Supermarkets are just the latest government scapegoat

Shoppers often don’t buy certain products unless they are on special. Picture: Getty Images

When the Australian Competition & Consumer Commission launches litigation against the supermarket giants on the same day the Prime Minister releases updates on their regulation, external spokespeople are ready to attack – and it just happens to be a low point in the news cycle – you get the impression there is an orchestrated pile-on.

Cost of living is a hot political issue and politicians want to be seen to be doing things about it.

Woolworths and Coles are easy targets in part because on paper their business is easier than making jam, given they sell a product before they have to pay for it.

They have form and are arguably perennial offenders.

From January this year they have been in the politicians’ sights, with the ACCC directed to formally inquire into their operations.

They have learnt over the years to deal with this cycle, taking turns with the big banks and Qantas when politicians want to blame someone.

The known losers are supermarket staff who are the first line of defence in shopper attacks from the Prime Minister down.

Coles and Woolworths are a long way short of perfect and this week’s barrage should teach them if they want to mix selling strategies they better have the right systems in place.

A retailer like Bunnings operates on an “every day low price” strategy, where it claims it will never be beaten on price.

The supermarkets mix it up, sometimes claiming the lowest prices on some goods but on others adopting a “high-low” strategy, which means you keep the price high but include regular discounts.

Savvy consumers don’t buy detergents and other products unless they are on special, because they know they soon will be.

High-low is an acceptable strategy, provided your systems are in order.

Based on the ACCC’s allegations, they were not.

The rule of thumb says you should leave one month before cutting prices after a price hike.

This means if the product went from $1 to $2 on October 1 you would leave it until November 1 before you cut the price by 50c.

Normally it would be the supplier who would wear the cost of the discount.

But everyone is happy because the supplier gets $1.50 for the product, the consumer is “saving” 50c and the supermarket gets to shift product well before it actually has to write the supplier a cheque.

This is the rule of thumb but there are variations – and the ACCC for obvious reasons has failed to draw a line in the sand to say what it would accept as a “reasonable” gap.

This is a grey area which the court may clear up, but it’s also better if the regulator is clear.

The ACCC is meant to be an independent statutory authority but it knows the political game, even if this means overstepping the market and providing voluminous commentary on two cases this week, which are yet to be heard by the court.

Prime Minister Albanese went further in crossing the line, commenting on the case before the court.

The risk of this highly political game is attracting the Looney Tunes brigade from the National Party, which is surely just playing dumb when it claims farmers are being caught in the clutches of the supermarkets and it’s time they were broken up.

This is plain nonsense on many fronts.

It ignores the fact that farmer Jill generally sells to a middle man or two who then sells to the supermarket.

The line of command on who is pocketing what is then somewhat blurred.

Just how you would “break up Coles and Woolworths” is more nonsense, and the federal opposition should run it past its lawyers to actually see how stupid they are to keep pedalling the line.

The next confusion is with mandatory notification in the supermarket code, which has zero to do with prices.

The code governs relations between the supermarkets and suppliers, and in fact such talks could even drive prices higher.

But the government in its push for mandatory notification has oversold the policy as being a universal answer for every known fault in the supermarket.

The last time the supermarkets were caught in the ACCC headlights was back in 2014-16, when they were accused of monstering suppliers.

Coles played ball and settled the case with the ACCC but Woolworths took on the regulator and won.

The Federal Court observed that supplier relations were often contentious, and asked what the problem was.

There are different issues this time but the competing strategies highlight the dangers.

By the time any litigation is decided there will be a new government but the politicians and ACCC won’t care because they have achieved their mission.

Well, almost. The ACCC is doing the politicians’ bidding on the supermarkets (to be fair, the case has been under preparation for 18 months), so when is the government going to make some decisions?

Even the planned supermarket code changes are just more consultation for something agreed to in April.

The ACCC 26 months ago asked for digital platform enforcement remedies, which were agreed to last December but under consultation, just like merger reform.

If the regulator is doing the government’s bidding on cost of living questions, what chance is there of seeing some actual government decisions?