ACCC supermarket inquiry highlights pricing and competition concerns

The Australian Competition and Consumer Commission (ACCC) has released its final report on the supermarket sector, raising concerns about pricing transparency, competition, and supplier relationships. The inquiry found that rising grocery prices have been driven by increasing costs, but also suggested that the dominance of major retailers may be limiting fair competition, particularly for smaller suppliers and independent grocers.

“In the past 12 months the ACCC has heard from more than 20,000 consumers who responded to our consumer survey, received more than 100 public submissions, held eight supplier roundtables, reviewed tens of thousands of internal documents, conducted private hearings and ten days of public hearings, and analysed billions of points of supermarket data,” ACCC Deputy Chair Mick Keogh said.

“Based on this extensive analysis we have recommended a range of measures to improve conditions for competition in the sector and deliver better outcomes for consumers and suppliers.”

The report calls for potential regulatory changes to improve competition and transparency, including stronger protections for suppliers and clearer pricing structures for customers.

Barriers to small business entering supermarket sector

The report found as it stands there are significant barriers for new or small supermarkets to gain traction in the sector, noting. It has taken Aldi 20 years to gain 9 per cent share  of the market.

“There is no ‘silver bullet’ that will address all the issues we have identified in the supermarket sector, but we are confident that our recommendations will make a difference for consumers, will equip suppliers to make more informed business and investment decisions while bearing a more appropriate level of risk, and will boost competition in the sector,”

Industry response

Coles, one of Australia’s largest supermarket chains, has responded to the report by acknowledging rising costs as a key driver of price increases. The retailer stated that expenses such as electricity, rent, insurance, wages, and transport have all risen, impacting pricing decisions.

“As the ACCC’s analysis shows, grocery price increases during the past five years are significantly impacted by rising costs,” a Coles spokesperson said. “We do not control these inflationary costs, but they contribute to higher grocery prices for Australian households.”

While the ACCC raised concerns about competition, Coles argued that the Australian grocery sector remains highly competitive, with consumers having access to a range of shopping options including Aldi, Costco, Amazon, specialty retailers, and independent grocers.

Small biz players struggling

For small business owners in the food and grocery sector, the ACCC’s findings highlight both challenges and potential opportunities. Independent grocers and suppliers often struggle to compete with major retailers’ buying power and pricing structures. The report suggests that improved transparency and regulatory oversight could level the playing field, making it easier for smaller players to operate.

Additionally, potential changes in supplier negotiations could impact businesses that rely on major supermarkets for distribution. Small suppliers may benefit from stronger protections and fairer contract terms if regulatory measures are introduced.

“To improve competition and enable greater entry and expansion Keogh said the ACCC are recommending that all levels of government simplify and planning and zoning requirements to make it easier to establish new supermarkets.”

“Currently, the availability of suitable retail sites is limited by planning and zoning laws, which restrict overall supply,” Keogh said

The inquiry’s findings are likely to fuel ongoing discussions about supermarket pricing and competition as the government considers suggested reforms.

The ACCC’s 20 recommendations are:

1. Governments should consider support for community-owned stores in limited choice areas (particularly remote areas) with appropriate governance measures
2. Supermarkets should be required to publish pricing information
3. Governments should adopt measures to address planning and zoning issues
4. Supermarkets should be subject to minimum information requirements for discount price promotions, supported by record keeping obligations
5. We support the Australian Government’s proposal to consult in relation to proposed changes to the Unit Pricing Code
6. Supermarkets should be required to publish notifications when package size changes occur in a manner adverse to consumers
7. Coles and Woolworths should be required to provide members with periodic loyalty program information disclosure summaries
8. Coles and Woolworths’ loyalty program practices should be reviewed in 3 years
9. We recommend measures to strengthen complaints handling mechanisms in remote locations
10. Supermarkets should not be able to negotiate out of key minimum protections in the Food and Grocery Code
11. Harmonisation of accreditation and auditing requirements
12. ALDI, Coles and Woolworths should be required to provide fresh produce suppliers with detailed information about their supply forecasts
13. ALDI, Coles and Woolworths should be required to provide fresh produce suppliers with greater transparency about the weekly tendering processes they use to negotiate price and volumes with suppliers
14. Greater transparency about supermarkets wholesale fresh produce prices
15. ALDI, Coles and Woolworths should not be able to unilaterally reduce wholesale fresh produce prices or volumes agreed with suppliers
16. Greater transparency for growers who sell fresh produce through intermediaries
17. Suppliers of supermarket branded fresh produce to supermarkets should have earlier certainty about orders placed with them
18. Suppliers should be allowed to apply their own branding to fresh produce
19. There should be greater transparency about the rebates suppliers pay to supermarkets
20. Coles and Woolworths should be more transparent about how supplier funding contributions to their inhouse retail media services are used.

You can read the full report here

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