Coles and Woolworths increased prices during a cost-of-living crisis to boost profits and used promotions that made it hard to judge a good shopping deal, the competition regulator concluded in a major report investigating the sector.
The Australian Competition and Consumer Commission (ACCC) also found the big chains, along with discount rival Aldi, are among the most profitable supermarket businesses in the world, and that the sector requires widespread reform.
In a 441-page report released late on Thursday, the ACCC made 20 reform recommendations to the federal government, including forcing Coles, Woolworths and Aldi to publish all prices on their websites, and allow online comparison tools to access the data to inform shoppers.
There are recommendations designed to improve transparency of pricing, promotions and loyalty programs to help customers better understand whether an offer is actually a good deal.
Under the recommendations, the chains would be required to notify customers when a product’s size has reduced, alerting shoppers to a practice known as “shrinkflation” commonly used to hide price increases.
The regulator has also recommended the supermarkets provide more transparency in their negotiations with fresh produce suppliers, after finding there was a significant bargaining power imbalance.
The ACCC’s deputy chair, Mick Keogh, said the measures would improve conditions for competition and deliver better outcomes for consumers and suppliers.
“There is no ‘silver bullet’ that will address all the issues we have identified in the supermarket sector, but we are confident that our recommendations will make a difference for consumers, will equip suppliers to make more informed business and investment decisions while bearing a more appropriate level of risk, and will boost competition in the sector,” Keogh said.
The report, which drew upon public and private hearings, as well as submissions and consumer surveys conducted over a 12-month period, has been released before an election expected to be fought on cost-of-living policies, with the price of housing, utilities and groceries at the forefront.
The treasurer, Jim Chalmers, said the government was taking action “to get a fair go” for families at the checkout and suppliers.
“This is about ensuring Australians aren’t treated like mugs by the supermarkets,” Chalmers said.
Profits up
Many of the issues in the sector have been linked to its tightly held structure, described by the ACCC as an “oligopoly” with Coles and Woolworths collectively holding a 67% hold over national grocery sales. Aldi has a 9% share, followed by Metcash-supplied supermarkets with 7%.
The regulator acknowledged that Coles and Woolworths’ dominance would continue given their entrenched position.
The regulator assessed three different profit metrics before concluding that Coles, Woolworths and Aldi “appear to be among the most profitable supermarket businesses globally”.
Grocery prices were also found to have risen sharply over the past five years, most of which was attributed to increased business costs.
“However, Aldi, Coles and Woolworths have increased their product and [profit] margins during this time, meaning that at least some of the grocery price increases have resulted in additional profits for Aldi, Coles and Woolworths,” the ACCC said.
The ACCC’s findings are in line with research conducted by Guardian Australia that has consistently shown that the major chains are among the most profitable in the world and that they used the inflationary period to expand profit margins.
The country’s major grocery retailers have consistently defended their pricing decisions against price-gouging allegations, and say they are committed to helping Australians with cost-of-living pressures. They say that they have healthy, long-term relationships with the agricultural sector.
Reform measures
The ACCC singled out Coles, Woolworths and Aldi, saying they should be required to provide produce suppliers with detailed information about their supply forecasts as well as greater transparency about the tendering processes used to negotiate price and volumes.
The inquiry heard from fruit and vegetable suppliers who said they needed firmer commitments on how much produce supermarkets would buy, to avoid losing money and wasting stock.
The regulator said it supports the government’s move to improve the unit pricing code, which sets out the rules for which businesses must display unit prices.
The government plans to improve readability and visibility of prices in stores and the comparability of prices between stores, as well as address inconsistent unit measurements.
The recommendations included requiring all supermarkets – including small rural stores and remote community stores – to display prices next to products to improve transparency, addressing a common complaint among shoppers at those outlets.
