Supermarket inquiry: Duopoly under fire

The power dynamic between major supermarkets and farmers is under the microscope, as industry experts weigh in.

Woolworths and Coles have been allowed to get “too big” and the nation’s consumer watchdog needs more powers to monitor the market, a leading economist says.

The critique comes as Australian supermarket chains placed responsibility for soaring produce prices at the feet of farmers and suppliers, arguing their price requests were a contributing factor to consumers’ checkout pain.

The dominance of supermarket duopoly of Woolworths and Coles is under fire at the moment, with a Senate inquiry into price gouging underway.

University of Canberra school of politics, economic and society deputy head John Hawkins, who made an inquiry submission as an impartial academic, said by the Australian Competition and Consumer Commission’s own standards, the supermarkets were a “concentrated industry dominated by two players”.

“When you’ve got two players so large it means farmers cannot afford to offend those two big companies,” Dr Hawkins said.

“To me, the root cause of the problem is Woolworths and Coles have been allowed to get too big.”

Dr Hawkins said the ACCC was in a position to monitor the market and determine if there was a reduction in competition.

“The committee could look at the legislation and see if it’s tough enough,” Dr Hawkins said.

“I think there could be measures to strengthen the ACCC’s hand, the ACCC could go to government and say, ‘There’s a problem here, we need a few more resources’.”

Coles and Woolworths are at the centre of a number of inquiries and reviews into supermarket grocery prices. Picture: Supplied.

Coles used its submission to defend itself against accusations of price gouging, citing inflation, natural disaster, and numerous price increase requests from farmers as key factors for price hikes at the checkout.

Woolworths’ submission argued the entry of Aldi, Costco, and Amazon into the Australian market had intensified competition.

But Fruit Growers Victoria chairman Mitchell McNabb said major supermarkets had dominant market share and could set prices for horticultural produce, leading to producers selling fruit below the cost of production.

According to his submission, both major supermarkets had heightened mark-up percentage in the case of Granny Smith apples: Coles with more than 100 per cent throughout 2023, and Woolworths recording 128 per cent and 134 per cent in November and December last year. “Most growers’ average farmgate return for Granny Smith during this period has been between 50 to 60 cents per kg, which is below the current cost of production,” Mr McNabb wrote.

Mr McNabb called for greater price transparency, as supermarkets holding price information subsequently reduced bargaining power for fruit producers.

Last week, the Australian Council of Trade Unions published findings from its own inquiry into price gouging, led by former ACCC chair Allen Fels.

The union report made a suite of recommendations relating to prices including a comprehensive ACCC inquiry into pricing and competition in the retail food and grocery industry, making the Food and Grocery Code Review mandatory, and possible creation of a price register for farmers under the code to better understand market prices.