Two more shots in the supermarket war
Two reports released last week attack the supermarket majors for anti-competitive practices, returning the focus to the ACCC’s consideration of groceries and adding to calls for a formal investigation.
The peak employer organisation for independent supermarket and liquor retail operators, Master Grocers Australia (MGA) and Liquor Retailers Australia (LRA), released a report last week saying Coles and Woolworths are deliberately killing competition in the domestic market. The “Let’s Have Fair Competition” industry report reveals many anti-competitive policies and practices in this duopolistic market including: anti-competitive price discrimination, shopper docket schemes, ‘store saturation’ strategies and over-sized store strategies. These strategies operate to create barriers to entry for smaller independent competitors.
In addition, the Senate Committee Inquiry into Australia’s food processing sector was released on 16 August 2012, revealing similar concern of the concentrated market, sensitivity to price, rise of the private label products, and misuse of market power.
The ACCC has stated that the behaviour of supermarkets is a particular area of interest, although it is still consulting with market participants, especially suppliers. Accordingly the Senate Committee’s report advises food processors to present their concerns to the ACCC now. Ultimately the report makes three key recommendations in this area:
1. That the government initiate an independent review of the competition provisions of the CCA: misuse of market power; creeping acquisitions; predatory pricing; and unconscionable conduct;
2. That the CCA consider the inclusion of the function of food supply chain ombudsman within the ongoing role of the ACCC;
3. That major supermarkets in Australia voluntarily compile and establish benchmarks within their corporate social responsibility documents to measure the level of satisfaction of their suppliers in dealing with the supermarkets.
We expect the ACCC’s scrutiny in this area to ramp up in coming months, and the similar tone of these two reports will place further focus on supermarket behaviour.
Louise Beange and Smriti Arora