The former head of Australia’s competition watchdog has urged the federal government to order an in-depth investigation into supermarket profit margins and supply chains, accusing the major chains of “overpricing”.
Key points:
- An ACCC investigation would be more comprehensive than other inquiries into supermarket pricing underway
- The ACCC’s powers to investigate are limited unless requested by the government
- The federal government is under pressure to provide cost-of-living relief for consumers
Former Australian Competition and Consumer commissioner Allan Fels wrote to federal Treasurer Jim Chalmers on Monday outlining the initial recommendations from the ACTU-led inquiry into supermarkets he chaired.
He highlighted the recommendation for a comprehensive ACCC inquiry into “competition and prices in the retail food and grocery industry”.
Speaking on ABC Radio Sydney on Tuesday, Professor Fels said “on the face of it, there seems to be the probability of overcharging” by the major supermarket chains.
“They need to explain why their mark-ups have gone up and maybe some of the specials have been cut back.”
He said the ACCC’s powers to investigate were limited unless requested by the government.
“If they’re ordered by the government, then that gives them the powers to get all the information they need to probe in-depth what the profits are and also tell us a bit more about the whole supply chain issue.”
Supermarkets slow to pass on savings
Supermarkets, in particular the two major chains Coles and Woolworths, have been under scrutiny for recording large profits while raising prices substantially, leading to claims of price gouging.
Professor Fels said the term price gouging traditionally applied when an essential item was in short supply and there were sharp mark ups.
“I think today it just means prices above the levels that would occur if there was a competitive market. On that test, I think the supermarkets are overpricing.”
Professor Fels said while supermarkets were quick to raise prices when the wholesale price increases, they were slow to pass on cost savings to shoppers.
“[When] the price the supermarket pays farmers goes way down, as it has with meat in recent times, what about dropping prices to pass that on to consumers? That really needs to be looked at.”
Woolworths reduced the cost of 80 red meat products, including 20 per cent off lamb, in November.
A Woolworths spokesman said Woolworths Group CEO Brad Banducci met with Professor Fels before Christmas as part of the ACTU-initiated inquiry.
“We are committed to offering our customers value while working with our suppliers to sensitively manage economy-wide pressures,” the spokesman said.
Coles also dropped prices on several meat items earlier this month with further reductions on beef planned.
Coles executive general manager fresh, Andy Mossop, said Coles was committed to providing value for customers seeking budget friendly options, citing reductions on various fruit and vegetables.
More powerful than other supermarket inquiries
An ACCC inquiry would be the most powerful and wide-ranging of a series of inquiries into supermarkets underway.
Former Labor MP and competition and trade minister Craig Emerson has been tasked with reviewing the voluntary Food and Grocery Code of Conduct, including the relationship between farmers and supermarket giants.
Professor Fels said Mr Emerson’s work was worthwhile, but a focus on how the consumer was affected was needed.
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“What I am talking about … is a much more comprehensive inquiry that looks at the treatment of consumers, the profits that are being made, and all these price rises.”
Confirming Mr Emerson’s appointment to the role, Prime Minister Anthony Albanese signalled the government was prepared to toughen its approach to supermarkets.
“We have been clear — if the price for meat and fruit and vegetables is going down at the farm gate then families should be seeing cheaper prices on supermarket shelves too,” Mr Albanese said in a statement earlier in January.
“Supermarkets have a duty to make sure they’re providing affordable options for all Australians, especially when they’re making savings on their own costs.”
The Queensland government will also hold a parliamentary inquiry into grocery prices, with all major supermarket chains expected to give evidence.
Queensland Premier Steven Miles said last week the inquiry would bring to light more information about how prices were determined and the difference between what Queensland farmers were getting and what consumers were paying.