Competition in the Australian Grocery Industry

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Sarah Moritz, Paul Schoff, Eric White, Jun 30, 2014

Competition in the Australian grocery retail industry has been a focus of Australian media, politics, and regulatory activity for several years. Given that the actions of Australia’s largest grocery retailers have a significant impact on small business, primary producers, and consumers, Coles and Woolworths have been subject to increasingly strident criticisms about their perceived dominance of the industry, allegations they “strong-arm’ suppliers,” and the flow on effects these actions have on smaller competitors and customers’ hip pockets at the checkout.

This article describes the dynamics of the industry in Australia, details the competition concerns, and outlines how the Government and the Australian Competition and Consumer Commission have responded to these concerns running just about every play from the antitrust enforcement playbook.

In summary, antitrust issues have revolved and-to some extent-continue to revolve around:

  • market concentration and the cumulative competitive impact of a series of apparently individually benign acquisitions of existing supermarkets by Coles and Woolworths-so-called “creeping acquisitions,” leading to calls for legislative amendment;
  • barriers to competitive entry in the form of restrictive provisions in supermarket shopping center leases entered by the major players-the ACCC has put an end to such provisions;
  • the “price wars” by the two major supermarket retailers, in particular in respect of milk, and the likely long-term competitive effect that product-specific discounting has on the supply chain;
  • the increase in the sale by major supermarkets of “private label” goods-which now account for more than one-quarter of the grocery sector and the contemporaneous shrinkage of shelf space, as well as disappearance of notable brands and brand diversity;
  • negotiations between each of Coles and Woolworths with their suppliers and concerns about the major supermarkets engaging in unconscionable conduct, with the result that this year the ACCC commenced proceedings against Coles for unconscionable conduct; and
  • calls for regulatory oversight from the ACCC in relation to supermarkets’ negotiations with suppliers; for example, through a voluntary code of conduct to apply to the sector.