ACCC to launch inquiry into supermarket sector

The Federal Government recently announced that it will direct the ACCC to conduct an inquiry into the markets for the supply of groceries. The announcement has been welcomed by the ACCC.

2024 Supermarket Inquiry‍

The Federal Government has directed the ACCC to have particular regard to:

• the structure of markets for the supply of groceries, including competition at the supplier, wholesaler and retailer levels;
• the interactions between these levels;
• the position of small and independent retailers; and
• the impact of technological change on the markets.

Cost of living pressures are being felt right across Australia with particular impacts on low to middle income households. The supermarket checkout has come into sharp focus in this respect and the inquiry will focus on the above in an effort to address these pressures.

The Minister has directed that the inquiry also consider the price-setting approaches of suppliers, wholesalers, and retailers, as well as factors affecting the price of inputs along the grocery supply chain. This will require the ACCC to examine differences between prices paid by, and prices charged by, different participants in the markets in an effort to ensure that the regulator considers the prices of groceries at each point in the supply chain. The ministerial direction is specific in its identification of prices paid to farmers (also known as farmgate), prices paid to intermediaries such as processors and transporters, and those paid by consumers at supermarkets.

The inquiry will also consider recent trends, including online shopping and loyalty programs.

This will be the first inquiry into the supermarket sector since 2008, when the ACCC conducted a comprehensive inquiry into the Grocery sector, which considered the competitiveness of retail prices for standard groceries. There is crossover between many of the matters taken into account in that inquiry and the current one.

The Treasurer has directed that the ACCC produce an interim report by no later than 31 August 2024, with the final report to be completed by no later than 28 February 2025.

ACCC Chair Gina Cass-Gottlieb has responded favourably to the announcement, saying “We know grocery prices have become a major concern for the millions of Australians experiencing cost of living pressures.”

“When it comes to fresh produce, we understand that many farmers are concerned about weak correlation between the price they receive for their produce and the price consumers pay at the checkout.”

“We will use our full range of legal powers to conduct a detailed examination of the supermarket sector, and where we identify problems or opportunities for improvement, we will carefully consider what recommendations we can make to Government,” Ms Cass-Gottlieb said.

The 2008 report

The 2008 inquiry was motivated by high rates of food price inflation in the late 2000s.

In the 2008 Report of the ACCC inquiry into the competitiveness of retail prices for standard groceries, the ACCC found that Australia had a ‘workably competitive’ market but acknowledged that it could do with more competition. Specifically, the report found that Coles and Woolworths had limited incentives to compete aggressively on price, and that both major supermarkets were subject to limited price competition from the independent sector.

The report also acknowledged that high barriers to entry and expansion, particularly in relation to difficulties in finding new sites for development, played a factor. This was a finding that had some purchase following the publication of the report with both major sellers agreeing, in 2009, to phase out restrictive provisions in supermarket leases that prevented shopping centre managers from leasing space to competitors.

The 2008 report attributed food price inflation to a range of domestic and international factors, including drought and the global commodities boom, but concluded that there was little evidence of weakening price competition playing a significant role.

Competition in grocery retailing and the dominant position of Coles and Woolworths is a hot button issue with significant media coverage. There is an uncanny similarity in both the impetus for the 2008 inquiry (coming amidst increasing grocery prices in an environment of high inflation) and the matters the 2024 inquiry and 2008 inquiry considered. History repeats…It will be interesting to see what findings and recommendations the ACCC makes in the 2024 report and if and how these are implemented.

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The contents of this article do not constitute legal advice and it is not intended to be a substitute for legal advice and should not be relied upon as such. It is designed and intended as general information in summary form, current at the time of publication, for general informational purposes only. You should seek legal advice or other professional advice in relation to any particular legal matters you or your organisation may have.