The Australian Competition and Consumer Commission (ACCC) has released its final report on the supermarket sector, making 20 key recommendations to address competition concerns. The inquiry found that ALDI, Coles, and Woolworths rank among the most profitable supermarket chains globally, with their average product margins increasing over the past five years.
Key Recommendations for a Fairer Market
The ACCC’s proposed changes focus on improving pricing transparency, creating fairer conditions for suppliers, and reforming planning and zoning laws to encourage competition. The dominance of Coles and Woolworths has led to limited market competition, resulting in higher prices and reduced supplier bargaining power.
After extensive research and industry engagement, the ACCC concluded that there is no single solution to these challenges. However, its recommendations aim to enhance competition, improve business decision-making, and create better outcomes for consumers.
Improving Price Transparency
Convenience remains a top factor in supermarket choice, but shoppers are increasingly comparing prices. The ACCC suggests ALDI, Coles, and Woolworths publish their prices online, while Coles and Woolworths should provide digital tools to enable independent price comparison.
Encouraging Market Expansion
Breaking into Australia’s supermarket sector is challenging, and large-scale competition is unlikely in the short term. ALDI took over 20 years to reach a nine per cent market share. Instead, smaller independent supermarkets could provide localised competition. The ACCC recommends simplifying planning and zoning laws to make it easier for new entrants to establish stores.
Strengthening Oversight of Supermarket Acquisitions
Coles and Woolworths have significant advantages in acquiring prime retail locations due to their financial strength. Since 2019, they have acquired around 260 sites, yet the ACCC was only informed of 14 transactions. The ACCC supports recent merger law reforms and calls for additional notification requirements to prevent anti-competitive acquisitions.
Reducing Consumer Burden in Decision-Making
Many consumers find it difficult to navigate supermarket pricing, promotions, and loyalty schemes. The ACCC recommends clearer labelling and sales tickets to help shoppers make informed choices.
A major concern raised during the inquiry was ‘shrinkflation’—where product sizes decrease while prices stay the same or increase. The ACCC suggests supermarkets be required to notify consumers when this occurs, with clear shelf and online product labels.
Enhancing Price Visibility in Remote Areas
Higher freight costs and limited competition contribute to higher grocery prices in regional areas. Some remote supermarkets also fail to display prices on shelves, making it harder for shoppers to assess value.
The ACCC proposes mandatory price display requirements, improved complaints handling, and government support for community-owned stores in areas with limited supermarket options.
Fairer Terms for Fresh Produce Suppliers
The inquiry found a major power imbalance between supermarkets and fresh produce suppliers. Supermarkets control pricing and trading conditions, with suppliers having little transparency over how prices are set.
To address this, the ACCC recommends that ALDI, Coles, and Woolworths provide detailed information on weekly tendering processes and demand forecasts. Additionally, supermarkets should be prevented from unilaterally lowering agreed prices or order volumes unless exceptional circumstances arise.
Strengthening Supplier Protections
To support suppliers, the ACCC proposes mandatory market reporting on fresh produce pricing, giving suppliers a clearer understanding of market trends. It also calls for amendments to the Food and Grocery Code to prevent supermarkets from negotiating their way out of key supplier protections.
Moving Forward
The ACCC’s recommendations, combined with recent merger law reforms, aim to boost competition, improve transparency, and create a fairer playing field for suppliers and consumers alike. The full report is available on the ACCC website.
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