Shoppers being played for mugs?

With the Greens and their populist pals in parliament promoting the idea that government must protect us from capitalism, Coles and Woolworths have done Australians no favours. At the very time when big business should be demonstrating that the free market, not big government, is the only way to create jobs, drive productivity and lift living standards, the pricing practices of perhaps the two best-known businesses in the country are called into question. The Australian Competition & Consumer Commission is taking them to court, alleging they misled consumers by claiming price cuts on hundreds of products, “when the discounts were, in fact, illusory”.

Whatever the specifics of the allegations, commission chair Gina Cass-Gottlieb set out why the case will resonate: “Many consumers rely on discounts to help their grocery budgets stretch further … It is critical that Australian consumers are able to rely on the accuracy of pricing and discount claims.” Coles states it will defend the proceedings and Woolworths has announced it will “review” the ACCC’s case. But what will be critical for them is whether they are able to credibly respond to what people in supermarket queues could wonder in responding to price promotions – are they being played for mugs? Shoppers caught in the Qantas “ghost flight” fiasco certainly will have every right to feel aggrieved again. In May, Qantas admitted to the ACCC that senior managers knew the airline’s systems were such that tickets could be sold on flights that did not exist.

The ACCC case is terrible timing for Coles and Woolworths with news still fresh of a Senate committee inquiry into supermarkets. There was a great deal of nonsense in this, much of it due to rhetorical grandstanding by its chair, Greens senator Nick McKim. Committee recommendations – for legal prohibition of the “charging of excess prices, otherwise known as price gouging”, and a commission on grocery pricing – would distort the way competition in the market serves us all. As the ACCC argued in its submission to the Senate inquiry, the arrival of Aldi in Australia has had “a significant effect on the pricing of major supermarket chains”.

While the case for leaving market competition to set supermarket prices may not be one best made today, the campaign should start tomorrow and business should lead it. As former ACCC chair Rod Sims once put it: “The profit motive is the most powerful tool for enhancing social welfare. It provides businesses with the incentives to produce the goods and services consumers need and want. It rewards the businesses that do it best.” The market economy works when prices are set openly and honestly, are the consequence of competition, and are not distorted by cartels contriving to cripple competitors and governments imposing agendas or unfairly favouring entrenched interests. Labour market supply firms facing the CFMEU can tell us all about that. As Mr Sims said: “Government needs only to set some basic rules and enforce them, and the market organises itself.”