**Australia**: The ACCC’s comprehensive report outlines 20 recommendations aimed at enhancing competition in the supermarket sector, addressing issues like pricing transparency, planning laws, and supplier relations, to ultimately improve outcomes for consumers and suppliers in the industry.
The Australian Competition and Consumer Commission (ACCC) has released the final report from its supermarket inquiry, which recommends a comprehensive set of measures aimed at improving competition in the supermarket sector. The analysis highlights the notable profitability of dominant supermarket chains such as ALDI, Coles, and Woolworths, observing that their average product margins have increased over the past five financial years, raising concerns about consumer outcomes and supplier conditions in the market.
ACCC Deputy Chair Mick Keogh outlined the thorough investigative process employed by the commission, stating, “In the past 12 months, the ACCC has heard from more than 20,000 consumers who responded to our consumer survey,” among other extensive consultations. He added, “Based on this extensive analysis, we have recommended a range of measures to improve conditions for competition in the sector and deliver better outcomes for consumers and suppliers.”
The inquiry’s findings reveal that issues persist in Australia’s supermarket landscape, particularly with regard to convenience, pricing, and competition. While consumers prefer convenient shopping options, the report suggests that there is a growing trend of price scrutiny among shoppers. To address this, the ACCC has recommended that major supermarkets publish their prices online and provide dynamic price information to third parties, aiding consumers in making comparisons.
A major obstacle highlighted in the inquiry is the restrictive nature of planning and zoning laws, which currently hinder the entry and expansion of new or smaller supermarket chains. The ACCC urged a simplification of these regulations to facilitate competition within the sector. Keogh noted that these restrictions can result in delays that may deter new market entrants, stating, “Currently, the availability of suitable retail sites is limited by planning and zoning laws.”
In addition to planning reforms, the report underscores the importance of a newly introduced merger regime that aims to enhance the ACCC’s ability to scrutinise acquisitions made by Coles and Woolworths. Since 2019, these companies have acquired approximately 260 retail sites, but the ACCC was formally notified of only 14 of these acquisitions. The recent merger reform laws are expected to equip the ACCC with greater oversight capabilities to prevent a significant reduction in competition resulting from supermarket acquisitions.
Moreover, the report addresses consumer concerns regarding pricing transparency and promotional practices. Keogh highlighted the prevalence of ‘shrinkflation’, wherein product sizes decrease without a corresponding reduction in price. The ACCC has recommended that supermarkets notify consumers of such changes, which would enable shoppers to make more informed decisions and potentially switch to more cost-effective alternatives.
The inquiry also spotlighted disparities in pricing and service quality faced by consumers in regional and remote areas, often attributed to higher freight costs and a lack of competition. The ACCC’s recommendations include increasing price transparency in these underserved locations and advocating for support for community-owned grocery stores.
In terms of relations with suppliers, the ACCC noted a significant power imbalance, particularly in the negotiation of fresh produce prices. The report suggests enhancing transparency in weekly tendering processes and ensuring that supermarkets cannot unreasonably alter agreed contract terms unless in the case of force majeure events. Keogh remarked on the complex dynamics at play, indicating that “many suppliers fear retribution for raising concerns directly with the major supermarkets.”
Lastly, the ACCC is calling for amendments to the Food and Grocery Code to reinforce protections for suppliers and to facilitate better market reporting obligations for major retailers. This is expected to empower suppliers with a clearer understanding of market conditions and enhance their position in negotiations.
In summary, the ACCC’s final report presents a multifaceted approach to improving the supermarket sector in Australia. With its 20 recommendations, the commission aims to foster a more competitive environment, ultimately benefiting consumers and suppliers alike.
Source: Noah Wire Services
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