ACCC delays decision on legal action over supermarkets’ price wars

John Durie
October 30, 2013
The Australian

The Australian Competition and Consumer Commission (ACCC) has delayed a final decision on any legal action against the big supermarket chains until next year, citing the complexity of the issues involved. In a speech to be delivered today to the Australian Food and Grocery Council leaders’ forum in Canberra, ACCC chairman Rod Sims flagged the delay and outlined the major competition issues facing the industry, but also noted that supermarket competition is just a fraction of the ACCC’s focus.A decision on whether to go to court is now expected by next March.Mr Sims’ comments come as the federal government outlines its concerns about the price war between supermarket giants Woolworths and Wesfarmers-owned Coles and its impact on the Australian food growing industry.Small Business Minister Bruce Billson told the same conference today that market pressures could “stifle” Australian suppliers and eventually lead to higher grocery prices for consumers. Wesfarmers chief executive Richard Goyder yesterday moved to head off any new constraints on the company by using a speech in Sydney to insist he had to keep driving down costs to match global competitors such as Amazon and Aldi.Mr Sims noted that his concerns included whether the supermarket chains were engaged in unconscionable conduct in dealing with their suppliers and whether they misused their power in discriminating in favour of house brands.He said the delay in any legal action reflected the complexity and breadth of investigations and the challenges associated with gathering evidence while safeguarding the business relationships suppliers who speak to the ACCC have with supermarket chains.Coles and Woolworths have been in long-running talks with suppliers over a voluntary code of conduct.On the proposed code, Mr Sims said: “We have concerns with the code which relate primarily to its coverage. Our view is that if there is to be a code it should be effective, otherwise it would be better to have no code.”Both sides of the industry claim they are close to an agreement but Mr Sims’ speech suggested this was being achieved by ignoring the more complex issues.The ACCC boss also said investigation into the supermarkets’ use of shopper-dockets with petrol discounts was nearly complete. The regulator is looking into whether the dockets were hitting competition in the petrol industry and also whether they were having an impact on petrol prices.An ACCC case against Coles, in which the competition regulator accused the supermarket of false and misleading conduct on the supply of bread that was partially baked-off site and sold in stores as “baked today”, is currently before the Federal Court.On acquisitions, Mr Sims noted in his speech that Woolworths now had nearly 900 supermarkets and 1200 bottle shops while Wesfarmers had 750 supermarkets and 800 bottle shops, adding that deals would be considered by the watchdog on a local market basis.Mr Sims said the ACCC’s role was not “to protect existing firms” when a large supermarket opened in an area, nor to monitor the impact on the community other than the competition impact.“It is incorrect to argue that a market economy needs no regulation,” he said. “It requires a modest amount of appropriate regulation to be effective.”Mr Sims welcomed the federal government’s proposed root-and-branch review of competition law “as an important opportunity to ensure the laws we administer are appropriate and serve to enhance the welfare of Australians”.He noted the review would look at both the existing law and also “structural issues related to the competitiveness of the Australian economy”, which suggests it will follow the lines of the 1992-93 Hilmer Review that led to the introduction of a national competition policy in 1995.Mr Sims worked on the Hilmer Review while employed at the Department of Prime Minister and Cabinet.Mr Billson has said he aimed to release a draft terms of reference and name a business person as the chair of the new inquiry shortly, with the review to take place next year.