Government should support community stores: ACCC

THE long-awaited report into supermarket reforms from the Australian Competition and Consumer Commission (ACCC) has highlighted the importance of community and remote supermarkets. The Supermarkets Inquiry Final Report was released by the Federal government on Friday after the ACCC conducted a 12-month inquiry into Woolworths, Coles, and Aldi supermarkets. The ACCC supplied the report to Treasury on Friday, 28 February. Of the 20 recommendations given by the consumer watchdog, a highlight was the need for supporting community-owned stores in 'limited choice' areas with necessary governance measures. The inquiry found that ALDI, Coles, and Woolworths were some of the most profitable supermarket businesses among global peers and their average product margins had increased over the past five financial years. The report said Australians’ wages had not kept pace with grocery inflation since 2021, with prices increasing at more than twice the rate of wage growth by the start of 2023 and that, despite that growth having since slowed, prices remained substantially higher relative to wages compared to the pre-2022 period. The ACCC said the 'ColesWorth' domination of the sector was 'not working well' and was leading to poorer outcomes for consumers and suppliers than would be expected in a more competitive market. The recommendations also include clearer pricing practices, greater transparency for suppliers, and reforms to planning and zoning laws, which aim to improve competition and give suppliers fairer bargaining conditions. ACCC deputy chair Mick Keogh said the range of measures to improve competition had come from extensive analysis of the over 100 public submissions to the inquiry and 20,000 consumer survey responses. "The ACCC (also) held eight supplier roundtables, reviewed tens of thousands of internal documents, conducted private hearings and ten days of public hearings, and analysed billions of points of supermarket data,” Mr Keogh said. “There is no ‘silver bullet’ that will address all the issues we have identified in the supermarket sector, but we are confident that our recommendations will make a difference for consumers, will equip suppliers to make more informed business and investment decisions while bearing a more appropriate level of risk, and will boost competition in the sector." The report recognised consumers' preference for convenience but noted that customers were shopping around more than in the past, possibly increasing the supermarkets' incentive to compete more 'vigorously' on price. The ACCC is recommending ALDI, Coles, and Woolworths be required to publish their prices on their websites. The report said significant barriers for new or smaller supermarkets made the large-scale entry of a new supermarket chain in the immediate future unlikely, as demonstrated by ALDI taking more than 20 years to achieve its current market share of nine per cent and that small-scale local entry and expansion was more achievable. The report recognised the different product range and level of service provided by small-scale independent supermarkets. Land acquisition was also scrutinised by the inquiry, hearing that Coles and Woolworths had significant advantages of competing with each other for suitable retail sites due to their size and financial resources, making the process challenging for smaller businesses. Coles and Woolworths have acquired about 260 sites between them in the last six years, of which the ACCC was only notified of 14, sometimes by third parties. Mr Keogh said government zoning played a big part in land acquisition and that recently passed merger reform laws would give the ACCC greater power to scrutinise supermarket acquisitions further. The ACCC also called for greater transparency with pricing and discounts. A key concern raised by consumers throughout the inquiry was instances of ‘shrinkflation’, where a product’s size was decreased but the price either remained the same or increased. The ACCC is recommending that supermarkets publish when shrinkflation occurs. The inquiry also found that there was a significant bargaining power imbalance between ColesWorth and some suppliers, with the two chains exercising their buying power through their trading terms and business processes and practices. The ACCC recommended that ALDI, Coles, and Woolworths be required to provide fresh produce suppliers with greater transparency about the weekly tendering processes they use to negotiate price and volumes with suppliers and recognised the need for further consultation on this. Under the recommendations, supermarkets would need to provide fresh produce suppliers with more detailed information about the basis for seasonal forecasts to allow those suppliers greater ability to predict future demand. “Improving transparency for demand forecasts will give suppliers greater certainty and greater ability to assess their risk exposure in the supply of fresh produce,” Mr Keogh said. “We received detailed information in confidential submissions and roundtables with suppliers who fear retribution from raising concerns directly with the major supermarkets. "We found that suppliers need more information and protections to be able to make more informed investment decisions.” Coles Supermarkets responded cautiously to the report by saying the country’s grocery sector was highly competitive and rapidly evolving, and welcomed the ACCC recognising that rising business costs had driven grocery prices up. "Coles' net profit margin of 2.6% has remained stable for the past five years," the statement said. "Coles welcomes any recommendations that improve transparency for suppliers and customers but cautions against measures that will increase red tape and drive up costs." The supermarket chain said it was currently reviewing the report and its recommendations in detail. Nationals leader David Littleproud said the report's release was designed for a government 'about to go to an election' and represented a business-as-usual approach to supermarket anti-competitive behaviour. Mr Littleproud accused the Prime Minister of reneging on an earlier promise to consumers. “Anthony Albanese pledged on January 16, 2024, ‘if the ACCC asks for more powers, then my government will give it to them’, after ACCC chief Gina Cass-Gottlieb said she would welcome new powers to break up big business including supermarkets and that those powers would be ‘useful to have in the toolkit’," Mr Littleproud said. “However, just a month later, after the big supermarkets had obviously got to him, he declared he would rule out divestiture because ‘we are not a Soviet country’. “Mr Albanese has been too weak to stand up to the major supermarkets and has had the wrong priorities, making excuse after excuse for three years.” The final report can be found at https://www.accc.gov.au/inquiries-and-consultations/supermarkets-inquiry-2024-25/final-report