What Should The ACCC Do About Woolworths And Coles?

The Australian Competition and Consumer Commission (ACCC) announced last week that it is investigating claims that Coles and Woolworths are bullying suppliers. The issue is serious, but the ACCC investigation only treats the symptom and diverts attention away from the real cause of the problem: supermarket power.

Trolley picture from Shutterstock

ACCC enforcement action action against the duopoly for "unconscionable conduct" is nothing but a skirmish on the edge of supermarket power. It would be much better to spend time and money on creating alternative ways in which the eaters and producers of food can connect with each other outside of the major supermarket chains.

Chances are the ACCC will not win any unconscionable conduct case against the supermarkets. They have had very limited success in taking action for such conduct in the past. The relevant provisions poorly define unconscionable conduct and leave it to the courts to make a moral judgement in the circumstances of each case.

Here, the allegations are certainly serious. Suppliers claim that Coles and Woolworths require them to make payments above and beyond that negotiated in order to stock their products, and that the supermarkets impose penalties that do not form part of any negotiated terms of trade. Suppliers also claim that the duopoly does not pay the prices agreed and that they discriminate in favour of their own home-brand products.

These tactics may be unattractive, even uncivilised. But they are exactly what we should expect when two retailers hold 80 per cent of the grocery market. Coles and Woolworths likely have a bevy of lawyers ready to show that their terms were set out in contracts that suppliers freely agreed to; any deviations were the rogue acts of individual bad apples. The supermarkets will argue that this is nothing more than robust competition in the interests of low prices for consumers.

It will be difficult for the ACCC to prove otherwise. In a competitive marketplace, why not ask for the lowest possible price from suppliers and demand extra payments for shelf space, in-store advertising and so on? Why not prefer home-brand products if they make more profit for the supermarket?

The real worry is the fact that these two supermarkets have gained so much power in the first place. We should not be wasting precious public resources fighting over particular instances of the abuse of that power. Instead, we should use every ounce of imagination and creativity we have to challenge the Coles and Woolworths duopoly over grocery retailing and therefore over the very relationship between consumers and their food.

The tragedy of the Coles-Woolworths duopoly is the narrow, greedy, profit-oriented way in which they control and manipulate the relationship between all of us who eat food and those who produce it. The supermarkets say that they are just delivering what consumers want — cheap, reliable, accessible food. Squeezing producers on prices is supposedly part of that equation.

Yet it is the supermarkets and processed food companies that present food to us as something that should be cheap, plentiful and industrial — devoid of any connection with the earth, sun, animals, plants and people who produce it. They barely give us a chance to find out about where our food comes from, let alone at what cost to humans and ecosystems it is produced and sold. If we knew, we would be shocked.

Take "free range" eggs as an example. Woolworths claim to be continually improving animal welfare standards throughout the supply chain. Coles claim to be helping customers switch to "free range" by cutting their prices on cage free eggs.

Yet both are demanding that producers supply "free range" eggs at a price that can only be delivered by an industrialised, concentrated egg production and retail system. This system does not and cannot match the glossy pictures of happy hens on the carton, yet consumers are told that this is what "free range" must mean.

Many consumers turn off "industrialised supermarket free range" as soon as they realise the conditions that the hens are actually kept in. They are even more likely to do so once they meet a farmer at a farmer's market and taste a day-old egg from a truly happy hen for breakfast. The story can be repeated for any number of foods on the supermarket shelves.

Duopoly supermarket power is stopping us seeing and imagining alternative ways of producing and buying food. The supermarkets like to tell us that they are giving us affordable choices. Instead of spending money fighting over who they bully to deliver us those low cost choices, let's spend time and money finding, celebrating and developing alternatives such as local, organic or wholefood stores, farmers' markets, exchange at community food hubs and backyard and urban gardens.

If we spent public money on creating alternative retail spaces and developing affordable ways to make tasty, fresh, sustainable food then there would be some true competition for Coles and Woolworths. Instead of asking the ACCC to occasionally thump the duopolists, let's try to imagine how to nurture thriving small scale social enterprise to build healthier local relationships between us and our food. Then we can figure out what we need to do to make sure that Coles and Woolworths don't undermine creative alternatives.

