How the feds fitted up Choice over grocery shambles

Well notice they did that late Friday afternoon when Minister Emerson finally killed off GroceryChoice. Within a couple of hours, radio and internet news stories exposing the Government’s failure on GroceryChoice were in full flight.

Clearly, consumers and news commentators had seen through the Federal Government’s attempt to sweep the GroceryChoice debacle under the carpet.

They were not going to let the Government and Ministers’ Craig Emerson and Chris Bowen forget that GroceryChoice had been a complete waste of taxpayers’ money and a disaster from beginning to end.

Now let’s turn back the clock to see how GroceryChoice was conceived and implemented, only to fail spectacularly leaving egg on the Federal Government’s face.

It begins when the ALP was in opposition. Recognising that voters were concerned about ever rising food and petrol prices, the then opposition made some big announcements that Labor would do everything possible to put maximum downward pressure on food and petrol prices.

That pleased voters enormously. Finally, there was strong political acknowledgment of the plight of Aussie families whose budgets were being stretched by rapidly rising food and petrol prices.

The voters sensed that they were being ripped off by the supermarket and oil company giants and they wanted action. And action is what Kevin Rudd, Wayne Swan and Chris Bowen promised voters.

Of course, the devil is in the fine print, and voters soon learnt that with the election safely won, Labor’s “action” on grocery prices simply meant a strategy of “watching.”

First came the customary inquiry undertaken by the Australian Competition and Consumer Commission. The ACCC promised they would look very, very closely at grocery prices.

After much looking the ACCC concluded that there were no major problems in the grocery sector, but suggested that some issues may need a little bit more investigation. More ACCC watching was to follow!

In the meantime, the ACCC tried to calm us by telling us that there was “workable competition” in the grocery sector. Sounds ok you might think. That is, until you realise that “workable competition” is a euphemism for weak competition.

In short, we have confirmation that competition in the grocery sector is not as vigorous as it should be. Of course, that would not come as a surprise to consumers. Consumers have long known that food and petrol prices are higher in some suburbs than they are in other suburbs.

Even the ACCC recognised that grocery prices are lower where there is, for example, an ALDI store in the neighbourhood.

That’s not surprising. Coles and Woolworths, like the big oil companies, engage in geographic price discrimination, a predatory practice where they charge lower prices in those suburbs where they face competition from independents, but charge higher prices in those suburbs where there are no independents.

Sadly for consumers, those lower prices only last as long as the independents do. Once the independents are gone, Coles and Woolworths simply push up their prices in that suburb. As more and more independents are forced out of the market, more and more suburbs get hit with higher grocery prices.

What was the Federal Government’s response to the rising grocery prices? Well, that’s where GroceryChoice version 1 comes in. That’s the one the ACCC put together.

Under that version Australia was divided into 61 regions and a rotating basket of goods for each region was surveyed every month. Prices on around 500 products were collected from 600 supermarkets around Australia.

The flaws in the ACCC version of GroceryChoice didn’t take long to identify. The regions were very large and stretched across large parts of a city and even a State or Territory. The number of products surveyed was a small fraction of the upwards of 25,000 items that could be found in a Coles or Woolworths supermarket. Even the number of supermarkets surveyed was a fraction of the total number of the supermarkets around Australia.

The ACCC version did not provide specific information about particular products. It simply provided a “snapshot” of average pricing information across large regions of Australia that was out of date even before it went onto the website. That’s why the ACCC version failed.

That failure cost taxpayers $3.64 million.

Realising its failure, the Federal Government tried to flick GroceryChoice to the consumer organisation Choice. Choice got to work on the ill patient.

More millions of taxpayers’ dollars were spent, but the patient was pronounced dead before arrival, with Minister Emerson pulling the life support just days before Choice was set to launch a new version of GroceryChoice.

Would the Choice version of GroceryChoce have worked? Probably not given the total lack of support from the supermarket chains, but we will never know as rather than bringing the chains into line the Federal Government just caved in to them. In the meantime, Australia consumers continue to be ripped off and the Federal Government continues to watch.