But while the Australian Competition and Consumer Commission found grocery prices had jumped 24 per cent in five years and criticised supermarkets for not passing on savings to customers, it stopped short of labelling them a “duopoly” or accusing them of price gouging.
In a 400-plus-page report, the ACCC called for action on shrinkflation, price transparency, confusing promotions, zoning laws and a range of supplier protections but didn’t recommend more extreme actions such as breaking up of companies or fines.
The federal government welcomed the report and agreed to all the recommendations “in principle”.
Prime Minister Anthony Albanese announced the year-long inquiry in January last year amid increasing anger with the big supermarkets during the cost of living crisis and allegations from some of price gouging.
In its report released overnight, the ACCC laid the blame for most of the price increases on general economy-wide changes but said “at least some of the grocery price increases have resulted in additional profits for ALDI, Coles and Woolworths”.
It criticised Coles and Woolworths particularly for using their promotions and loyalty programs to make it harder for shoppers to know if they’re getting a good deal and noted their “strong bargaining position” over suppliers.
“Coles and Woolworths’ dominance of the sector seems set to continue,” the ACCC said, highlighting their “entrenched position in an oligopolistic market” left “limited incentive to compete vigorously” on price and little likelihood of a shift from the status quo.
“There is no ‘silver bullet’ to address all the issues identified by this inquiry.”
While “hard discounter” ALDI had managed to break into the market over 20 years and keep prices lower, independent retailers such as Metcash-supplied independent IGA had actually gone backwards in terms of revenue and number of stores.
Indeed, ALDI ranked alongside Coles and Woolworths as among the most profitable supermarket businesses globally, in the ACCC’s analysis. The German discounter also doesn’t compete head-to-head with the big two in several categories.
“Even if ALDI, Coles and Woolworths have acted to moderate cost growth – they have not passed on to consumers the full benefit of savings from those initiatives,” the ACCC said, while noting a 24 per cent increase in food and non-alcoholic beverages was less than in most wealthy OECD countries.
According to the watchdog, Woolworths controls 38 per cent of grocery sales nationally, Coles has 29 per cent, ALDI has 9 per cent and independent supermarkets have 7 per cent.
There were significant barriers to new entrants trying to establish themselves in the sector, particularly in land zoning, which sparked calls for reform.
Addressing claims of “land banking”, the ACCC said Coles and Woolworths held more than 150 undeveloped and unused sites intended for future supermarket use.
It noted there were many reasons they might hold onto such sites without developing them but called for more powers to scrutinise the purchases.
While the dominance of the big two and ALDI had significant impacts for consumers across the country, much of the report focused on the more extreme challenges in regional and remote Australia, where prices could be “significantly higher”.
One of the recommendations was for the governments to find ways to support community-owned and community-run stores, which tended to offer cheaper prices for remote shoppers.
Other recommendations included forcing major supermarkets to publish all their prices in-store and online and create an API that third-party developers could plug in to and share dynamic price information with shoppers.
The ACCC also wanted supermarkets to be forced to provide more information about discounts and tell customers when product size was reduced, commonly known as “shrinkflation”.
Tweaks to the information Coles and Woolworths would have to share with loyalty program members and a raft of changes to give food suppliers more transparency and protect their bargaining power were also needed, the report argued.
“We are taking action to get a fair go for families at the checkout and a fair go for farmers at the gate,” Treasurer Jim Chalmers said.
“This is about ensuring Australians aren’t treated like mugs by the supermarkets.
“Our ongoing supermarket crackdown means more competition, better prices and better deals for Australians.”
Queensland University of Technology retail marketing and consumer behaviour expert Professor Gary Mortimer said it was not the “damning” report many expected.
“The recommendations are to improve zoning laws to enable smaller players to enter the marketplace, greater support for rural and regional towns and cities to get access to lower food prices, and that may be in the form of just kind of freight, clear education programs around shrinkflation and unit pricing, stronger review around loyalty programs,” he said.
“And ultimately, a more harmonised and simplified approach in dealing with suppliers so make it easier across all boards and all retailers to those suppliers.”
Coles said it had cooperated with the ACCC inquiry and either other inquiries and reviews into the sector in the past year and a half.
“Coles believes Australia’s grocery sector is highly competitive, is evolving rapidly, and offers consumers greater choice than ever before,” it said, in a statement.
“Over recent years, Coles has not only been competing with traditional supermarkets like Woolworths and IGA but also now with major multinational players like ALDI, Costco, and Amazon, who have all established significant businesses in Australia and are expanding their market share.
“For example, Amazon has substantially grown and has introduced more than 6,000 product lines that overlap with our offering, significantly increasing competition from a new source.”
Coles said it had worked hard to keep grocery prices low and its net profit after tax margins were comparable with global peers.
“Coles welcomes any recommendations that improve transparency for suppliers and customers but cautions against measures that will increase red tape and drive up costs. We will review all of the recommendations in detail,’ it said.
