Woolworths and Coles have reduced the prices of red meat products for consumers while defending their payment rates to farmers. This comes as former Australian Competition and Consumer Commission (ACCC) chairman Allan Fels, who was chosen by unions to investigate allegations of price gouging, called for a competition watchdog inquiry into the major supermarket chains.
Professor Fels sent a letter to Treasurer Jim Chalmers, requesting the ACCC to initiate a formal investigation, anticipating the release of his findings in February. He highlighted that his inquiry, initiated by the Australian Council of Trade Unions, has received numerous concerns from experts and the general public regarding the pricing strategies of major supermarkets.
Woolworths confirmed a price reduction for nearly 80 red meat products, including a 20% discount on all lamb items, even though they maintain long-term contract rates with farmers. Coles also announced a more than 20% price reduction for lamb and beef this month.
Both retailers insisted that they honour the price commitments made to their long-term farmers and suppliers, providing them with stability for planning purposes. They emphasised that they do not take advantage of lower spot prices in the market.
Professor Fels argued that Coles and Woolworths have increased their profit margins since the pandemic due to a lack of strong competitive pressures, allowing them to retain cost reductions instead of passing them on to consumers.
According to preliminary findings from his report, submissions and testimony from the National Farmers Federation and the NSW Farmers highlighted the advantage held by major retailers and the limited information accessible to farmers and producers.
Professor Fels also pointed out that the concentration of Australia’s food and grocery sector exceeds that of comparable countries like the United Kingdom, Germany, and the United States. Despite the entry of Aldi, Woolworths and Coles still dominate more than 65% of the market, contrasting with the UK, where the top four grocers account for a similar market share.
Former Labor minister and economist Craig Emerson, who was separately commissioned to review the supermarkets’ voluntary code of conduct, suggested that paying higher prices to farmers would not necessarily result in higher consumer prices if competition pressures were stronger. He proposed measures like changes to zoning rules, forced divestiture in cases of market power abuse, and the impact of more online, direct-to-retail wholesalers on competition.
However, former Victorian premier Jeff Kennett, who recently resigned from his role as an independent arbiter of disputes between Coles and its suppliers, questioned the value of the ongoing inquiries. He believed that introducing another major competitor would not be a straightforward solution and emphasised that there was already competition in the supermarket industry.
Mr. Kennett noted that during his nine years in the arbiter role, disputes had been effectively addressed, and complaint volumes had reduced. He expressed scepticism about the outcome of the inquiries and the potential for changes to the code of conduct. He also pointed out the complexity of determining responsibility for price gouging, given the significant difference in prices between the farmgate and supermarket shelves and the involvement of various middlemen in the supply chain.