Thanks for doing nothing for consumers in 09 Mr Rudd
As with all governments there is the irresistible urge to pass the buck as a way of trying to deflect voters from the government’s inaction on a particular issue.
Sadly when it comes to buck passing the Federal Government has been in top form during 2009.
We saw the buck passing on the GROCERYchoice debacle in June when the Federal Government pulled the plug on the consumer group Choice before Choice could launch a new revamped website to bring about much needed real transparency on grocery prices.
Coles and Woolworths said that they couldn’t provide the pricing information that Choice wanted and the Federal Government and, in particular, Minister Craig Emerson didn’t insist on Coles and Woolworths cooperating with Choice. There was a lot of finger pointing with the inevitable “blame” game.
Rather than provide the necessary leadership role in bringing Coles, Woolworths and Choice together in a meaningful and productive manner, we saw the Federal Government simply lose its nerve and pass the buck back to the industry to develop its own pricing website.
Six months after the dumping of the Federal Government’s GROCERYchoice experiment and we have heard nothing from either the industry or Minister Emerson about a possible “industry website.”
The GROCERYchoice debacle is a classic case of election promises being made to win an election by promising to “put maximum downward pressure on grocery prices” and then excuses and buck passing when the promises are inevitably broken.
Meanwhile, consumers are missing out on full transparency on grocery prices and they consistently face some of the highest levels of food inflation in the developed world.
Australian consumers are being ripped off on grocery prices and all we get is watching, excuses, and buck passing. With the real problem being the ever growing market dominance of Coles and Woolworth, it’s clear that the solution requires tackling that dominance.
With Coles and Woolworths still protected from competition from restrictive terms in leases that prevent independent competitors from entering shopping centres and with restrictive covenants, like the one in the Perth suburb of Ellenbrook, preventing independent competitors from opening up outside the shopping centre, it’s clear that all these restrictions must be immediately removed.
It’s the supermarket duopoly that dominates the market and it’s Coles and Woolworths that determine what prices they individually charge customers. If prices at a Coles supermarket are going up it’s because Coles has decided to put up its prices. The same goes for Woolworths.
So recent suggestions that it’s the “nasty” multinationals food companies that are forcing Coles and Woolworths to “put up” grocery prices can be readily dismissed. The “multinationals” cannot tell Coles and Woolworths to put up retail prices at a Coles or Woolworths supermarket. That would be illegal under our competition laws.
So if no one can tell Coles and Woolworths to put up their prices, then Coles and Woolworths need to take full responsibility for putting up their retail prices. Why do Coles and Woolworths put up prices? Simply because they have the power to do so.
Given that Coles and Woolworths control 87% of supermarkets over 2000 square metres, it’s clear that they have a stranglehold over the supermarket sector and with that comes “pricing power” or, more specifically, the ability to be able to put up grocery prices at will to the detriment of consumers.
Similarly, if Coles and Woolworths put down their prices that’s simply because they chose to do so. So why would Coles and Woolworths drop the price of home brand products? Because they choose to compete with strong independents such as ALDI.
ALDI is an aggressive discounter that generally only sells home brand products. Given that ALDI has been slowly building its presence in the market it’s clear that Coles and Woolworths need to meet that competitive challenge. To do so Coles and Woolworths are known to have lower retail prices where there is an ALDI supermarket in the local market. This was an important fact revealed by the ACCC’s own research.
So the blame game continues. Sadly, there are suggestions that the Federal Government may also be seeking to blame the food multinationals for our food inflation problem. So, again, we hear excuses and get poor attempts at deflection from the Federal Government rather than policy leadership.
Deflection and spin is no substitute for action. We simply need the Federal Government to act to give us strong competition laws. We also need more price competitive independents in the market.
The petrol industry is yet another example of spin and deflection. The ACCC alerted us to the problem of “price coordination” between the oil majors back in December 2007 and even made legislative recommendations to try to deal with the problem. After 2 years the Federal Government is yet to introduce legislation into Parliament to act on the problem and to implement the ACCC’s recommendations.
Instead, Minister Emerson has commissioned yet another petrol Inquiry. We know that the “price coordination” problem reflects the stranglehold that the oil majors have at the wholesale level. We know that the oil majors and Coles and Woolworths together control 93% of the retail market.
Clearly, we need new price competitive independents in the oil industry. We need Mobil to sell its 300 service stations to independents and not to the cosy club made up of the other oil majors and Coles and Woolworths.
Why are price competitive independents so important? It’s because they compete aggressively on price and keep the oil majors and Coles and Woolworths honest. Even the ACCC acknowledges the importance of independents.
With independents being driven out of the market, motorists are being hit with inflated petrol prices more often. This is happening right now in the lead up to Christmas and all we get from the Federal Government and the ACCC is excuses or, worse, a defence of the large and powerful companies that are helping inflate petrol prices.
Let’s hope that 2010 is a year for action by the Federal Government, Minister Emerson and the ACCC on much needed effective competition law reform and enforcement. Anything less will mean that consumers will continue to be ripped off.
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