Why does everyone hate supermarkets right now?

Everyone seems to have an opinion about supermarkets lately.

It’s hard to wade through all the news about the industry and it seems everyone is gleefully happy to give it a kicking.

While a great deal of it is probably deserved, I also suspect there is a bit of bait and switch from politicians happy not to have their policies and performances examined too closely. Behind banks, everyone hates supermarkets, so it’s a good tactic to rail on them publicly and garner a few headlines designed to have us all clutching our pearls. It takes the heat off any closer scrutiny the government may be under. 

So it goes a bit like this, people are quite rightly worried about the cost of living, and in response, the government gets all publicly antsy about supermarket pricing which they are not responsible for, thus diverting us from examining the decades of neglect over cost of living triggers such as energy pricing and policy and pension indexation which they are responsible for. 

However, there is no doubt supermarkets are under intense scrutiny at the moment, and quite a bit of their own making. Here’s a round-up of what’s going on.

Legal action

We’ve probably all heard about the Australian Competition and Consumer Commission’s (ACCC) legal action against the duopoly of Coles and Woolworths over their pricing tactics, but what’s actually going on? 

Well, the ACCC complaint is against the strategy whereby the price was inflated, then went on special, and then when it went back to full price, it was considerably higher than the original price. 

“Following many years of marketing campaigns by Woolworths and Coles, Australian consumers have come to understand that the ‘Prices Dropped’ and ‘Down Down’ promotions relate to a sustained reduction in the regular prices of supermarket products. However, in the case of these products, we allege the new ‘Prices Dropped’ and ‘Down Down’ promotional prices were higher than, or the same as, the previous regular price,” ACCC Chair Gina Cass-Gottlieb said.

The ACCC alleges the conduct involved 266 products for Woolworths at different times across 20 months, and 245 products for Coles at different times across 15 months. 

According to the ACCC, the maximum penalty for each breach of the Australian Consumer Law increased on 10 November 2022, part way through the period of the alleged conduct. For contraventions from 10 November 2022, the maximum penalty is the greater of:

• $50,000,000
• if the Court can determine the value of the ‘reasonably attributable’ benefit obtained, three times that value, or
• if the Court cannot determine the value of the ‘reasonably attributable’ benefit, 30 per cent of the corporation’s adjusted turnover during the breach turnover period for the contravention.

Generally, the supermarkets brush off any fines, but $50 million might be hard to ignore. 

Inquiries

Supermarkets are also facing an ongoing major ACCC inquiry, And to back its endeavors, the government last week announced an additional $30 million in funding to go towards investigating and policing the sector. 

In a recent press release, the ACCC claims supermarkets are “engaging in practices which disadvantage both their customers and suppliers”. 

Very few suppliers are going on record because they know they are in danger of losing their biggest contracts if they do, but a writer in The Australian has compared the big two supermarkets’ buying tactics as “like the Mafia”. That’s fighting words for a media outlet very much on the side of big business. 

Journalist Roger Montgomery said a supplier he spoke to was told that the supermarket expected to make $1m from selling the supplier’s product, but because it only made $800,000, it missed its budget and needed to reduce the previously agreed payment to the supplier by $200,000. 

While it’s appalling, this doesn’t surprise me at all, and the supermarkets get away with it because they know suppliers won’t speak out about it due to the very real fear of losing their contracts. 

Supermarkets were also the subject of a Senate Select Committee inquiry, which handed down its report earlier this year.

In the final report, the committee recommended several brutal changes to the industry including: 

• Prohibiting price gouging
• Creating divestiture powers specifically for the industry
• Closer government scrutiny of supermarket pricing,
• Greater powers for the ACCC to prosecute supermarkets
• Powers to investigate land banking 

Perhaps Mr Jeremy Griffith, a member of the NFF Horticulture Council said it best in his submission to the inquiry: “There is nothing good about duopolies. It doesn’t matter what economy you are in, they are bad for the economy. They slow economic growth, they reduce employment, and consumers will always pay more money. And they are extraordinarily difficult to regulate.”

What do you think? Do supermarkets need to be regulated? Or broken up? Why not share your thoughts in the comments section below?

Also read: How much does your supermarket know about you?