ACCC's inquiry into supermarket bullying misses the real issue of duopoly power
The Australian Competition and Consumer Commission (ACCC) announced last week that it is investigating claims that Coles and Woolworths are bullying suppliers. The issue is serious, but the ACCC investigation only treats the symptom and diverts attention away from the real cause of the problem: supermarket power.
ACCC enforcement action action against the duopoly for “unconscionable conduct” is nothing but a skirmish on the edge of supermarket power. It would be much better to spend time and money on creating alternative ways in which the eaters and producers of food can connect with each other outside of the major supermarket chains.
Chances are the ACCC will not win any unconscionable conduct case against the supermarkets. They have had very limited success in taking action for such conduct in the past. The relevant provisions poorly define unconscionable conduct and leave it to the courts to make a moral judgement in the circumstances of each case.
Here, the allegations are certainly serious. Suppliers claim that Coles and Woolworths require them to make payments above and beyond that negotiated in order to stock their products, and that the supermarkets impose penalties that do not form part of any negotiated terms of trade. Suppliers also claim that the duopoly does not pay the prices agreed and that they discriminate in favour of their own home-brand products.
These tactics may be unattractive, even uncivilised. But they are exactly what we should expect when two retailers hold 80% of the grocery market. Coles and Woolworths likely have a bevy of lawyers ready to show that their terms were set out in contracts that suppliers freely agreed to; any deviations were the rogue acts of individual bad apples. The supermarkets will argue that this is nothing more than robust competition in the interests of low prices for consumers.
It will be difficult for the ACCC to prove otherwise. In a competitive marketplace, why not ask for the lowest possible price from suppliers and demand extra payments for shelf space, in-store advertising and so on? Why not prefer home-brand products if they make more profit for the supermarket?
The real worry is the fact that these two supermarkets have gained so much power in the first place. We should not be wasting precious public resources fighting over particular instances of the abuse of that power. Instead, we should use every ounce of imagination and creativity we have to challenge the Coles and Woolworths duopoly over grocery retailing and therefore over the very relationship between consumers and their food.
The tragedy of the Coles-Woolworths duopoly is the narrow, greedy, profit-oriented way in which they control and manipulate the relationship between all of us who eat food and those who produce it. The supermarkets say that they are just delivering what consumers want - cheap, reliable, accessible food. Squeezing producers on prices is supposedly part of that equation.
Yet it is the supermarkets and processed food companies that present food to us as something that should be cheap, plentiful and industrial - devoid of any connection with the earth, sun, animals, plants and people who produce it. They barely give us a chance to find out about where our food comes from, let alone at what cost to humans and ecosystems it is produced and sold. If we knew, we would be shocked.
Take “free range” eggs as an example. Woolworths claim to be continually improving animal welfare standards throughout the supply chain. Coles claim to be helping customers switch to “free range” by cutting their prices on cage free eggs.
Yet both are demanding that producers supply “free range” eggs at a price that can only be delivered by an industrialised, concentrated egg production and retail system. This system does not and cannot match the glossy pictures of happy hens on the carton, yet consumers are told that this is what “free range” must mean.
Many consumers turn off “industrialised supermarket free range” as soon as they realise the conditions that the hens are actually kept in. They are even more likely to do so once they meet a farmer at a farmer’s market and taste a day-old egg from a truly happy hen for breakfast. The story can be repeated for any number of foods on the supermarket shelves.
Duopoly supermarket power is stopping us seeing and imagining alternative ways of producing and buying food. The supermarkets like to tell us that they are giving us affordable choices. Instead of spending money fighting over who they bully to deliver us those low cost choices, let’s spend time and money finding, celebrating and developing alternatives such as local, organic or wholefood stores, farmers’ markets, exchange at community food hubs and backyard and urban gardens.
If we spent public money on creating alternative retail spaces and developing affordable ways to make tasty, fresh, sustainable food then there would be some true competition for Coles and Woolworths. Instead of asking the ACCC to occasionally thump the duopolists, let’s try to imagine how to nurture thriving small scale social enterprise to build healthier local relationships between us and our food. Then we can figure out what we need to do to make sure that Coles and Woolworths don’t undermine creative alternatives.Comment on this article
Christine Parker does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.
Monash University provides funding as a founding partner of The Conversation AU.
Victoria State Government provides funding as a strategic partner of The Conversation AU.