Christine Parker is Professor of Regulatory Studies and Legal Ethics at Monash University. She does not work for, consult to, own shares in or receive funding from any company or organisation that would benefit from this article, and has no relevant affiliations.

The ConversationThis article was originally published at The Conversation. Read the original article.


Comments

    Coleworths have been out of control for years. Farmers sent to the wall, florists had huge orders cancelled at the last minute.. We all know real people and families who have been crushed by these two gorillas without any conscience or accountability.
    Aldi, IGA, and other independents are our best chance of breaking this duopoly without a real watchdog or (a hate to say it) more laws. Also, an increase in maximum fines may help.
    Market gardens? I don't see this making a difference, at least not for my shopping habits.

      I have been fighting back for years - i buy all my fresh food from the local green grocers (cheaper, and better quality), and give myself a 20-50% discount when i do buy things like toilet paper, cereals etc, thanks to the self serve checkouts (i mean, if i have to do the work, then i'm going to charge them for it, and since i cant do that, ill just not pay for anything).

      No, what we really need is a few large under cover places where the suppliers can just show up and sell their wares for a good price without any additional overhead required - cheaper for us, better for them and we can all give Coles / Woolworths a big f*uck you.

        Dude.... Your discounts are just not helping anyone... I really hope you're joking, I can't really tell, if not, hope you get caught soon..!

        Last edited 20/02/13 9:37 am

          First off, i am not out to help other people, but my own family - Given the current cost of living, we do what we can to get by, whilst trying to save for our own house - Perhaps if the average house price was 4-5x the average wage (as it was in the 80s), rather then 9-10 times (currently), i wouldnt need to do this to get by?

          Maybe if we had interest rates of 18% again? (yes i would like this)

          Maybe if we had proper competitiveness in supermarket chains?

          Maybe a lot of things.

          But in the mean time ill do what i can, and if that means paying fair price then so be it.

          In regards to me getting caught, well dont be a hypocrite - unless you have never broken any law (and i really mean any), then you can not comment. It would be like me saying i hope you get caught because you have driven over 10km/h in a car park (which is the legal limit).

            Here's hoping you get caught. I would love to see you get caught when you have your "Family" with you.

            You are one of these people who should never have been allowed to have children. Teaching them that its OK to steal.
            Can't wait for them to start. Hopefully, they will get caught breaking in to some ones house who has a cricket bat handy. Not to kill mind you, but to turn them into a brainless vegetable forcing you to look after them for the rest of your miserable life removing their obviously flawed DNA from the gene pool.

              Given the ludicrous nature of your comment, i can only conclude that you are attempting to troll. It failed.

              If however, this is your true self, then given the irrational nature of your argument and reasoning, please hand yourself into the nearest police station as you are in serious need of mental assistance.

                you are in serious need of mental assistance

                Says the person teaching his kids to be thieves.

                Given the ludicrous nature of your comment, i can only conclude that you are attempting to troll. It failed.

                But, you replied, didn't you? Hence troll win?

                Yeah, the self-confessed criminal is hardly the person to be taking the high road here.

            You're intimating that I have committed an equally larcenous crime to you and that I find very offensive!

              intimating? Or implying.

              In any case, a crime is a crime, is it not? or, if as you seem to hint at, there are different levels of crimes, then what makes mine any better / worse then yours? If you bring personal opinion into this matter, then we will travel down the rabbit hole and never reach any agreement! :)

                in·ti·mate
                2 [in-tuh-meyt] Show IPA
                verb (used with object), in·ti·mat·ed, in·ti·mat·ing.
                1. to indicate or make known indirectly; hint; imply; suggest.
                2. Archaic. to make known; announce.
                Hate Grammar nazi's

                You are suggesting that I have definitely committed a crime sometime in the past. I'm not going to argue that point but I don't think you have the right to say it, given you don't know me at all. That suggests a level of intimacy that you do not share. You however have admitted to it and are thus guilty...!

                Last edited 20/02/13 11:03 am

                No matter how you try to spin it, stealing is still stealing and on top of that you are admitting you are regularly doing so. Think of it this way;

                While you may think that your just taking 'off the top' of their profit margins, what you are doing is making them push harder to make that profit, thus making things worse for everyone else (increase the squeeze on the 'little guys' to increase their monopoly to safeguard their profits). It's not like supermarkets don't know how much stock they lose to theft when they do their checks and balances. How do you think they recuperate those 'losses'?

