What are you really doing about grocery prices, PM?

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.