Mandatory reporting of prices and package sizes are some of the recommendations made by the Australian Competition and Consumer Commission in a 441-page report into the supermarket sector.
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See subscription optionsWHAT DID THE REPORT FIND?
* Coles and Woolworths are some of the most profitable supermarkets in the world based on three metrics assessed by the ACCC, while ALDI's Australian supermarkets are more profitable than ALDI stores in other countries
* Supermarkets have increased their average product margins in recent years, even as cost pressures have risen
* The oligopolistic structure of the market, in which the major chains boasted a dominant share of sales, gave them little incentive to be competitive on pricing
* High profitability compared to global peers indicates there is room for more competition in the Australian supermarket sector
* Coles and Woolworths wielded monopsony power over suppliers, meaning they are often their sole purchaser and can dictate prices the supplier can expect to get for their products
* Coles and Woolworths' dominance of the sector was entrenched and departures from the status quo were unlikely in the foreseeable future
* The report made no findings on whether the supermarkets were guilty of price gouging and stopped short of calling Coles and Woolworths duopolists
* Despite the lack of competition, Australia has a relatively efficient food supply system and the supermarkets' large scale provides convenience to consumers
WHAT DID THE ACCC RECOMMEND?
* Balancing supermarket power over suppliers by enforcing stricter reporting and transparency requirements, preventing chains from unilaterally reducing agreed wholesale prices or volumes, earlier certainty for suppliers about orders and allowing suppliers to use their own branding
* Ending dodgy discounting and shrinkflation by giving consumers more information about prices, promotions and loyalty programs, including mandatory notifications when supermarkets change the size of packages in a way that detriments shoppers
* Reducing barriers to entry by addressing planning and zoning issues
* Improving choice and supply in remote areas by supporting community-owned stores and strengthening complaints-handling mechanisms
* Preventing supermarkets from negotiating out of key minimum protections in the Food and Grocery Code
HOW DID WE GET HERE?
* Woolworths and Coles drew criticism after announcing record profits while grocery prices were skyrocketing amid the post-pandemic inflationary outbreak
* The opposition called for the competition watchdog to be given powers to break up Coles and Woolworths, but this was derided by Labor as a "Soviet Union" relic and was not supported by the ACCC
* A Greens-led Senate inquiry was set up into the sector and recommended divestiture powers, finding Woolworths and Coles were operating without proper oversight and restraint
* Woolworths CEO Brad Banducci was threatened with jail time by Greens senator Nick McKim for failing to answer questions during a committee hearing and later stepped down from his role after walking out of an ABC interview
* The federal government pledged more funding for consumer group Choice to monitor supermarket pricing trends
* Merger rules were changed to notify the ACCC of every supermarket business and land acquisition
* Prime Minister Anthony Albanese announced the ACCC inquiry into supermarkets in January 2024
WHAT HAPPENS NEXT?
* The federal government has announced $2.9 million in funding over three years for education programs for suppliers
* The government supported all 20 recommendations of the report in principle, but will consult on some of the recommendations before implementing them while others will be incorporated into existing measures being rolled out
* A mandatory food and grocery code of conduct, designed to ensure retailers and wholesalers treat suppliers fairly and armed with millions of dollars in penalties, will replace the existing voluntary code on April 1
Australian Associated Press
