The Australian Competition and Consumer Commission (ACCC) has labelled Woolworths and Coles as key players in an “oligopoly.”
In its 265-page interim report released on Sept. 27, the supermarket giants were revealed to have lost consumer trust, with nearly half of the respondents complaining about prices, up from 17 percent in 2008.
Key concerns include misleading pricing practices, loyalty program penalties, and limited negotiating power for suppliers.
It also discusses growth constraints in the supermarket sector, with Coles and Woolworths indicating land may be held for extended periods due to rezoning delays. Concerns about “land banking” also hinder market access for new entrants.
The Commission will summon the supermarket executives in November for a public inquiry.
According to the report, Woolworths and Coles account for 67 per cent of supermarket retail sales nationally, while Aldi accounts for 9 percent and Metcash-backed independent supermarkets with 7 percent.
On Sept. 22, ACCC also filed a court case against the two giants for breaching Australian Consumer Law for misleading “discount pricing” claims on hundreds of common supermarket products.
ACCC Deputy Chair Mick Keogh said the current oligopolistic market structures can limit incentives to compete vigorously on price.
“We see Woolworths and Coles providing a broadly similar experience to customers through largely undifferentiated product ranges, pricing at similar levels, and similar non-price offerings including loyalty programs,” Keogh said.
Prime Minister Anthony Albanese welcomed the interim report, stating it was initiated on his directive in January.
“This is an important piece of work, and we will study it closely.”
He further added that his government is taking various actions to ensure Australians are paying a fair price at the checkout and that suppliers are receiving a fair price for their goods.
“Customers don’t deserve to be treated as fools by the supermarkets. They deserve better than that.”
Assistant Minister for Competition Andrew Leigh added that greater competition is critical for increasing dynamism, productivity, and wage growth.
“It will help put downward pressure on prices and deliver more choice for Australians dealing with cost-of-living pressures.”
The final report, scheduled for release in February 2025, will present the results of their analysis into further aspects of the business.
What Are Consumers Saying?
Many consumers report having lost trust in supermarket pricing, according to the interim report.Almost half of the respondents told the ACCC that they “always” or “most times” compare prices between stores before shopping. In 2008, a similar survey found only 17 percent of consumers practiced this, compared to 50 percent now.
“Many consumers have told us that they are losing trust in the sale price claims by supermarkets,” Keogh said.
“These difficulties reportedly arise from some of the pricing practices of certain supermarkets, such as frequent specials, short-term lowered prices, bulk-buy promotions, member-only prices, and bundled prices.”
Consumers have also raised concerns about being penalised for not participating in supermarket loyalty programs, particularly following the emergence of member-only pricing.
Suppliers Complain of Limited Negotiating Power
Suppliers, on the other hand, have claimed that the dominance of major retailers leaves them with limited negotiating power, making it difficult to secure fair deals.Key issues raised by suppliers include being forced to pay rebates to retailers for specials and promotions, the mandatory use of retailer-specified advertising and transport services, and the need to comply with costly accreditation and packaging requirements.
“The issues raised by a number of suppliers are concerning. We are using our compulsory information-gathering powers to examine this reported behaviour by the supermarkets and will include any findings in our Final Report,” Keogh said.
Meanwhile, perishable product suppliers have voiced significant concerns regarding supermarket procurement practices.
Key issues include burdensome accreditation requirements, inaccurate demand forecasting, strict quality standards, and opaque weekly tendering processes that shift considerable risk onto suppliers.
Market Growth Constraints
Meanwhile, the report says ALDI took 20 years to manage to carve out a 9 percent share in the Australian market, highlighting how difficult it is to enter and expand in the sector.Keogh argues that planning and zoning laws slow a supermarket retailer’s ability to develop new stores by creating additional costs or adding significant delays.
“We have received submissions raising concerns about alleged ‘land banking’ but have not yet formed any views on this issue.”
Coles and Woolworths have indicated to the ACCC that land may be held for extended periods due to various factors, such as the need for rezoning and development approvals, construction delays, site clean-ups, and slower-than-expected population growth.
The data reveals that Woolworths has interests in 110 sites designated for future supermarket use, while Coles has interests in 42 sites. In contrast, ALDI reports holding only 13 undeveloped sites.
“This information will be further examined as we prepare our Final Report,” Keogh adds.
