analysis shows grocery price inflation in Australia has been lower than in countries like Canada, the UK, US and New Zealand.”

Coles said the company ‘welcomes any recommendations that improve transparency for suppliers and customers but cautions against measures that will increase red tape and drive up costs’. Picture: NewsWire

The company’s Net Profit After Tax (NPAT) is comparable to “global peers”, including Canada, the US and UK, according to the statement.

Coles said their NPAT remained about 2.6 per cent over the last five years, meaning the company earned about $2.60 for every $100 a customer spends.

“We will review all of the recommendations in detail,” the statement said.

“We have listened intently and have already made changes such as simplifying our promotional tickets, providing additional information to customers about promotions and are working to make it easier for customers to compare products through clearer unit pricing.”

Woolworths Group said the company also welcomed the recommendations in a statement to the ASX.

She said the ACCC report showed supplier costs to supermarkets had increased dramatically post-Covid, while acknowledging the cost-of-living pressures on households.

“We have worked constructively with the ACCC to help it understand our business, the sectors in which we operate, our suppliers and supply chains, and the considerable competition we face,” Woolworths chief executive Amanda Bardwell said.

“Year-on-year prices in our Australian food business have now declined for four consecutive quarters, as noted at our F25 Half-Year Financial Result,” Ms Bardwell said.

“We welcome recommendations that improve transparency for customers where they don’t have unintended consequences or increase costs.”

Woolworths Group said it had already implemented a variety of measures in the past 18 months including committing to improving price transparency in the horticultural sector, simplifying promotional programs and making in-store offers clearer, and delivering increased value to customers through lower prices and deeper promotions.