                I will freely admit that when I was younger I did break the law and do something illegal, you know what happened? I regretted it and have not since done so. The difference between you and me (and quite a few others) is that you at no point even feel the slightest bit of remorse or guilt for your actions. You think you are entitled to do what you do, as a middle finger to the system.

                I would say you are no better than the big supermarkets you despise so much based on what you are saying. If you want to make a difference, without being such an unethical tool, take your business elsewhere, don't steal.

                /endrant

                  Your wasting your breath. This is the "New" Australian. couldn't give a fuck about anyone else, as long as he gets on top. Complains that this person is giving a hard time to that person so attacks this person forcing them to make life even harder for that person.

                  Its the "I pressed like on the facebook post that says not helping kids being kidnaped and forced to fight in a war is bad, so I've done my bit" and the "I don't like seeing the sick kids in the world vision ads because it makes me feel bad, I'll complain to the ACMA.

                  Its the "I pressed like on the facebook post that says not helping kids being kidnaped and forced to fight in a war is bad, so I've done my bit" and the "I don't like seeing the sick kids in the world vision ads because it makes me feel bad, I'll complain to the ACMA./q>

                  Gone a bit too far there.

                  Also you didn't finish your sentence.

            Given the current cost of living, we do what we can to get by, whilst trying to save for our own house

            The vast majority of people manage to pay the rent, save for a house, and feed their kids without resorting to stealing. Try harder and grow up.

            Last edited 20/02/13 12:45 pm

        oh yes, aren't you clever. taking the profits right out of the big bosses' pockets.

        try taking the wages' out of the pockets of the tens of thousands employed by these brands. i guarantee you that when profits are down, this is one of the first places they look to lower costs.

        no one is forcing you to take your patronage to any of these establishments. you can purchase almost anything you need elsewhere.

        scum.

        sincerely,

        giving you a big "f*uck you".

          "no one is forcing you to take your patronage to any of these establishments" Well, this is wrong. When Coles and Woollies are the only shops around, what are we supposed to do? The big guys have effectively killed off all the smaller grocery store, so they should be forced to deliver in a reasonable way. You really didn't think that through, did you?

        Dear WSDK_II,
        I understand if you are a troll. I also understand if you want to steal. However simply wanting to do these things gives you no rights to do them. I personally hope you do get caught, and I hope that your children are shown the right way to live. Somebody posted about the "new" Australian before me - I hope this is not what's happening! I am a member of a younger generation and I know one shoplifter. Although I would never report him, I do hope he gets caught, as he is NOT what I, and I'm sure most Australians would agree, think that the "new Australian" is. It embarrasses me, it shames our country and it is overall just a stupid thing to do that ends up not having the good effect - in place of this it damages many Australians who work for Coleworths. The ACCC tries, and true Australians try, in their own way, to control Coleworths. I hope your way remains far segregated from the norm.

      LIDL are coming into Oz soon and Woolworths South Africa (No relation to the one here. More like Marks and Spencer U.K.) have bought David Jones so soon we can expect lovely shops with wide ranges of quality prodicts. I hardly buy anything from Coles or Woolworths. I buy most meat and veg at Aldi now as I am reluctant to spend any money at the major supermarkets.

    I avoid the big 2 as much as I can, I go to my local Butcher for my meat and chicken, all of my fruit, veg, milk, cheese and eggs from a small locally owned stores. My Wife and I love living in Tasmania, the quality of the local produce is spectacular. So why would I want to go to Coles/Woolies and pay more for lower quality. (Full disclosure: I work for one of the big 2, just because they pay my wages, doesn't mean I have to shop with them, even with staff discount, I prefer to support the little local bloke)

      Good to see other people who realise that 'Fresh Food' in Coles / Woolworths is complete bullsh*t.

        Yep. I buy all my fresh produce from local farmers markets, meat from the local butcher and only buy anything I can't source elsewhere at the "stupidmarket". My local butcher is right next door to the Woolies and yet I see people lining up at the checkout with piles of rubbish meat from the Woolies butcher... makes me sad people are that lazy.

