While the LNP is garnering a lot of attention lately for its stand on nuclear energy, another of its policies is going under the radar, but probably will have a greater day-to-day impact if it goes ahead.
National Party leader David Littleproud said the Coalition is calling for divestiture powers because supermarkets ‘don’t respect’ current regulations.
“What we’re saying is we’re not moving or increasing the regulatory burden on them, and therefore any cost, but what we’re saying is the penalties should be higher.”
The Coalition has flagged it wants to break up the duopoly of the two big chains Coles and Woolworths, using forced sell-offs, or divestitures. The aim is to provide more competition, forcing prices lower.
In a twist, the campaign has the backing of the Greens, which has long called for breaking up the supermarket market share.
Not that simple
If only it was that simple. For a start, who is going to buy them? The only reasonable answer is a large multinational, which would immediately send any profit overseas, defeating any financial pluses with a bunch of minuses.
It’s not realistic to expect another Australian company to suddenly appear to fill the void. It would take a decade or more to set up the sort of supply chains and buyer networks Coles and Woolworths have, and there are no guarantees they would succeed.
IGA could absorb some stores, but not at any significant level, and as their business model is different to the chains, prices might even increase, not decrease.
IGA stores are owned by individual owners, not one large company, so their ability to simply ‘just buy more’ stores is limited.
IGA is also a banner owned by Metcash, a separate company that owns the IGA supply chain and supplies marketing and technical support. As a result, the owners do not have the financial advantage of owning their supply chain, which adds to their costs.
Metcash also does not have the ‘buying power’ the two big supermarket chains have, and is often a price taker rather than price maker.
Prices are higher
As such, as most people know, IGA’s shelf prices are often higher than the two big chains.
Former Australian Competition & Consumer Commission (ACCC) commissioner Graeme Samuel has weighed in with his view that divestiture was not ‘the answer’ to price increases. In an interview with the ABC he said prices would not fall if divestitures went ahead.
“That’s simply not the case and it cannot be the case,” he said.
“What we’ve got to ask is, ‘are we going to help consumers get lower prices on the supermarket shelf?’
“The answer is this will not have any impact at all.”
Under the coalition plan, divestiture powers would also be used if the ACCC found the duopoly was using its market share to distort prices and squeeze suppliers.
This would be a difficult task. No supplier in Australia is going to dob in the supermarkets. They know as well as everyone proposing these ideas that no one involved wants to get into expensive and potentially lengthy legal battles to prove supermarkets are treating their suppliers poorly. Unless a dodgy email turns up or a whistleblower goes public, the duopoly will continue on its merry way.
And part of that problem is while price gouging is rife and it gives any business a bad name, it’s also not exactly illegal in Australia.
Most notably, the government has not supported the proposal. It knows full well that forcing any extreme measures such as divestiture on any Australian organisation would make the business sector jittery, if not downright hostile. It’s one thing to propose something while you are in opposition; it’s quite another to go ahead with it while you are in power.
Do you think the two big supermarket chains should be broken up? Why not share your opinion in the comments section below?
I noticed the other day checking our Coles delivery list that Kirk’s Ginger beer has jumped in 2 months from $1.45, which it has been for many years, to $2.65, and extrra $1.20 suddenly. I cannot see any justification for that, and there were a few otrher items that have now jumped up. What it needs is another big business , like Aldi to come down to Tasmania, that would bring Coles and Woolies prices to a more rwalistic level,. When I lived in Qld, we shopped at Aldi for about 90% of our fortnightly shop, and only went to our local woolies for ceertain products that Aldi didn\’t stock. Unfortunately, Aldi has no intention of coming down here, proabably because of catchment area would be too small.
We need new company’s to come to Australia.
Lidl’s , Morrisons, Tesco’s etc etc.
Life Experience, we DO NOT need any NEW OVERSEAS companies or chains coming into Australia and funneling their PROFITS Overseas.
It may bring down prices slightly for the consumer, but is worse for the overall economy.
What the ACCC and Federal Government need to do is have a mandatory requirement for the supermarkets to reveal the wholesale buying landed price of goods and make that public so that consumers can see the markups and profits made by them. Obviously there has to be overheads added to the wholesale price but price gouging is rife. Aldi whilst still cheap, their prices have increased and now I am finding that with some products, Woolworths and Coles can be cheaper (excluding specials). The multibuy is a rort. I may only need one item and have to pay more for it as an individual price rather than the price if I buy two under multibuy. The other rort is the big yellow price tags that make items appear on special so shoppers grab that item but if they lift the tag, often the original price tag underneath may be the same or even cheaper.
Totally agree with you!
I tried a scrteen shot on what you said, but it isn’t working here. Lifting the price tag on ‘Specials’ with the same price beneath, I have encountered that in Hill street grocers.
Gordon, inteersting fact. Woolworths is part of the Woolworhs group, which has an 88.48% overseas ownership .