ACCC clears Coles in milk price wars

The Australian Competition and Consumer Commission (ACCC) has announced that it found no evidence that Coles broke any competition rules when it slashed it’s house brand milk to $1 a litre.

The Coles milk price reductions, which began garnering headlines half a year ago, kick-started a price war with supermarket rival, Woolworth and sparked a debate over the pricing of staple food products.

Concerns that the lowered costs would hit dairy farmers, seems unfounded. Following an industry-wide investigation, ACCC chairman Graeme Samuel said that the major impact from the reduction has been on the supermarket’s profits.

"These price reductions have benefited consumers who purchase house brand milk," said Mr Samuel.

The ACCC had investigated whether Coles had violated provisions in the Competition and Consumers Act that concern predatory pricing activity. The concern was that Coles had been taking advantage of their market power to damage the competitiveness of its rivals.

But Mr. Samuel said “price cutting, or underselling competitors, does not necessarily constitute predatory pricing. Businesses often legitimately reduce their prices and this is good for consumers and for competition in markets".

Reactions to the price war were mixed, with consumers welcoming the reductions, while dairy farmers expressed fear that it would damage the profitability of the dairy industry.

"As to the relationship between dairy farmers and milk processors, it is the case that some processors pay some farmers a lower farm gate price for milk sold as supermarket house brand milk.

"However on the evidence we’ve gathered over the last six months it seems most milk processors pay the same farm gate price to dairy farmers irrespective of whether it is intended to be sold as branded or house brand milk," Mr Samuel said.

The Sydney Morning Herald reported a Coles spokesman as saying: "Coles fully co-operated with the ACCC review of our ‘Down Down’ milk discounting campaign and is pleased they have confirmed there was no beach of the law."


Image courtesy of www.abc.net.au


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