The Australian Competition and Consumer Commission (ACCC) has issued its final report on the supermarket sector, recommending 20 reforms aimed at improving competition, providing fairer outcomes for consumers, and enhancing bargaining conditions for suppliers.
The inquiry, which involved extensive consultations and data analysis, found that major supermarket players such as ALDI, Coles, and Woolworths are some of the most profitable globally, with their product margins increasing over the last five financial years.
The ACCC’s report highlights concerns about the current functioning of Australia’s supermarket market, which is dominated by Coles and Woolworths. The Commission found that aspects of the market are not operating effectively, leading to poor outcomes for both consumers and suppliers. The recommendations focus on increasing transparency, improving pricing practices, and revising planning and zoning laws to foster competition.
Key Recommendations for Improvement
- Enhanced Price Transparency and Comparisons
The ACCC recommends that major supermarkets, including ALDI, Coles, and Woolworths, be required to publish their prices online and provide dynamic price information to third-party price comparison tools. This would facilitate price comparison and promote greater price competition, benefiting consumers. - Reforming Planning and Zoning Laws
Acknowledging that planning and zoning laws currently limit the availability of suitable retail sites, the ACCC calls for all levels of government to simplify these regulations to enable new supermarkets to enter the market more easily. The report stresses that while large-scale supermarket chains face significant barriers to entry, small-scale local entries could provide valuable competition and benefit local markets. - Improving the Merger Review Process
The ACCC highlights the challenges competitors face in securing retail sites due to the dominance of Coles and Woolworths. To address this, the Commission recommends enhancing its ability to scrutinize supermarket acquisitions. Recent merger reform laws are expected to improve the ACCC’s capacity to monitor acquisitions by major supermarket chains, ensuring that competition remains fair. - Greater Transparency in Pricing, Promotions, and Loyalty Programs
The ACCC recommends supermarkets provide clearer information on pricing, promotions, and loyalty programs to help consumers make more informed shopping decisions. This would also include publishing notifications of product price increases, such as shrinkflation, where the size of products decreases but the price remains the same or increases. - Boosting Competition in Remote Areas
The ACCC calls for increased price transparency in regional and remote areas, where consumers face higher prices due to limited competition and higher freight costs. The report suggests requiring supermarkets in these areas to display prices on all products and to improve complaints handling mechanisms. Governments are also encouraged to support community-owned stores in locations with limited supermarket choices. - Improved Supplier Transparency
A major focus of the inquiry was the imbalance of bargaining power between major supermarkets and suppliers. The ACCC recommends that supermarkets provide greater transparency regarding pricing negotiations, particularly for fresh produce suppliers. This would include clearer forecasts for supply and more transparency in the weekly tendering processes, helping suppliers make better-informed business decisions.
“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,” ACCC Deputy Chair Mick Keogh said.
Addressing Supplier Concerns and Market Inequities
The ACCC found that Coles and Woolworths often exercise significant buyer power over suppliers, especially in the fresh produce sector. To mitigate these concerns, the Commission has recommended several changes, including mandatory market reporting for fresh produce suppliers, more detailed information on seasonal forecasts, and restrictions on supermarkets unilaterally reducing agreed-upon prices or volumes.
Further, the ACCC suggests strengthening the Food and Grocery Code of Conduct to ensure that supermarkets cannot negotiate out of core protections, providing suppliers with greater certainty and security in their relationships with major retailers.
