With a federal election fast approaching it’s time for voters to start evaluating Mr Rudd’s performance on supermarket issues.

Cartoon:Michael Atchinson.

For Mr Rudd there is no escaping that grocery prices remain literally a bread and butter issue for all Australians.

With struggling families certainly not pleased with ever rising grocery prices and with swinging voters unlikely to be impressed with the fact that Australia still faces some of the highest levels of food inflation in the developed world, Mr Rudd certainly has some convincing to do.

First, of course, voters will need to get past the millions of taxpayer dollars wasted on the GroceryChoice fiasco. Some will even remember that in finally dumping the GroceryChoice project the Federal Competition Minister Craig Emerson was heavily swayed by advice from Coles and Woolworths claiming that any grocery website could not deliver timely and accurate information to consumers.

Leaving aside the UK experience with mySupermarket.co.uk website and any questions relating to the speed at which Minister Emerson appeared to accept the advice from the supermarket giants, that advice must now surely be questionable given that Woolworths has recently launched its own grocery prices website. 

Policy disasters are not generally well received by the voters, especially if lessons are not learnt by the Government or Minister. Some however will be prepared to forgive, but only up to a point. While voters may see beyond the occasional policy failure, like GroceryChoice, they do like their Federal Government to show leadership and to faithfully deliver on their election promises.

Now that’s where Mr Rudd has a real challenge on his hands. Quite simply, Labor has very little to show in Government to back up its big election talk about putting maximum downward pressure on grocery prices. In fact, the big talking continues with cosmetic changes being announced and then re-publicised at regular intervals for dramatic effect.

With less than a handful of announcements so far, it certainly won’t take long to digest them.

Federal Government announcement No. 1: “The Government has relaxed foreign investment rules for overseas owned supermarkets.”

The relaxation of foreign investment rules will only help where the overseas owned supermarkets can get access to suitable retail sites and in sufficiently large numbers to be able to take on Coles and Woolworths across the country. The relaxation of those rules does nothing to deal with the substantial Coles and Woolworths land banks that the chains use to lock up suitable retail sites even before they come onto the market.

The Coles and Woolworths land banks operate to effectively deny all other competitors, whether local or foreign owned, access to suitable retail sites and that places those other competitors at a severe disadvantage when trying to get into the market to take on Coles and Woolworths.

Land banks raise competition issues given that they are used to accumulate land parcels and need to be tackled if both local and foreign competitors are able to secure sufficient sites to keep Coles and Woolworths honest on grocery prices.

Federal Government announcement No. 2: “The Government has sought the removal of restrictive clauses in tenancy agreements between major supermarket chains and shopping centre owners that inhibited the entry of rivals.”

Firstly, only 80% of the restrictive clauses in shopping centre leases have been targeted. There are still upwards of 20% of these restrictive clauses remaining. While the remaining restrictive clauses should be progressively phased out within the next few years, those remaining clauses continue to operate to prevent competitors coming into shopping centres to compete with Coles and Woolworths.

Secondly, removing the restrictive clauses will do nothing to increase competition in shopping centres where the shopping centre landlord refuses to make space available in the centre for additional supermarket competitors to Coles and Woolworths. Unless independent supermarkets can get space in shopping centres, they can’t take on Coles and Woolworths in those shopping centres.

Finally, the Federal Government has failed to tackle the related issue of restrictive covenants relating to land outside shopping centres, where those restrictive covenants are used to prevent competitors from acquiring or leasing land to take on Coles and Woolworths outside the centre. 

Federal Government announcement No. 3: “The Government has been working on an agreement of the Council of Australian Governments to begin removing unwarranted anti-competitive provisions in planning and zoning laws.”

The process has been slow and an agreement even slower in coming. When reached, any agreement will take years to implement. The reform of planning and zoning laws needs to be carefully undertaken to ensure a diversity of competitors in the market. This means that we need more independent supermarket competitors to counter the dominance of Coles and Woolworths.

Simply allowing more Coles and Woolworths supermarkets to open will not generate cheaper prices unless planning and zoning laws allow more independent supermarkets into the market to take on Coles and Woolworths.