    There are essentially two sides to this; consumers who want the lowest prices and retailers who want the biggest price mark-ups. Between are the farmers, food quality and safety. Much is made by the two big chains in Australia of "fresh" fruit and vegetables however most Australian shoppers probably don't know that so-called fresh product can be up to three years old! It also appears that the big chains are not all that interested in food safety, which seems to me to be counter intuitive. And where does all of the above leave political talk of Australia becoming the "food basket of Asia".

    If you can't grow it yourselves you should probably buy directly from growers. And if you can't buy direct you should probably buy from smaller retailers. Big business won't do anything other than what suits themselves.

    I honestly couldn't care less about where my food comes from as long as it is: cheap, tasty and not completely artificial. I buy house brand essentials (flour, sugar, salt, etc). I buy meat from the local butcher (same price as woolies anyway). I grow my own fruit and veggies (don't believe what they tell you about organic, I use some chemicals and they taste just as good since they are fresh).

    I hardly, if ever, visit the local grocery store because they seriously overprice everything and only visit farmer's markets when I want to get unusual meats that aren't sold in the big 2 or at my butcher.

    You say this is the sort of behaviour we should expect when there is a 80% market share.. but the behaviour you're highlighting are breaches of contract and other activities that are illegal (whether or not it's proven is another matter). Sure, we can expect there to be a favouring of one brand over another.. we can expect them to not buy one or another as a method of bullying.. but to breach contractual agreements, it's not expected.

    When the farmers already have their backs to the wall it's probably too late, but someone needs to give the ACCC some balls and some teeth...!

    This is a more complex argument than the author presents, and I detect a mild dog whistle tone running through the article (pay close attention to what she is a professor of).

    This duopoly is fairly new - go back 10-15 years, when there were 4-5 major supermarket players. The others went bust, because the economies of scale for food distribution in Australia are very, very sharp. When transport operations workers became much less unionised, and transport technology cheaper and more efficient, the margins for any but the biggest two became zero (well, actually, less than zero, but that is what the ACCC has trouble proving), so many players went belly up. There are really four alternatives:

    1. Live with it
    2. Develop a supermarket equivalent to the "4 pillars policy" for banks (and very likely, you'd need to created at least one government-owned or -backed supermarket as well)
    3. Create humungous amount of regulation and red tape to monitor and control Coles and Woolies market practices.
    4. Introduce further incentives for co-operatives (mind you, they're disappearing rapidly and have been mostly bought out by IGA)

    The first three are fine if you want to be able to keep bitching from the sidelines. The fourth option is likely the one that will deliver what most of us are whingeing for, but it does require us to get off our arses and do something.

      Hey look.. If I somehow had the cash behind me.. I'd do it.. but next to no one these days has spare funds to set something like that up any more.

        In theory, that's why co-ops are created. No single person ponies up the dough. You get enough people in your community to pitch in with a small investment each, which gives you the start-up cash. When the place is up and running, everyone one that invested gets some mixture of discounts when shopping, and an annual dividend if there are any profits. Non-members pay regular prices. Pretty much exactly like a Kickstarter.

        Down-side is you've got likely a few thousand people who think they own the place (and they kinda do), and will tell you how to run it. After a few years of ... every ... single ... person ... in town telling you what you did wrong, and what you should be doing now, on a daily, weekly or fortnightly basis, a buy-out from IGA can look soooo very attractive.

    make aldi /& iga sell petrol!.open up all centro to aldi /& iga as well. aldi sell at same price in every store, that would shake up the petrol & discount voucher system. just think if petrol was the same price at every outlet?!?!.

      Sorry - replied to wrong post.

      Last edited 20/02/13 11:39 pm

    @wsdk_ii - You are a fool if you think you are screwing over the big 2 by stealing items. Ever wonder why replacement razor heads and batteries are so expensive? It's because so many people steal them that they jack up the prices to cut their losses. Stealing is only causing more price rises because we are the ones paying for the losses, not the company.

    Last edited 20/02/13 11:52 am

    What we need is more competition to level the playing field .. and shops like Aldi aren't really cutting it for me.. really crap quality low budget meat and almost always sub standard fruit and veg coupled with a very limited selection.

