Major supermarkets must adopt fairer farmgate buying and consumer pricing practices, the ACCC says. Photo: Michelle Kroll.
Supermarkets Coles, Woolworths and Aldi must adopt clearer pricing practices for customers and more transparency for suppliers if competition and fairness in the sector is to improve.
That’s the verdict from the Australian Competition and Consumer Commission, which has handed down the final report from its inquiry into the supermarket industry.
The ACCC has made 20 recommendations after finding the three supermarket giants are among the most profitable in the world, with their average product margins increasing significantly over the past five financial years.
It is recommending the three supermarkets publish their prices on their websites, and that Coles and Woolworths also make available “application programming interfaces” that provide dynamic price information to third parties such as online price comparison tools.
The report says there are significant barriers for new or smaller supermarkets to enter and expand at a large scale in Australia’s supermarket sector.
“In the short to medium-term, it is unlikely that there will be large-scale entry of a new supermarket chain, as demonstrated by the fact that it took Aldi more than 20 years to achieve its current market share of nine per cent,” it states.
Australia’s supermarket sector is dominated by Coles and Woolworths, with the ACCC saying the current situation is leading to poorer outcomes for consumers and suppliers than would be expected in a more competitive market.
The federal government directed the ACCC to investigate the supermarket sector last year over rising allegations of price gouging during the pandemic and continued ripping off of both customers and suppliers.
The three supermarkets plus IGA-supplier Metcash, as well as many farmgate suppliers, appeared before ACCC hearings last year.
“In the past 12 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 10 days of public hearings, and analysed billions of points of supermarket data,” ACCC deputy chair Mick Keogh said.
“Based on this extensive analysis we have recommended a range of measures to improve conditions for competition in the sector and deliver better outcomes for consumers and suppliers.
“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 recommendations include clearer pricing practices, greater transparency for suppliers and reforms to planning and zoning laws.
The report notes consumers have a strong preference for convenience when choosing where to buy groceries, but some consumers are also comparing prices and shopping around more today than they have in the past.
To further facilitate this, it states, supermarkets could make price comparison easier for consumers.
Adopting this practice could increase supermarkets’ incentives to compete more vigorously on price, as there is little incentive for them do so under the current regime.
The ACCC is also recommending greater pricing transparency with promotions and loyalty programs in order to reduce the burden on consumers trying to understand the value for money of supermarket offers.
“Through clearer sales tickets and promotions, consumers will be better placed to make more informed decisions about what products offer the best value for them at the checkout,” Mr Keogh said.
Another key concern raised by consumers throughout the inquiry was the lack of notice of price increases.
Of particular concern is the practice of what is known as ‘shrinkflation’ where a product’s size decreases but the price either remains the same or increases.
The ACCC says this is effectively a price increase and is recommending supermarkets be required to publish notifications when this occurs.
“This information would, at a minimum, be required to be published in proximity to the product ticket on shelves, and on the webpage for the product,” Mr Keogh said.
“By giving consumers this transparency over what are effectively price increases, consumers would be better able to ‘vote with their feet’ and switch to cheaper alternatives if that is their preference.”
Woolworths and Coles currently enjoy a bargaining power imbalance with some suppliers, the report found, with a “substantial information asymmetry” between fresh produce suppliers and supermarket chains when they participate in weekly tendering process.
The ACCC is recommending that all three supermarket chains be required to provide fresh produce suppliers with greater transparency about the weekly tendering processes they use to negotiate price and volumes with suppliers.
The implementation of this recommendation should be undertaken by the ACCC and would involve further consultation.
Federal Treasurer Jim Chalmers said the government agrees in-principle with all the ACCC’s recommendations.
Original Article published by Chris Johnson on Riotact.