Also, the Federal Government and the ACCC need to look at any planning objections lodged by Coles, Woolworth and/or existing Shopping Centre landlords against proposed new developments by independents aimed at competing with Coles, Woolworths and/or the existing shopping centres. The use of objection processes to hinder or prevent competition raises issues under our competition laws and these require urgent attention.

Federal Government announcement No. 4: “The Government has announced amendments to the competition laws to address the issue of creeping acquisitions.”

The Federal Government has been sitting on this issue for 2 years and following two extended periods of consultation, the Government has only recently announced amendments. These very recently announced amendments differ completely from previous proposals and, unfortunately for consumers, will not stop creeping acquisitions.

The existing anti-merger law allows around 97% of mergers and acquisitions to be approved by the ACCC. This extraordinarily high approval rate occurs because the competition test used under existing anti-merger laws is far too hard to prove. That allows companies like Coles and Woolworths to get away with making creeping acquisitions that over time operate to reduce competition to the detriment of consumers.

The Federal Government is not changing the existing competition test and until it does change that test the Government will be failing to stop creeping acquisitions and that’s bad news for consumers.

With so much more that can be done to actually put maximum downward pressure on grocery prices, surely it’s time for Mr Rudd to get on with it and do whatever it takes to tackle the dominance of Coles and Woolworths.

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17 comments

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    • The Shoe says:

      06:03am | 17/03/10

      Probably there is not enough investment and purchasing power in Australia to breed another grocery giant like a Coles or a Woolworths. Here locally, at Mt Gravatt Queensland,  is a Woolworths with Coles not too far in either direction. Also tucked away here, is an un-fashionable IGA market with a decent fresh selection, good check out service and reasonable prices. The main attraction for me is the parking, thus making it not a bad option on busy days. (and quiet days.) So prices aren’t everything sometimes.

    • John A Neve says:

      06:22am | 17/03/10

      Frank,

      I’ll ask you yet again, are you in favour of Free Enterprise or not?

      Do you believe in open competition or don’t you?

      Do you support government control of prices?

      Until you tell us where you stand Frank, your articles are just so much B*** S***.

    • Iva M Tarbell says:

      05:29pm | 17/03/10

      Dear John,

      The greatest threat to the free enterprise system doesn’t come from red raggers, with the hammer and sickle tattooed on their forehead as it had in the past.

      Today, the real danger to the free enterprise system comes the those that worship duopolies and oligopolies such the camp followers of Woolworths & Coles.

      If you don’t understand that Zumbo is a true friend of the free enterprise system, you’ve simply missed the point.

    • Davido says:

      06:31pm | 17/03/10

      John you are a moron. Free competition involves more than a duopoly cramming inflated prices down the public’s throat.

      Free Enterprise, as you call it, involves many suppliers competing for the business of many buyers.

      Really you should refrain from commenting until you go back to school and learn some basic economics.

    • True Believer says:

      10:19pm | 17/03/10

      To quote John Kenneth Galbraith;
      “Marx, in his innocent, and now obsolete way thought it would be the workers who would force the pace of socialism, He must be looking with surprise at the way, in our time, it is the bankers and the big industrialists who lead the march, carry the flag.”

      No doubt if Marx were alive today he would approve of the concentration of economic power enjoyed by Woolworths/Coles

      Wake up John, if you support the Woolworths/Coles duopoly you are not a supporter of free enterprise, but are you are carrying the flag of socialism.

    • John A Neve says:

      07:20am | 18/03/10

      Davido,

      You have not improved have you, this is in a par with another or your posts.

      Free Enterprise and competition produces fewer and fewer suppliers.
      The successful gobbly up the weaker, if you don’t accept that, there is no hope for you. Although based on some of your past posts, we already know there isn’t.

    • John A Neve says:

      07:21am | 18/03/10

      True Believer,

      I find this a classic, I ask three questions, from this you, Davido and Iva come up with three versions of what I thought am thinking or support !!!

      Maybe you should all pool your brains, then you all might make some sense.

    • Nigel Catchlove says:

      07:00am | 17/03/10

      What I remember most about the Grocery Watch debacle was the decietful media management that has become a hallmark of this government.  Minister Emerson distributed a media release late on a Friday afternoon (too late for Friday media); at the end of a sitting week (avoiding Parliamentary scrutiny); the day after Michael Jackson’s death (so the Grocery Watch story would be buried).  Emerson had only once before issued a media release on a Friday and that was early enough to meet the media’s requirments and related to a previously announced Government decision (designed to extend a flagging story).  The PM’s announcement about Garret’s demotion was also made on a Friday afternoon at the end of a sitting week to minimise scrutiny of his decision but there was already so much attention on the Government’s mis-handled market intervention that the story was covered.

