aught in a political quagmire and the repercussions of an economic and social reset. For arguably the first time, Woolworths and Coles had no political cover, with the Labor, Liberal, National and Greens parties all supporting greater regulation to curb abuse of their dominant market shares. At opposite ends of the political spectrum, the National Party and the Greens both argued that divestment provisions should be incorporated into federal competition laws to ensure fair trading with suppliers and consumers. Woolworths and Coles drew consumer ire for cost-of-living pressures affecting Australian households, business costs, and the viability of suppliers of agricultural products and manufactured goods. From bad to worse The major supermarkets emerged from parliamentary and regulatory agency inquiries as well as concerted political, media, union and consumer group gang tackles in 2024 that damaged their reputation and affected their share price and enterprise value. Woolworths fared the worst of the two, starting 2024 with a controversial decision not to promote Australia Day merchandise and ending the year with a distribution centre employee strike costing tens of millions of dollars and ravaging supermarket shelves. Through the course of the year, Woolworths increased revenue by more than $2 billion, to $50.74 billion, but booked provisions worth $1.6 billion that cut net earnings to just $108 million. The provision included an impairment of $1.5 billion on its New Zealand food business and a $209 million writedown on its now divested stake in Endeavour Group. Woolworths’ share price fell from a year high of $37.59 to as low as $29.19 amid the controversy and negative headlines on price gouging and alleged anti-competitive behaviour. In comparison, Coles posted a $1.11 billion net profit for the last financial year, with a year-high share price of $19.40 and a low point of $15.24, albeit edging close to the higher mark at year’s end. Let the investigations begin While the wider retail sector was scrutinised by a raft of inquiries by the government, regulatory agencies, the trade union movement and the media, supermarkets and especially the two dominant retailers were also snared by inflation, cost-of-living challenges for consumers, and the squeeze of operating costs on suppliers. The timing of the inquiries for the supermarket sector was also not ideal – with changes of leadership at Woolworths, Coles, Metcash, Costco and Aldi. Even so, the two dominant chains were under the greatest scrutiny from the outset. With justification, Woolworths, with around a 37 per cent share of the grocery market and Coles with about 25 per cent, argued they have actually lost market share to Aldi and Costco in recent years and faced tough competition from Metcash and Amazon. However, their supplier relationships and trading terms, their pricing and promotional strategies targeting consumers, and their land banking of potential supermarket sites to shut competitors out of markets were all interrogated by federal government-initiated inquiries, the media and consumer lobby groups. Inflation levels and consumer cost-of-living pressures triggered the investigations but the more significant and longer-term issue for the political parties was the importance of maintaining a fair and competitive market. The competition issues included barriers to entry for new retail and potential supplier businesses, and the ability of the dominant retailers to possibly manipulate the market through obligations, trading restrictions and onerous trading terms on suppliers. The inquiries also examined anti-competitive behaviour that could include land banking, the use of veto power to prevent retail landlords from leasing tenancies to competitors, and the effectiveness of the grocery industry’s voluntary code of practice. Breaking up is hard to do The first report critical of the supermarket sector was released in January 2024. It was commissioned in August of the previous year by the Australian Council of Trade Unions (ACTU) and written by former Australian Competition and Consumer Commission (ACCC) chair, Professor Allan Fels. Fels investigated supermarket profit margins and supply chains, arguing the chains were overpricing products and price gouging, allegedly exploiting inflation spikes and product shortages after the Covid-19 pandemic. Although recognising that two further inquiries into the supermarket sector were initiated in December 2023, Fels pressed the federal government for a more comprehensive investigation by the ACCC. The two inquiries announced in December 2023 were a Senate Select Committee Inquiry and a review of the voluntary Food and Grocery Code of Conduct that former Labor minister Dr Craig Emerson adopted in 2015. The Fels ACTU report made 35 recommendations, including six regarding supermarket pricing, four about mergers and divestiture, and five on competition policy and cost-of-living pressures. The government, keen to deflect government responsibility for the twin problems, confirmed Fels’s call for a one-year ACCC investigation in February 2024. Emerson’s interim review of the grocery code was released publicly in April, with eight key recommendations, including that the code be made mandatory and enforced by the ACCC, with the introduction of penalties of $10 million or more for serious breaches and 600 penalty units for less serious transgressions. Emerson said making the code mandatory was essential to deal with the heavy imbalance in market power between the major players – Coles, Woolworths, Aldi and Metcash – and their smaller suppliers. Emerson rejected Fels’s call for breakup powers for chains that had misused their market power, powers that are strongly supported by the Greens and the National Party. Business associations, including the Australian Retailers Association, the National Farmers’ Federation and the ACTU have all rejected divestiture proposals, as has Prime Minister Anthony Albanese. After considering Emerson’s final report issued in June, the federal government introduced and secured the support of both houses of Parliament, in its final sitting week, for a bill to make the code mandatory, with enforcement powers confirmed for the ACCC. The bill enacted maximum fines under the code of whichever is the greater of $10 million, three times the value of the benefit from the misconduct, or 10 per cent of the retailer’s previous year’s turnover. Pricing practices under scrutiny  The Senate Select Committee on Supermarket Prices reported in mid-2024 on the price-setting practices and market power of major supermarkets after some testy public hearings and consideration of more than 120 submissions. The Senate committee endorsed a mandatory Food and Grocery Code of Practice and expanded enforcement powers for the ACCC; they were the only substantive recommendations committee members agreed upon. However, the inquiry’s investigation generated a broader range of issues, including pricing strategies, the integrity of discounting and promotional activities, the impact of home brands, technology and automation in the sector, as well as the role of multinational food companies in price inflation. The ACCC may address some of the issues the Senate inquiry generated in its report on the supermarket sector. That report is set to be presented to the Federal Treasurer by the end of February, following public hearings in November and consideration of submissions lodged with the inquiry. Pricing strategies, including the potential use of false or misleading ‘was/now’ pricing and ‘special’ promotions, and the relationship between retail prices and wholesale and farmgate prices, are being considered by the ACCC. The ACCC report may also comment on federal government strategies to address ‘shrinkflation’ when a product is sold at the same price but in a reduced size or weight by strengthening the unit pricing code. There may also be comment on the government requirement for notifications to the commission on mergers in the sector, opportunities for planning and zoning reform, and landbanking practices, as well as an ACTU call for a permanent prices commission. A warning shot to retailers Armed with an additional $30 million in funding to tackle misleading and deceptive pricing practices in the supermarket and retail sectors, the ACCC has already shown it is keen to flex its muscles following the 2024 inquiries. In September, the regulator launched separate legal proceedings against both Coles and Woolworths, alleging their respective ‘down down’ and ‘prices dropped’ promotions misled consumers because of price manipulation. A law firm, Gerard Malouf & Partners, is piggybacking on the regulators’ proceedings by launching a class action to recover funds for consumers on the 266 products allegedly subject to false or misleading discount claims. It is a warning shot to retailers that changes in competition laws could increasingly generate class actions and civil lawsuits, along with, or even in place of, enforcement action by regulators. Another sobering thought is that the forthcoming federal election is unlikely to lead to any of the legislative changes coming out of the 2024 inquiries to be scaled back or repealed any time soon.