I guess Stephen Long on Four Corners was hoping for a more interesting grocery inquiry report from the ACCC. Last night’s program attempted to make the case for how terrible it was that the price consumers pay from Coles and Woolworths is many times more than the price they pay from suppliers. That is a fact but what of it? Suppliers were continuing to supply. And consumers were continuing to shop at Coles and Woolies. Graeme Samuel answered every challenge put to him and I was more, not less, convinced that the supermarket industry was workably competitive.
The report also appeared quite biased towards finding problems. For instance, it failed to consider at all MetCash which that ACCC found was imposing even higher margins on than the big two chains. It also claimed that concentration in Australia was unprecedented in the Western world. Hello? Anyone looked across the Tasman?
It also tried to exposit a theory called the ‘water-bed effect.’ This is a system whereby Coles and Woolworths supposedly insist on low prices from a manufacturer and the manufacturer then gouges other purchasers by more than they otherwise would to make up for the losses. Another hello? How can they make up for losses by charging other producers more than the price Coles and Woolworths actually charge their customers? There won’t be any sales to be gouged? Moreover, this is one area where the ACCC a decade ago successfully prosecuted a case to prevent this type of thing. In any case, it is not clear that by making retail groceries more competitive, the pressure on manufacturers will be eased. That isn’t the case in the US.
The ACCC report did identify areas for concern on site selection and rental contracts. It also identified unit pricing as an issue and the government has launched GroceryChoice; neither of which were mentioned in the Four Corners report at all — even if to say they won’t do anything. Indeed, it offered no solutions or policy prescriptions for all of these problems at all. This was a disappointingly empty story.