    • Rob says:

      07:23am | 17/03/10

      Frankly i dont see a problem,the power and conduct of the supermarkets was highlighted some 15 years ago with a great deal of publicity and yet the consumers embraced them at the demise of small businesses, well now its time for the consumer to pay the piper .

    • shabangabang says:

      07:36am | 17/03/10

      “Simply allowing more Coles and Woolworths supermarkets to open will not generate cheaper prices unless planning and zoning laws allow more independent supermarkets into the market to take on Coles and Woolworths”
      Unfortunately, one of your fellow punchers, and the NIMBYS that preach from the same fountain of crap as her, don’t want this to happen. Don’t expect it to happen while we have a bunch of gutless, timid governments.
      That said, judging by the level of obesity in Australia, I think it is fair to say the majority of the population couldn’t give a stuff about grocery prices. They still stuff their faces more often than they should.

    • Jen from Nana Glen says:

      07:46am | 17/03/10

      thank you for your insight.  Pity Rudd and co aren’t up to governing as they should.  Fancy a Labor party that supports big business against working families.

    • Rob says:

      08:06am | 17/03/10

      Another thing,i may not be an academic but i see that more foreign investment in our country cant be good in the long run . firstly they change our work culture which in turn has and will change our social culture and finally all the profits go overeseas why dont governments give small independent australian businesses some tax incentives to bring on competition

    • Sherlock says:

      08:48am | 17/03/10

      Yawn! yet another predictable article. Supermarkets today, the banks next week then back to the petrol companies. It’s a never ending cycle.

      You complain about grocery prices from Coles and Woolworths yet I don’t see anyone selling any cheaper. My local butcher is far more expensive than the supermarkets, ditto the greengrocer, fishmonger and just about anyone else. We have a Franklins which I usually pass on my way to my local Woolies. It has some great specials but on the whole it’s far more expensive and the foods not as good.

      All your talk about land banks and restrictive covenants hasn’t stopped Aldi from opening up over 200 stores with plans for further expansion nor did it stop Costco from opening in Melbourne with plans to open in other cities.

      If our grocery prices are artificially high then it creates an opening in the market for others to exploit. However I don’t see any of the worlds major supermarket chains rushing to fill this gap. I’d suggest it’s because they see little profit in it.

      There is choice in the supermarket industry with Aldi, IGA, Franklins as well as a number of local operators not to mention the plethora of newly available online grocery retailers. However all they mange to do is garner miniscule percentages of the market. Even Aldi with it’s 200 plus stores only has a single digit market share consisting of pensioners and those who don’t care about taste as long as it’s cheap.

      Week after week Australians vote with their wallets for Coles and Woolworths. The day somebody does it better and cheaper then Australians will change that vote..

    • True Believer says:

      10:33pm | 17/03/10

      Sherlock if you believe that the artificially high grocery prices paid by Australian families over the last decade, “creates an opening in the market for others to exploit” and that these“others” will like magic pop up out of the woodwork and enter the market and drive prices down from their artificial highs -  I think you have swallowed one too many textbooks.

    • BensonBird says:

      11:06am | 17/03/10

      If Abbotts scheme comes in , the prices we are paying now will seem cheap in comparrison. None of us like paying high prices , but its either pay or starve.

    • Harquebus says:

      11:55am | 17/03/10

      All this talk, just like the River Murray talk, is to hide the facts. Prices are going to go up and there is nothing anyone can do about it. We are running out of oil, just as we are running out of water.
      The average Aussie meal travels thousands of kilometers to get to the dinner plate. I don’t see fuel prices going down until the next GFC, coming soon.

    • Davido says:

      06:31pm | 17/03/10

      I think Australians will only realise just how much they are being ripped off when they are better informed of the incredible margins the big chains make.

      You….  as an Australian pay up to four times the price Australian made grocery items are sold for elsewhere in Asia.

      Wake up people!

 

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