SYDNEY (Reuters) – Australia’s dominant supermarket chains have benefited from wider profit margins at a time of rapidly increasing shelf prices, the competition regulator said in a new report on Thursday, and called for measures to make the industry fairer.
Grocery prices have jumped 24% in the past five years, outpacing wages and disproportionately affecting lower-income earners, the Australian Competition and Consumer Commission (ACCC) said in the report, published by the government.
Between them, top retailers Woolworths, Coles and privately-held ALDI sell three-quarters of Australia’s groceries.
Most of the price rises were due to increased supply chain costs, but the grocers also increased their profit margins during this time, the report said, meaning that “at least some of the grocery price increases have resulted in additional profits for ALDI, Coles and Woolworths.”
Recommended measures include forcing supermarkets to publish changes to package sizes, simplifying planning laws to enable new entrants to open stores, and limiting companies’ negotiating power with suppliers.
The report also suggested government support for community-owned rivals.
The federal government, which polls suggest could lose its parliamentary majority in elections due to take place by May 17, has been grappling with a rising cost of living crisis, although inflation is subsiding after hitting a late 2022 peak of 7.8%
It said it agreed in principle with the report’s recommendations and would allocate A$2.9 million ($1.84 million) to education programmes for fresh produce industries to understand their rights when negotiating with the supermarkets.
The government has previously said it will impose hefty fines if supermarkets fail to comply with a compulsory industry code of conduct.
“Our ongoing supermarket crackdown means more competition, better prices and better deals for Australians,” said Treasurer Jim Chalmers, who will deliver the federal budget on March 25, in a statement.
Thursday’s report also recommended new transparency requirements for supermarkets.
Separately, the ACCC is pursuing lawsuits against both Woolworths and Coles accusing them of inflating certain shelf prices, and advertising discounts of above the original price of products.
The ACCC has described Australia’s grocery sector as an “oligopoly”, where ALDI has managed to grow its market share to 9% in two decades, but otherwise competition remains weak.
Woolworths and Coles have an “entrenched position in an oligopolistic market… substantial pro-competitive departures from the status quo are unlikely in the foreseeable future,” the report said.
($1 = 1.5788 Australian dollars)
(Reporting by Byron Kaye; Editing by Rachna Uppal)
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