The Australian Competition and Consumer Commission (ACCC) has released its final report on the supermarket sector, offering 20 recommendations aimed at enhancing competition, improving consumer outcomes, and providing fairer conditions for suppliers.
The inquiry found that ALDI, Coles, and Woolworths are among the most profitable supermarket chains globally, with their product margins increasing over the past five years.
The recommendations focus on clearer pricing practices, increased transparency for suppliers, and reforms to planning and zoning laws, all designed to create a more competitive environment in the sector.
According to the ACCC, parts of Australia’s supermarket sector are not functioning as effectively as expected, leading to suboptimal outcomes for consumers and suppliers.
“In the past 12 months, the ACCC has heard from more than 20,000 consumers through a survey, reviewed over 100 public submissions, held eight supplier roundtables, and analysed billions of supermarket data points,” said ACCC deputy chair Mick Keogh.
“Based on this extensive analysis, we have recommended measures to improve competition and deliver better outcomes for consumers and suppliers.
“There is no ‘silver bullet’ to address all the issues, but we believe these recommendations will improve conditions and enhance competition in the sector.”
Strengthening competition
Consumer preference for convenience remains a key factor in supermarket choice. Despite this, more shoppers
are now price-conscious and willing to compare prices.
The ACCC suggests that making it easier for consumers to compare prices will encourage supermarkets to compete more aggressively on cost.
To facilitate this, it has recommended that ALDI, Coles, and Woolworths be required to publish their prices online, with Coles and Woolworths also providing application programming interfaces (APIs) that allow third parties, such as price comparison websites, to access dynamic pricing information.
The inquiry also highlighted the barriers preventing new or smaller supermarkets from expanding in Australia. With limited retail sites available due to restrictive planning and zoning laws, the ACCC recommended that all levels of government simplify and harmonise these requirements.
This would make it easier for new supermarkets, particularly small-scale independents, to enter the market and provide local consumers with more choices.
“Currently, suitable retail sites are limited by planning and zoning laws, which restrict supply and can deter expansion,” said Keogh.
“Simplifying these laws will enhance competition and make it easier to establish new supermarkets.”
New merger regime
The ACCC also noted that Coles and Woolworths hold advantages in securing retail sites due to their size, reputation, and financial strength. This makes it difficult for potential competitors to find suitable sites.
The inquiry stressed the importance of strengthening the ACCC’s ability to monitor supermarket acquisitions, an area the new merger reform laws are designed to address.
Since 2019, Coles and Woolworths have acquired around 260 sites, though only 14 of these acquisitions were formally reported to the ACCC. The recently passed merger reform laws will enable greater scrutiny of such acquisitions, with the aim of preventing a substantial reduction in competition.
“The merger reforms, combined with the recommendations in our final report, will help improve competition and lead to better outcomes for consumers and suppliers in the long term,” said Keogh.
Reducing consumer burden
One of the ACCC’s key recommendations is improving transparency around pricing, promotions, and loyalty programs to reduce confusion for consumers trying to assess value for money.
This includes clearer sales tickets and better communication of promotions, which would help shoppers make more informed decisions when they are at
the checkout.
One issue raised during the inquiry was ‘shrinkflation’, where the size of a product decreases while its price remains the same or increases. The ACCC has recommended that supermarkets be required to notify consumers when shrinkflation occurs, with these notifications displayed on product labels and online product pages.
“By giving consumers clearer information on price changes, they can make more informed choices and switch to cheaper alternatives if they prefer,” said Keogh.
Price transparency
Higher freight costs and a lack of competition in regional and remote areas contribute to higher supermarket prices in these locations. The ACCC has recommended improving price visibility and complaints handling in these areas, as well as encouraging community-owned stores in regions with limited supermarket options.
“Some remote supermarkets do not display prices for all grocery items, which makes it difficult for consumers to assess product value,” said Keogh.
“We support measures to ensure all items in remote stores are clearly priced, and that consumers know where to submit complaints if necessary.”
Transparency for fresh produce suppliers
The ACCC’s inquiry revealed an imbalance in bargaining power between supermarkets and some fresh produce suppliers. Supermarkets like Coles and Woolworths can exert considerable influence over pricing and supply terms, often leaving suppliers with little room for negotiation.
To address this, the ACCC is recommending that major retailers provide suppliers with greater transparency around weekly tendering processes, and that supermarkets be prohibited from unilaterally changing agreed prices or volumes except in the case of a force majeure event.
Keogh explained that providing suppliers with better information on seasonal forecasts and demand would allow them to plan more effectively, reducing risk and uncertainty in their business dealings.
“We found that suppliers are often at a disadvantage in negotiations due to a lack of transparency. By improving access to market data and forecasts, suppliers will be better equipped to make informed decisions and manage their risks,” he said.
The ACCC also recommended amending the Food and Grocery Code to ensure that supermarkets cannot bypass its core protections during negotiations with suppliers.
The commission’s recommendations aim to address these issues by increasing transparency, simplifying regulations, and enhancing competition. The proposed changes are expected to benefit both consumers and suppliers, fostering a more dynamic and fair supermarket market in Australia.