Yes, Australia’s big supermarkets have been raising prices. But solving the problem will not be easy

A long-awaited report into Coles and Woolworths has uncovered what many customers have long believed: Australia’s big supermarkets practice price gouging.

What began as a simple Senate investigation into grocery prices and the power of supermarkets has generated an extensive 195-page report covering the impact of supermarket prices on customers, food waste, relationships with suppliers, employee wages and conditions, excessive profitability, company mergers and land banks. .

The report makes some important recommendations, including giving courts the power to dismantle anti-competitive businesses and strengthening the Australian Competition and Consumer Commission (ACCC).

It also recommends making the Food and Grocery Code of Conduct mandatory for supermarket chains. This code regulates how they should deal with suppliers. The government’s recent Independent Review of the Food and Grocery Code also recommended making it mandatory for supermarket giants.

But at this point it’s hard to say what, if anything, the recommendations will mean to ordinary Australians and the prices they will actually pay.

Price gouging is not illegal

At the center of the Senate inquiry was the question of whether Australian supermarkets were increasing prices. According to the committee, the answer is a “resounding yes”, despite evidence presented by supermarkets to the contrary.

Price gouging occurs when companies exploit the lack of competition by setting prices well above the cost price. But the practice is not explicitly illegal.

The committee presented a series of recommendations that could help reduce price gouging. These include criminalizing the charging of excessive prices and establishing a new “Pricing and Competition Commission” to examine pricing practices in different sectors.

The committee also wants the ACCC to be given greater powers to investigate and prosecute unfair trading practices, and to be better funded and resourced.

The committee says supermarkets’ claims that there is no price gouging should mean the giants have nothing to fear under tougher legislation. However, he says:

Evidence presented by people willing to speak out about the trading practices of Coles and Woolworths suggests that maintaining margins and increasing margin growth comes at the expense of suppliers, consumers and best business practice, and without adequate justification.

We are unlikely to see relief soon

Will these recommendations really alleviate prices? It’s hard to say at this point. The recommendations presented are comprehensive, but are unlikely to result in any short-term changes for consumers.

In any case, the Albanian government does not support many of them. In the report’s additional commentary, Labor senators argue that Australian competition law already addresses excessive pricing by prohibiting misleading and deceptive conduct. They also do not support the establishment of a new commission to examine prices.

Rather, the report calls for a radical review of the current regulatory setup, which it says is “neither appropriate nor fit for purpose.” This will not be an easy or quick process.

What does the report mean for the Greens’ divestment bill?

While the investigation was underway, the Greens introduced a bill that would give courts “divestment powers.” This means that a corporation could be ordered to sell some of its assets to reduce its market power.

While the bill lacks mainstream party support, the committee suggested such divestment powers should be introduced specifically for the supermarket sector. Where an abuse of market power could be demonstrated, supermarkets could be forced to sell certain stores.

While Australia does not have divestment powers in this context, some other countries do. In New Zealand, the United Kingdom and the United States, courts can force corporations that abuse their market power to sell components of their businesses. These powers are rarely used, but the deterrent they impose can have a major influence on corporate behavior.

Labor rejects the creation of any form of divestment power in the report’s additional commentary. But the Coalition is not entirely against the idea, noting that it “does not believe the committee has convincingly determined that divestment powers should not be exercised at all” and that “divestment powers should be directed at sectors of interest.” ”.

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Read more: It’s time to give Australian courts the power to break up big companies that misbehave

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Whats Next?

At this stage, the report suggests that there is only one action that all political parties agree on: making the Food and Grocery Code of Conduct mandatory and ensuring its full implementation. We are unlikely to see much unity in the other recommendations.

In a scathing comment, the Coalition argues the report represents “a missed opportunity to address some of the structural imbalances in our supermarket sector that are impacting Australian growers, farmers, small businesses and ultimately consumers.” “.

While this is a harsh assessment, the reality is that unless these structural imbalances in our food system are addressed, we are unlikely to see significant changes.

The report draws on substantial evidence to paint a worrying picture of the food system in Australia, particularly how producers and consumers are struggling. The task of regulators is to determine what mechanisms can be used to address the power imbalance in the market, in a way that does not force Australian producers and consumers to bear the cost.