Australian grocery retailer Coles has been cleared of predatory pricing after slashing the price of milk to A$1 a litre.
The Australian Competition and Consumer Commission (ACCC) announced today (22 July) that it had found no evidence that Coles’ move had breached consumer law.
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The price cut, which was made on Australia Day (26 January), led to Woolworths Ltd, Aldi and Franklins following suit. The Australian senate called for an inquiry into the cuts, outlining concerns that the behaviour was anti-competitive and could have a negative impact on dairy farmers.
The ACCC said that Coles cut prices on its house-brand milk to increase its market share by taking sales from its competitors, including Woolworths. “This is consistent with what the ACCC would expect to find in a competitive market,” the regulator said.
The ACCC found said the major impact of the reduction in milk prices since January seems to have been a reduction in the margins supermarkets make on house-brand milk.
The watchdog found that farmers had not been adversely affected by the price war. However, it is in the process of extending an agreement to allow farmers to collectively bargain with milk processors.
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By GlobalData“As to the relationship between dairy farmers and milk processors, it is the case that some processors pay some farmers a lower farmgate price for milk sold as supermarket house-brand milk. However, on the evidence we’ve gathered over the last six months, it seems most milk processors pay the same farmgate price to dairy farmers irrespective of whether it is intended to be sold as branded or house-brand milk,” the ACCC said.
The ACCC said it recently issued a draft decision proposing to allow dairy farmers associated with industry association Australian Dairy Farmers to continue to collectively bargain with milk processors for a further ten years. “This strengthens the position for farmers when negotiating with processors over milk prices,” Samuel said.
