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ACCC defends Coles, Woolworths


Graeme Samuel, chair of the Australian Competition and Consumer Commission called for a ‘reality check’ in the debate around food inflation and the dominance of two players in the grocery market, when he addressed the National Retail Forum in Melbourne on Wednesday.
 
"I understand concerns about the growth of ‘Big Business’ but some commentators should take a Bex and have a lie down when it comes to the activities of major supermarkets," Mr Samuel said.
 
Food price inflation over the last 12 months to June 30 2009 was 4.7 per cent, compared with general inflation for the year of 1.5 per cent. "This statistic is quoted to suggest that we are being ripped off at the supermarket checkout," Mr Samuel said.
 
"The facts and figures tell a different story. Food prices have been rising faster than general inflation across the OECD and Australia is not special in that regard. In fact, the most recent data from the OECD shows that Australia had the 11th highest food price inflation rate for the year, out of 30 countries.
 
Food prices in the United Kingdom went up 7.2 per cent, compared with a general CPI of 2.1 per cent; New Zealand's increased 8.3 per cent with CPI at 1.9 per cent; and Canadian food prices went up 7.4 per cent against a CPI rise of 0.1 per cent.
 
Mr Samuel said the ACCC was determined to ensure that the supermarket sector was as competitive as possible, addressing structural and long term issues to encourage more retail competition and improve options for consumers.
 
"The important thing is to allow new entrants to expand, make sure that others can't shut them out through the misuse of market power and restrictive covenants or planning laws, and ensure consumers have access to good comparative information," he said.
 
"The two large firms, Coles and Woolworths, each have about 30 per cent of stores nationally, maintaining a fairly consistent share of supermarkets above 1,000 m2 over the last 10 years.
 
"Coles, for example, has over 700 supermarkets (including BiLo and after accounting for the 45 being sold by Coles to Foodworks, and Woolworths has around 780 (including Safeway).
 
"But now they face expansionary new entrants. ALDI has recently opened its 200th store and has announced plans to expand much further, up to 700 supermarkets in due course, which would put it on a par with Coles. Costco is entering Australia with its first warehouse in Melbourne and plans to open more in New South Wales.
 
"Independents including IGA supermarkets, Franklins, Foodworks and Supabarn are also tough, and in some cases expanding, competitors - Foodworks is buying 45 supermarkets from Coles, and it too now has over 700 stores."
 
The ACCC had been investigating restrictive covenants - which involved big supermarket chains and independents, landlords and tenants - since its grocery inquiry delivered last year.
 
Mr Samuel told the National Retail Forum that supermarket owners and landlords risked prosecution if they continued to block business competitors through lease arrangements.
 
Mr Samuel also referred to the national rollout of unit pricing, where all products in large supermarkets will have labelling showing the price per unit of weight or volume.
 
"Unit pricing is an initiative from the ACCC's Grocery Inquiry of last year, and it will give consumers opportunity not only to easily compare the price you pay for products on the shelves, but also between stores."
 
Mr Samuel said the ACCC's role was to promote competition, not protect competitors, working in the interests of all Australian consumers.
 
 

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