Former ACCC boss Allan Fels says supermarkets desperate to protect reputation
A Senate inquiry has been told of allegations that Woolworths and Coles are desperate to protect their reputation, while gouging suppliers and customers.
Woolworths and Coles are more anxious than other businesses to protect their reputation, with the current spotlight of an inquiry by the Senate helping to restrain their ability to ratchet up prices, a former ACCC boss has said.
Former Australian Competition & Consumer Regulator chairman Allan Fels told the Senate inquiry that while the policy measures available to curtail the power of the two major chains and push down prices was not simple or a “quick fix” the fact the supermarkets and their behaviour were now in the spotlight was helping to keep a lid on shelf prices.
“There are no quick or easy fixes in retail, the reputation in the spotlight will make them (Woolworths and Coles) more restrained on their pricing,” Professor Fels testified on Monday.
“They are very concerned about their reputation, that is true of all businesses, but particularly these businesses that face the public every day,” he said.
“Reputation really counts for supermarkets and while you have scrutiny of them that has an effect.”
The former chairman of the competition regulator, Professor Fels, says the nation’s $135bn supermarket sector was less competitive than those in the US and Britain, and that he supports the voluntary food and grocery code of conduct between supermarkets and suppliers being made mandatory.
He also echoed concerns of previous witnesses before a Senate inquiry about Woolworths and Coles engaging in ‘land banking’ to limit or keep out competition, and called for a greater focus on combating this strategy.
Professor Fels, who led the ACCC from 1995 to 2003, also said he backs the introduction of divestiture laws – allowing the courts to forcibly break up large corporations or forcing them to sell parts of their business – as a “sensible” approach to stop powerful companies misusing market power.
Professor Fels kicked off the inquiry’s public hearings on Monday and was followed by an executive who has worked in the grocery sector that detailed in allegations to the senators the way Woolworths and Coles squeeze food and grocery suppliers, demand money for advertising and block requests for price rises.
The litany of allegations of price gouging suppliers and ratcheting up shelf prices made by Abdel Badoura, who said he had been involved in the grocery supply industry for years, led one Senator at the public hearing, National’s Ross Cadell, to remark about the twin supermarket giants “is there no pocket they won’t pick?”
On Tuesday many of these allegations will be put to the chief executive of Woolworths, Brad Banducci, and Coles boss Leah Weckert, as they face the public hearing in Canberra and are grilled by the Greens-led Senate inquiry into the supermarkets.
Mr Fels, who earlier this year wrote a report for the trade union movement on price gouging and unfair pricing practices, was asked by senators about his view of the power of Woolworths and Coles and measures that could be taken to address this.
Professor Fels said the supermarket sector, dominated by Woolworths and Coles, was less competitive than those in the US and Britain, and that he supported the voluntary food and grocery code of conduct being made mandatory.
He said given the food and grocery code of conduct was voluntary it could be seen as “tokenistic and very weak” as it remained voluntary, with it being mandatory and allowing strong court action greatly strengthening it.
Former Labor federal minister Craig Emerson is currently conducting a review into the code of conduct and in his interim report has argued the code should be made mandatory. The signatories of the code are the supermarket giants Woolworths and Coles, as well as Aldi and supermarket wholesaler Metcash.
The Senate inquiry is continuing.
Professor Fels backed the introduction of divestiture laws but said any divestiture laws should only apply to businesses found in a court to have breached competition provisions, especially section 46 of the competition and consumer law that related to the misuse of market power.
The Greens-led Senate inquiry into the supermarkets is investigating the power of the supermarkets and allegations of price gouging, as well as Greens legislation to introduce divestiture powers.
Professor Fels said there had been break-ups of gas, energy and other companies in Australia that had not led to job losses – as is claimed by some critics of divestiture powers. He also said in the US, the “the home of free markets”, it had divestiture laws that had seen large corporations broken up.
He told Senators he was concerned about the level of ‘land banking’ by the supermarket heavyweights Woolworths and Coles, which could be limiting competition and the entry of new players.
“I think that should be looked at much more closely”, Professor Fels told the Senate inquiry.
Last week, the Senate inquiry into the supermarkets was told that Woolworths and Coles were both engaged in land banking – the strategy of buying up land and property to keep out other retailers.
“The key to getting better competition in the supermarket area is to open up the possibility of entry.”
More Coverage
Country Road, Mimco owner suffers pre-Christmas sales slump
The company behind a stable of fashion brands like Country Road, Mimco and Witchery has suffered a sales slump leading up to Christmas to add its name to a growing list of struggling retailers.
Return of Aussie wine to China fires up exports in sluggish market
Australian winemakers are sitting on a glut of mainly red but the reopening of the post-tariff Chinese market has helped ease the pressure by lifting exports 34 per cent in 2024.