The ACCC has found that Australian supermarkets are amongst the most profitable in the world and has recommended 20 measures to improve competition in the sector.
The consumer watchdog’s 441-page report showed that Coles and Woolworths increased their prices during a cost-of-living crisis to boost profits and used their loyalty programs to create confusion and encourage long-term loyalty rather than true price comparison.
The report made 20 reform recommendations aiming to increase pricing transparency, improve supplier bargaining conditions, and reform planning and zoning laws to facilitate greater competition.
Mick Keogh, Deputy Chair of the ACCC, said they gathered extensive data and input from consumers, suppliers, and industry stakeholders to inform their decision.
“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.”
The ACCC found that aspects of Australia’s supermarket sector, dominated by Coles and Woolworths, are not functioning competitively, leading to higher prices and limited supplier options.
Coles and Woolworths dominate the Australian grocery sector and control 67 per cent of national supermarket sales, with ALDI (9 per cent) and Metcash (7 per cent), the other main competitors.
Despite the dominance from the two major players, the ACCC did not declare the pair a duopoly, stating that Coles and Woolworths have limited incentive to compete vigorously with each on price and that they have not sought to substantially discount prices below each other in aggregate.
Greater Price Transparency
To enhance consumer decision-making, the ACCC recommends that supermarkets clearly display pricing information, including unit prices, and notify customers of product size reductions, commonly known as ‘shrinkflation.’
“By giving consumers this transparency over what are effectively price increases, consumers would be better able to ‘vote with their feet’ and switch to cheaper alternatives if that is their preference,” Mr Keogh said.
Over half of Coles’ and Woolworths’ products are sold on promotion, but the pricing structure remains unclear, with supermarket promotional cycles sometimes artificially influencing pricing perceptions.
The ACCC also calls for ALDI, Coles, and Woolworths to publish their prices online and provide dynamic price data for third-party comparison tools.
Barriers to Competition
The inquiry identified significant obstacles for smaller or new supermarket entrants. The ACCC recommends simplifying planning and zoning laws to allow new supermarkets to establish and expand more easily.
“Currently, the availability of suitable retail sites is limited by planning and zoning laws, which restrict overall supply and can lead to delays that deter entry or expansion for competitors,” Mr Keogh said.
Additionally, the ACCC supports new merger laws to enhance oversight of supermarket acquisitions. Between 2019 and 2024, Coles and Woolworths acquired around 260 retail sites, yet the ACCC was notified of only 14 transactions.
Fairer Conditions for Suppliers
The inquiry found a significant power imbalance between major supermarkets and suppliers, particularly in the fresh produce sector. The ACCC recommends that ALDI, Coles, and Woolworths provide suppliers with greater transparency regarding weekly tendering processes and supply forecasts.
“Improving transparency for demand forecasts will give suppliers greater certainty and greater ability to assess their risk exposure in the supply of fresh produce,” Mr Keogh said.
The ACCC also proposes amendments to the Food and Grocery Code to prevent supermarkets from negotiating out of key supplier protections.
Regional and Remote Price Visibility
Consumers in remote areas face higher grocery prices due to freight costs and limited competition. The ACCC is calling for improved price transparency in these locations, including mandatory shelf pricing and better complaints handling mechanisms.
“We support recommendations to improve price transparency in remote locations, including introducing a mandatory requirement for supermarkets to display pricing information on all items in stores,” Mr Keogh said.
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