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August 5, 2008

AUS: Oz watchdog calls for more grocery competition

The Australian competition watchdog has found that increased competition in the grocery sector would benefit consumers by forcing retailers to lower prices.

The Australian competition watchdog has found that increased competition in the grocery sector would benefit consumers by forcing retailers to lower prices.

The Australian Competition and Consumer Commission (ACCC) said that while the market was “workably competitive” steps should be taken to encourage more aggressive competition between supermarkets.

“Australian consumers would significantly benefit if Coles and Woolworths faced more competitive threats that encouraged more aggressive pricing strategies,” the ACCC said in a report released today (5 August).

The ACCC investigation was launched in response to increased concern surrounding rising grocery prices in Australia.

While the ACCC found no evidence that Australia’s two largest supermarkets, Woolworths and Coles, exploited their market positions, it did emphasise that there is no incentive for the multiples to aggressively compete.

Noting the emergence of privately-owned discount chain Aldi in eastern Australia, the ACCC said that the growth of the chain had had a positive impact on competition.

In order to further boost competition in the market, the ACCC recommended a number of legislative changes, including the introduction of unit pricing, changes at a federal level to the Horticulture Act and changes at state level to zoning and planning restrictions.

A new government website, GroceryChoice, will open tomorrow, providing a monthly comparison of prices offered across the various supermarkets.

Commenting on the price comparison site, ACCC chairman Graeme Samuel said it would be different from similar sites sponsored by supermarkets. 

“It won’t publish the weekly specials, it won’t list grocery prices for individual supermarkets….This is about giving consumers something new that the supermarket chains won’t tell them – who is cheapest in each region overall,” he said.

Responding to the report, Woolworths said that, while it would create challenges, it supported the implementation of unit pricing, provided it was a nationally consistent framework for all grocery retailers.

“Woolworths is already working towards this, with a trial in its Baulkham Hills store, leading to a national rollout soon,” the company said.

However, the Australian National Retailers Association, representing the country’s largest retailers, was quick to warn that the cost of introducing unit pricing should be limited.

“Retailers are well underway in rolling out unit pricing. Our main concern is that unit pricing does not become complex, costly regulation, with shoppers picking up the tab. It should also be nationally consistent and apply to all retail outlets,” ANRA CEO Margy Osmond said.

The ANRA was also critical of the suggestion that increased regulation of acquisitive activity is necessary.

“The Commission has found that the chains are growing by building new stores not by acquisitions. There is no evidence to support more regulation,” Osmond said.

At the same time, the ANRA praised the ACCC for highlighting planning issues.

“We would encourage all governments to commit to reform their outdated restrictive planning regulations and create more retail space which will help competition,” Osmond added.

Woolworths and Coles collectively control around 80% of the Australian grocery market.

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