    What we need is for Costco to continue its push into the Aussie market because they are a big enough global player with far more capital then coles and woolies put together. This is why westfields and other big Aussie players constantly try to block new stores from being opened by twisting anti competition laws ( talk about the pot calling the kettle black ) In a few days the qld government will make its decision on the future of the Costco Northlakes ( QLD ) site going ahead .. they had to make a call in to stop westfields from holding the new Costco up in the courts for years on end.

    Anyone worried about paying a 60 dollar membership fee I can tell you this .. I made my 60 dollars back in a single visit just on the savings alone.

    Melbourne, Canberra and Sydney already have one store each with Melbourne and Sydneys second stores already under construction its a good start .. Costco aims to have 25 stores operating in Australia when it reaches its peak .. this will be a great thing for fair competition .. and not just in groceries but electronics and a lot of other goods we currently get screwed for.

    BRING ON COSTCO << that is the answer!

    Those self serve checkouts piss me off, i look at them and think theres a couple of teenagers out of a job. im glad coles are loosing shitloads because of them, they invite theft.
    I refuse to use them.

      Agreed. Plenty of disincentive to use the self service checkouts. My local Coles store has one, i figure it takes up about 4 isles? So that leaves, at minimum, 2 jobs gone.

      Definite lack of social responsibility.

    What ever happend to voting with your wallet? Why is that any time Australian want to make a stand against something it has to involved government intervention?
    Guess who is paying the big bucks to get into MPs ears to deregulate farming industries it order to exploit farmers?
    Shopping for food shouldnt be able convenience it should be about getting the best freshest food and knowing where it has come from.
    Shopping at local markets you get the freshest and longest lasting fruit and vegetables as well as smallgoods and meats.
    And it is dirt cheap. Sure your preservative free csabai salami might cost you $8 but the 1kg of cucumbers you bought for a $1 negate that cost.
    If you want to go to your local supermarket and shuffle around the aisles like zombies & support corporations that screw farmers go right ahead.
    Or you could have walk thru the vibrant stalls of fresh food with the sounds of stall holders howling their specials through the air while saving yourself money and supporting the guys who were responsible for producing it.

      I have been championing this cause since the Big2 lobbied government to remove penalty rates (so they could open late and Milk Bars everywhere disappeared) - I try to shop elsewhere (Farmers direct) but if I can't - I NEVER buy the colesworth brand (as they are cutting out other suppliers as well!!)

    It's unfortunate that they let it get this way in the first place by approving the purchase of all the little chains by Coles and Woolworths. It's not like you needed a crystal ball to see where it was headed. Now the monsters they created are branching out to crush other retail segments like hardware, lighting, outdoor furniture and gardening. I feel sorry for any of the small retailers as they really don't stand a chance. Having worked for Coles while at Uni I am fully aware of the tactics they use to crush the little guys by selling at a loss for as long as it takes to put them out of business. To this day I still can't go into a Coles store. Bunnings though is another story altogether.

    People want to shop at Coles & Woolworths. Within 5km from me there are 5 Woolworths, 3 Coles, 3 Aldi, 2 IGA, 1 Bilo. Most people shop at Woolies & Coles. 1 centre that has all 5 bar IGA, Coles & Woolies are by far the most popular. If people wanted to pay more for groceries they would. The vocal minority calling for control need to accept democracy and that most people don't agree with them.

    Also they're Aussie owned, and the German owned Aldi and US owned IGA aren't. Yes IGA do franchise to Australian companies, but a large percentage ends up in the US

    To those mentioning selling at a loss - that is a common business tactic around the world. They sell some items at a small loss to get you in the store, hoping you buy other items with a higher markup.

    Look at the US and shops like Walmart, that can sell everything (which Woolies & Coles can't) - you can even buy your prescription medicine and petrol there. No need to drive to another place to get your petrol, buy it when you shop. And Walmart give up to 15c a gallon discounts

      Walmart is the worst of the worst when it comes to mega monolithic retailers. They have singlehandedly put more businesses under than all other garbage retailers combined.

        And most Americans don't complain about Walmart. Only the vocal minority. Americans love the store.

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