Supermarkets react to ACCC report following renewed demands for breakup powers

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The treasurer has rejected fresh calls for the competition watchdog to be granted divestiture powers.
It followed the Australian Competition and Consumer Commission releasing its final supermarket inquiry report.
The ACCC found major chains had little incentive to be competitive on pricing but did not recommend divestiture.

Treasurer Jim Chalmers has doubled down on the federal government’s rejection of calls to break up the big supermarkets, as Labor faces calls to ramp up its crackdown.

The renewed calls from the Greens and Nationals — which the government has — come after the Australian Competition and Consumer Commission (ACCC) into Australia’s supermarkets.

It found major chains had little incentive to be competitive on pricing due to their large market share, but it did not recommend that it be granted divestiture powers.

The parties want the ACCC to be given divestiture powers to increase competition and tackle what they say is Coles’ and Woolworths’ duopolistic control of the sector.

The ACCC report did not use this term, but described the nation’s supermarket industry as an “oligopoly” because “most of the market is accounted for by a small number of participants”.

Chalmers told ABC News Breakfast on Friday: “The risks [of breaking up the supermarkets] outweigh the benefits.”

“If you make one of the big chains sell in the community, there’s a risk that it’s just snapped up by the other big player in the supermarket sector and that would be counter-productive,” he said.

“Or if it chases supermarket options out of town in regional communities — it’s got hairs all over it, frankly,” Chalmers said.

He said the government accepted all 20 recommendations from the report, in principle, and was already taking substantial steps in most areas.

Others would take long lead times and require consultation, meaning it may be a while before consumers notice the changes in their daily shop.

As part of the government’s initial response, Tuesday’s budget will include $2.9 million over three years to help educate suppliers on how to stand up to the supermarkets.

“Cracking down on the supermarkets is all about getting a fair go for families at the checkout and farmers at the farm gate,” Chalmers said.

A split image. On the left is Nationals senator Bridget McKenzie. On the right is Treasurer Jim Chalmers.

Nationals senator Bridget McKenzie wants the federal government to introduce divestiture powers to break up the major supermarkets. But Treasurer Jim Chalmers says “the risks outweigh the benefits”. Source: AAP / Mick Tsikas/Lucas Koch

Bea Sherwood, senior campaigns and policy advisor at consumer advocate group CHOICE, welcomed the report’s findings.

“I think people continue to be worried about the cost of groceries, with about 80 per cent of Australian households concerned about the cost of food and groceries,” she told SBS News.

“The ACCC has recommended regulating confusing specials, introducing the shrink notices to make sure that consumers know when the price remains the same or is increasing when the product is reduced in size, and improving price transparency.

“It’s clear the supermarkets are going to set whatever prices that they like to set and they’re not passing on these savings to consumers.”

Renewed calls for divestiture powers as government’s crackdown criticised

Nationals senator Bridget McKenzie said Labor’s crackdown needed to go further, saying Chalmers’ response was “very flaccid”.

“We put a very comprehensive proposal on the table to address the lack of competition in our supermarket sector that the government failed to pick up,” she told Sky News.

“I didn’t hear the word penalties. I didn’t hear any tough measures that are actually going to put a very strong incentive for our supermarkets to behave better.”

Greens senator Nick McKim said divestiture powers would be “the final tool in the toolkit for regulators”.

“So that when markets are too concentrated and they are leading to poor outcomes for consumers … they can be broken up when necessary,” he said.

Opposition leader Peter Dutton has vowed to give the commission powers to divest the major chains to address anti-competitive behaviour if he wins the next federal election.

Sherwood pushed back on the Coalition’s plans and said the focus should be on “immediate” measures that will help consumers.

“I think a divestiture power would be really complex to design and it’s not clear if it would actually ever be used in this case,” she said.

“Our focus at CHOICE are changes that can immediately make a difference for consumers because we know they’re the ones doing it tough.”

Supermarkets respond to ACCC report

The report said there was no “silver bullet”, delivering a suite of recommendations to address four broad issue areas.

Increased transparency, such as mandated publication of price and package size information, would and , it noted.

The ACCC’s report also recommended financial support for community-owned stores to improve choice and supply in remote areas.

Coles and Woolworths have vigorously rejected claims of price gouging, arguing their preferred profitability metrics showed their margins are comparable to their peers in countries such as Canada, the United Kingdom and the United States.

“Coles believes Australia’s grocery sector is highly competitive, is evolving rapidly, and offers consumers greater choice than ever before,” the supermarket said in a statement.

Coles also warned against measures that will “increase red tape and drive up costs”.

Woolworths CEO Amanda Bardwell welcomed recommendations that improved transparency for customers “where they don’t have unintended consequences”.

Other supermarkets ‘concerned’ with growing dominance

Anna McGrath, CEO of ALDI Australia, said in the report “confirmed ALDI’s role in providing Australians with great quality products at everyday low prices”.

The ACCC recognised Aldi as a “hard discounter” that provided an important source of price constraint on Coles and Woolworths.

Meanwhile, a spokesperson from Metcash — which owns IGA supermarkets — said the company was “pleased” the ACCC had recognised the importance of independent supermarkets.

“Particularly the competitive role independents play in many local communities where they are able to better tailor their range and offer to the preference of locals,” the spokesperson said.

“We too are concerned with the growing dominance of the major supermarket chains in Australia and their ability to continue to grow through creeping acquisitions of independents and land banking.”

— With reporting by the Australian Associated Press