Australia’s competition watchdog has put forward a series of measures for the country’s major grocers to publish more information on prices.
In a 441-page report into Australia’s supermarket sector, the Australian Competition and Consumer Commission (ACCC) said Aldi, Coles and Woolworths “appear to be among the most profitable supermarket businesses globally”.
The three grocers “increased their average product margins over the last five financial years,
particularly for branded goods in household and packaged food categories”, the ACCC said.
The watchdog found “significant funding” is paid by suppliers to Woolworths and Coles – the two largest grocers in Australia – for “promotions and ancillary services”.
In the report, the ACCC made 20 recommendations for Australia’s federal government, taking in areas including prices, loyalty programmes, tendering processes and planning reform.
“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,” ACCC deputy chair Mick Keogh said.
The ACCC is recommending Aldi, Coles and Woolworths be required to publish their prices on their websites. It wants Coles and Woolworths to make available application programming interfaces that provide dynamic price information to third parties such as online price comparison tools.
The watchdog also said there should be “greater transparency” regarding pricing, promotions and loyalty programmes “to reduce the burden on consumers when they try to understand the value for money of supermarket offers”.
According to the ACCC, there is “a significant bargaining power imbalance” between Coles and Woolworths and some suppliers.
It said there is “substantial information asymmetry” between fresh produce suppliers and supermarket chains when they participate in weekly tendering process.
The ACCC is recommending Aldi, Coles and Woolworths be required to provide fresh produce suppliers with greater transparency about the weekly tendering processes they use to negotiate price and volumes with suppliers.
“We are proposing to hold a consultation process with relevant stakeholders to develop reform recommendations for supermarket fresh produce weekly tendering arrangements,” Keogh said.
The watchdog is also recommending the three grocers should not be able to unilaterally reduce the price or volume agreed in purchase orders confirmed through their weekly tendering processes other than in the case of a force majeure event.
Further, supermarkets should be required to provide fresh produce suppliers with more detailed information about the basis for seasonal forecasts to allow suppliers greater ability to predict and forecast future demand.
“Improving transparency for demand forecasts will give suppliers greater certainty and greater ability to assess their risk exposure in the supply of fresh produce,” Keogh said.
The ACCC also said major retailers should be subject to mandatory market reporting obligations, so that suppliers of fresh produce can obtain a much better understanding of market conditions and will be better able to engage in informed supply negotiations with supermarkets.
