Woolworths, Coles dodge worst fears of regulatory crackdown

Woolworths and Coles have been labelled oligopolies by the ACCC and the Treasurer has vowed shoppers will ‘no longer be treated like mugs’, as the chains dodge their worst crackdown fears.

The nation’s most powerful supermarkets Woolworths and Coles have avoided any forced break-ups or substantial punishment in the consumer watchdog’s months-long investigation into the $120bn grocery sector. Picture: Ian Currie

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Woolworths and Coles will avoid any forced break-ups or substantial punishment as a result of the consumer watchdog’s months-long investigation into the $120bn grocery sector, despite the regulator warning the two wield too much power and fit the definition of oligopoly.

Jim Chalmers on Thursday night claimed the report and its recommendations would ensure Australian shoppers are no longer “treated like mugs” by the big supermarket chains, as the Albanese government oversees what it has termed an “ongoing supermarket crackdown” to ensure better prices and better deals for Australians at the checkout.

In a detailed 441-page report the Australian Competition & Consumer Commission has accused Woolworths and Coles of being oligopolies, saying they have entrenched power and limited incentive to compete vigorously with each other.

It conceded there was “no silver bullet” to cure this, but recommended a collection of legislative and policy reforms and other actions to address aspects of the market that are not working well, including areas where competition is unlikely to emerge.

The recommendations, which include clearer pricing practices, greater transparency for suppliers and reforms to planning and zoning laws, are designed to improve competition in the supermarket sector, make a difference for consumers and give suppliers fairer bargaining conditions, the ACCC says.

But crucially for Woolworths and Coles, it has not recommended forced divestiture of parts of their sprawling retail empires.

The report comes just weeks before a federal election set to be dominated by the cost-of-living crisis, as Peter Dutton continues to threaten to break up the big supermarkets and Labor tries to win back voters angry over rising ­prices.

“We are taking action to get a fair go for families at the checkout and a fair go for farmers at the gate,” Dr Chalmers said on Thursday. “This is about ensuring Australians aren’t treated like mugs by the supermarkets.

“Our ongoing supermarket crackdown means more competition, better prices and better deals for Australians.”

Treasurer Jim Chalmers said the government’s crackdown on supermarkets would mean more competition and better prices. Picture: Tertius Pickard/NewsWire

Dr Chalmers will unveil $2.9m over three years in next week’s budget to help suppliers stand up to the big supermarkets, and increase ACCC funding by over $30m to go after supermarkets using misleading pricing tactics.

The government will also increase funding for consumer advocacy group Choice to give shoppers more information on the best value supermarkets.

Releasing the ACCC final report on the supermarkets, Dr Chalmers and ACCC deputy chair Mick Keogh revealed 20 recommendations to improve competition in the supermarket sector, provide better pricing information to shoppers and increase the powers of suppliers – especially farmers – as they negotiate contracts.

The report has also flagged greater transparency on shrinkflation – where a product is smaller size is reduced but the price stays the same – and on popular loyalty schemes that millions of supermarket shoppers have signed up for.

The key recommendations include: developing a simple and accessible online platform where shoppers can compare grocery prices for the major supermarkets and track changes in prices; supermarkets offering minimum discounting and pricing information; notification by supermarkets when package sizes change; and greater transparency about supermarket wholesale fresh ­prices.

The ACCC, having heard complaints from farmers, growers and farming groups about the power of Woolworths and Coles to alter supply arrangements at will, leaving them stuck with perishable produce that is suddenly rejected, has put up recommendations to improve the power of suppliers and transparency of their dealings with the chains. The chains should be required to provide fresh produce suppliers with greater transparency about the weekly tendering processes they use to negotiate price and volumes with suppliers. Aldi, Coles and Woolworths should also not be able to unilaterally reduce wholesale fresh produce prices or volumes agreed with suppliers. Suppliers of supermarket-branded fresh produce to supermarkets should have earlier certainty about orders placed with them.

Coles and Woolworths control 67 per cent of the $120bn grocery sector. Picture: Andrew Henshaw/NewsWire

Mr Keogh conceded Australia’s supermarket sector was highly concentrated with Woolworths and Coles controlling 67 per cent of the $120bn grocery sector.

However, there was “no silver bullet” to level the playing field or quickly reduce their respective market shares. Rather, he said the ACCC’s recommendations would make a difference for consumers, equip suppliers to make more informed business and investment decisions while bearing a more appropriate level of risk, and boost competition in the sector.

The ACCC deputy chair said forcing supermarkets to make pricing available in real time to third-party price comparison websites was a key measure.

“I think what we are seeing is some growth in cross-shopping and consumers starting to realise that they do need to look at and compare prices a bit more,” he told The Australian.

“The utility of actually being able to compare prices and have those sorts of things much more readily available gives greater focus to competition to attract those consumers, and has the potential to much better inform consumers about the real value of some of the promotions and campaigns that are run by the retailers.”

While the ACCC report has not recommended a crackdown on ‘‘land banking’’ – the practice of supermarkets sitting on undeveloped parcels of land to stop other retailers from entering a shopping centre or neighbourhood – but has called on all levels of government to simplify and harmonise planning and zoning requirements to make it easier to establish new supermarkets.