By Joe Montero
Anger against big price rises by the Coles and Woolworths supermarket duopoly has been on the rise in recent times. The Australian community believes that the extent of these price rises is unjust and that it amounts to robbing their customers. This makes perfect sense when you look into it.
Pushed along by this anger, the federal government has put on notice that it will release details of intended change to the law. This notice states the need to redress “a heavy imbalance in market power between suppliers and supermarkets in Australia’s heavily concentrated supermarket industry.”
No doubt the public will welcome any move in this direction. But there won’t be any move to break up the control of the two giants and therefore curb their monopolistic behaviour. The aim is to produce a mandatory code of conduct and provide fines for those who break it.
A mandatory code of conduct equipe with fines is a positive change. This is superior with the existing voluntary code, which isn’t working at all, and it should be welcomed by all. But we will have to wait and see how far the new mandatory code will go before judging its worth.
Mention is made in the proposed code about the treatment of suppliers. Farmers in particular, have been squeezed through low prices for their product, backed by the weaponizing of quotas to enforce these low prices. This is another form of profiteering made possible with the monopoly hold over the market.
The twin practices of excessive price rises and paying too little to suppliers lies behind calls for action to break the Coles and Woolworths monopoly. This includes Allan Fells, former head of the Australian Competition and Consumer Commission (ACCC), who said as much in a report commissioned by the Australian Council of Trade Unions earlier this year.
However, the interim report, produced by former trade minister Craig Emerson, on which the shift to the new code of conduct is based won’t go anywhere near taking on the power of these monopolies. Without this, there will be little change in reality.
The Emmerson report suggests a fine of up to 10 million or 10 percent of annual turnover for serious offence. In real life there will be little appetite to impose the highest penalty. The biggest cost to the offending supermarket will then be some bad publicity. The effectiveness will come down to whether the gains are greater than the losses.
When all is done and dusted, monopoly control over the market will remain. This gives the supermarkets tremendous power to continue to charge higher prices and pay too little to suppliers. They control 65 percent of the groceries market, and this makes this the world’s most monopolised.
Dealing with the practice of price gouging has become a major political issue and an important component of angst about the rising cost of living crisis. Price gouging means increasing pieces by a higher amount than a competitive market would allow. There are various means for doing this. rising inflation can be used as a cover. Another tactic is to crate shortages. This became more popular during the Covid lockdowns and remains with us today. There is also the practice of packaging a small quantity for the same price, which is an effective price rise.