ACCC finds ‘limited incentive’ for price competition, margins have risen

ABC NEWS (Australia)

The consumer watchdog has found that Coles and Woolworths are among the most profitable supermarket chains in the world and have so much power that they don't need to compete hard on price.  The Australian Competition and Consumer Commission found both supermarket giants have increased their margins in recent years but stopped short of concluding that grocery prices are excessive and has not declared Coles and Woolworths have a duopoly.

Transcript

00:00The ACCC Supermarket Inquiry report has concluded that the likes of Coles and Woolworths have

00:08so much power here in Australia that they really aren't forced to compete too hard on

00:13price. The report also notes that Australia's supermarket sector is one of the most profitable

00:20in the world. The watchdog actually forced the likes of Coles, Woolworths, Audi and the

00:26operator of IGA's Metcash to give up pricing data for its inquiry. That was one of the

00:32really interesting things about this and it's now analysed this pricing data and in this

00:38report it notes that for Coles, Woolworths and also for Audi that margins have actually

00:44been ticking up the last five years. It says with Coles and Woolworths this is specifically

00:49happening on branded products as opposed to its home brand no label products. Now margins

00:56are very different to profits. The ACCC notes this. It also notes that the supermarkets

01:02have had a lot of costs imposed on them the last five years. We obviously had this inquiry

01:09called as the cost of living pressures and grocery prices have been rising the last couple

01:15of years especially during the pandemic. The ACCC stops short of saying that grocery

01:20prices in Australia are excessive. It also doesn't conclude that Coles and Woolworths

01:26have a duopoly and that's interesting because that's been a really big allegation the last

01:30couple of years that we've heard to the extent that Coles and Woolworths now have this acronym

01:34for them called Colesworth. The ACCC does note though that the supermarket sector in

01:39Australia is an oligopoly. That means few players and it says this is specifically having

01:47issues with price competition. So Amelia what has the watchdog recommended and at this stage

01:53do we know if the government is committing to any of it? So the ACCC makes 20 recommendations.

02:01Some of the interesting ones that it's recommended include pricing data to be disclosed. It would

02:07be interesting to see how this could be done in Australia if it would be like along the

02:12lines of the way that petrol prices are disclosed. The ACCC also notes that loyalty programs

02:18have been very confusing for consumers in Australia. It wants a review of those in three

02:23years time and it wants something done about shrinkflation. Now this is this idea where

02:29a packet of chips gets smaller but the price stays the same. It says it's quite hard to

02:34look at shrinkflation in Australia and it would like something done about this. It also

02:38notes that it would like a range of things done for suppliers. There was a lot of concerns

02:45raised especially by farmers in during this inquiry. Now the federal government which

02:50asked the ACCC to do this inquiry it has had this report for almost a month now. It put

02:57out a statement last night saying that it welcomes this inquiry that in principle it

03:02agrees with these 20 recommendations. But they haven't actually said they will do this.

03:07The federal government has already increased merger powers for the ACCC. It gave them an

03:13extra $30 million in funding at the end of last year to help them tackle the supermarket

03:18sector. When this report has now been released the federal government has given an extra

03:24$3 million it says in next week's budget to help suppliers take on the supermarkets.

03:30And this morning have we heard from the government? And what about the supermarkets? Have they

03:34said anything?

03:36So we've had the Treasurer Jim Chalmers talk about this report this morning. As I noted

03:42the federal government hasn't actually committed to all of those 20 recommendations but says

03:47it agrees with them in principle. Here is the Treasurer speaking just this morning.

03:52We're implementing a bunch of them already. Whether it's unit pricing, competition, planning

03:57and zoning, food and grocery code, empowering and funding the ACCC. We're also funding the

04:04supplier groups to empower them to strengthen their arm in the negotiations with the big

04:10supermarkets. So this is all about cracking down on the supermarkets. We know that people

04:15are still under a pressure and a lot of that pressure is felt at the checkout.

04:20So that's the federal Treasurer noting that they believe they have done a lot already

04:24to tackle the supermarket sector in Australia. So far this morning we've heard from one of

04:30the major supermarkets Coles. As I noted the ACCC raised some ideas that margins have been

04:37rising in the last five years with the supermarkets. Coles says no, they're very competitive, they

04:42think they're doing the best for consumers. We expect to hear more from the supermarket

04:46sector this morning.

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