Australia’s two largest supermarket companies have criticised the government’s plans to tackle price gouging, while an industry association claims there is no evidence of gouging.
The Australian Competition and Consumer Commission (ACCC) released the results of its Supermarkets Inquiry on December 14, concluding that “Coles and Woolworths have limited incentive to compete vigorously with each other on price and that their dominance of the sector seems set to continue”.
The Federal Government claims supermarket companies Coles and Woolworths will be prohibited from charging prices that are seen as excessive in relation to their supply costs.
The ACCC then announced new ‘price gouging’ reforms, carrying a penalty of up to $10 million. The new measures include: Making the Food and Grocery Code mandatory, increasing the ACCC’s funding by over $30 million, consulting on options to strengthen the Unit Pricing Code, tackling shrinkflation, implementing the ACCC’s recommendations to improve transparency about prices, and ensuring the ACCC is notified of supermarket sector acquisitions by Coles and Woolworths.
A spokesperson for the Woolworths Group told Inside FMCG that the company has acknowledged the tabling of the new regulations. “Right now, we are absolutely focused on delivering the best value for customers,” they added.
“Average prices in Woolworths food retail have declined year-on-year for seven consecutive quarters, bringing lower prices for customers.
“This includes our Lower Shelf Prices commitment, which includes more than 800 products, delivering average savings of 12.6 per cent for customers since August. The law is unprecedented by targeting only two Australian-owned companies, creating an uneven playing field which will see much larger, foreign-owned retailers free to charge customers whatever they want, without any of the new proposed restrictions.“
Coles also provided a statement. A spokesperson said: “Multiple inquiries, including the ACCC’s 12-month Supermarkets Inquiry, found no evidence of price gouging and confirmed that higher grocery prices are being driven by rising costs such as energy, fuel, insurance, production, freight and distribution. For every $100 customers spend at Coles, we make around $2.43 in profit: less than three cents in the dollar.
“We urge the government to tackle the real drivers of higher grocery prices for Australian families. Increasing regulation is likely to put upward, not downward, pressure on prices. At a time when the focus should be on easing cost-of-living pressures, these regulations risk doing the opposite.”
These sentiments were echoed by Bran Black, CEO of the Business Council of Australia (BCA). “We all want lower prices for Australians, but regulation should be based on evidence,” he said.
“The ACCC did not find that supermarkets are driving inflation, and it also found grocery prices being pushed up by the rising costs of getting goods onto shelves — including energy, transport and insurance costs.
“If Australia wants lower prices and better outcomes for consumers, we need to focus on reducing unnecessary regulation and addressing the underlying cost pressures across supply chains – not increasing the regulatory burden without evidence that doing so will deliver benefits.”
The new regulations are set to take effect on July 1.
