Australia’s major supermarket chains have consistently increased profit margins over the past five years, but it’s not enough to warrant breaking up of the big chains, the ACCC says.
Australia’s major supermarket chains have consistently increased profit margins over the past five years, and are among the most profitable supermarkets globally, but it’s not enough to warrant breaking up of the big chains, the Australian Competition and Consumer Commission says.
The ACCC's final report for the supermarkets inquiry made 20 recommendations to increase competition in the sector.
The recommendations included clearer pricing practices, transparency for suppliers and reforms to planning and zoning red tape.
ACCC deputy chair Mick Keogh said there was no silver bullet to address issues in the supermarket sector.
“But we are confident that our recommendations will make a difference for consumers," he said.
"We 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,.
“In the past twelve months, the ACCC has heard from more than 20,000 consumers who responded to our consumer survey, received more than 100 public submissions, 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.”
Speaking on the release of the final report, Treasurer Jim Chalmers said the changes would ensure Australians weren’t treated like mugs by the supermarkets.
M&A scrutiny
A focus of the report was the extent to which smaller players in the industry were blocked from securing retail sites.
It found Coles’ and Woolworths’ size, reputation and financial resources often meant smaller supermarkets could not compete for sites.
Mr Keogh said recently passed merger reform laws would assist the ACCC scrutinise these moves.
Since 2019, Coles and Woolworth have acquired approximately 260 sites between them, including existing stores, land and shopping centres, of which the ACC was only notified of 14.
Some of those notifications came from third parties.
“The recently passed merger reform laws, and a potential Ministerial instrument that would introduce further notification requirements for supermarkets, will give the ACCC greater power to scrutinise supermarket acquisitions and guard against any substantial lessening of competition within the supermarket sector through such acquisitions,” he said.
More information for consumers
The report made several recommendations to improve access to information for consumers.
Among them was a requirement that Woolworths and Coles post all prices online and make dynamic price information available via an application programming interface (API) to enable third party online comparison tools to fetch prices.
Also recommended by the ACCC was a requirement for supermarkets to notify customers of shrinkflation; effectively a price increase whereby the product size decreases but the price remains the same.
It would mean, at a minimum, supermarkets would be required to publish a notice near the product ticket on shelves, and on the webpage for the product.
Improved information for suppliers
The report found there was a significant bargaining power imbalance between the major supermarkets and some suppliers
On the supplier side, the report recommended large (Aldi) and super large (Coles, Woolworths) supermarkets be required to provide fresh produce suppliers with detailed information on supply forecasts.
It was also recommended an independent central body be created, to which supermarkets would have to submit weekly data about the prices they have paid for fresh produce.
The body would then publish a single weighted average price paid for each grade of each type of produce acquired in each region, providing suppliers with increased understanding of wholesale prices in the region in which they operate.
It was also recommended supermarkets be stripped of the ability to unilaterally reduce wholesale fresh produce prices or volumes agreed with suppliers; and that supermarkets should also be forced to provide itemised accounts of all payments and deductions off invoices to suppliers at the end of the financial year.
