The federal government has released exposure draft legislation to prohibit excessive pricing by supermarkets.
According to the government, the legislation is part of its commitment to crack down on supermarket price gouging and ensure Australians get a better deal at the checkout.
“This reform aims to address a core finding by the ACCC in its Supermarkets inquiry that there are significant barriers to entry in the supermarkets sector and that Coles and Woolworths have limited incentive to compete on price,” says the government.
“The ACCC further found Australia’s major supermarkets to be among the most profitable supermarket businesses globally.
“The new law will help safeguard consumers against the risk that major supermarkets charge excessive prices, enabled by their entrenched positions in the market. Supermarkets that breach these new laws can face up to multi‑million‑dollar penalties.”
The ACCC will be responsible for enforcing the prohibition.
Retailers respond
The Australian Retailers Association (ARA) and National Retail Association (NRA) have cautioned that the legislation risks tangling business in unnecessary red tape.
ARA CEO Chris Rodwell says the best way to improve competition and put downward pressure on prices is to tackle the raft of tax and regulatory impediments faced by supermarkets and other retailers.
“There’s a long list of challenges to work through, not least the huge regulatory and tax inconsistencies across the states,” he says.
“It’s time to bring the states together to undertake genuine harmonisation reform in areas such as planning, waste and sustainability, transport and logistics, payroll tax. This is how the federal government can make the greatest difference.
“It’s critical the government prioritise tackling structural barriers to entry, planning and zoning restrictions, and the massive regulatory and tax inconsistencies that limit competition and keep prices high.
“Retailers are already heavily regulated under consumer and competition law. Adding another layer of red tape will not lower prices but rather increase compliance cost and complexity.”
No evidence of price gouging
Mr Rodwell says eight taxpayer funded reports have failed to find evidence of price gouging.
“The most recent ACCC report on this subject confirmed Australian grocery inflation is lower than in many OECD countries. In recent times, the net profit margin of Coles and Woolworths remained stable at less than three cents in the dollar,” he says.
“The Australian grocery sector remains highly competitive, with a growing number of physical and online shopping alternatives. New entrants are gaining market share, and cross-shopping behaviour among consumers is at an all-time high, ensuring strong competition within the industry.
“Our supermarkets are committed to policies that drive down business costs, ensuring that savings can be passed on to consumers. They have proactively implemented many measures to benefit consumers and suppliers including enhancing pricing transparency, increasing promotional offers, expanding affordable product ranges, and streamlining supplier engagement.
“Our Australian supermarkets are major contributors to community, whether through major tax contributions or by purchasing from local Australian suppliers. They are Australia’s largest private employers, often providing frontline support in times of crisis such as bushfires and flooding.”
The ARA and NRA say they will review the government consultation and “engage constructively to support a sustainable, competitive sector that delivers better outcomes for consumers and businesses”.
