The Australian Competition and Consumer Commission (ACCC) has described the supermarket industry as an ‘oligopoly’, particularly due to the market share of Coles and Woolworths.
An oligopoly is when a small number of companies control the majority of a market.
These findings come from an interim report released by the ACCC as part of its ongoing inquiry into supermarkets.
The ACCC also heard allegations that supermarkets are holding onto land for long periods. This process, called “land banking”, can be a way to stop competitors from using the land.
The consumer watchdog will hand down its final report in February 2025.
Background
The ACCC is currently undertaking a year-long inquiry into the supermarket sector. It follows concerns raised by the Federal Government and the community about supermarket prices.
A Federal Senate Inquiry and a Queensland Parliament Inquiry into supermarket pricing both handed down their reports in May.
On Monday, the ACCC announced it’s taking legal action against Coles and Woolworths over alleged misleading discount pricing claims.
The Coles and Woolworths oligopoly
In its interim report, the ACCC argued the supermarket retail sector, with Coles and Woolworths, is an oligopoly. This is where a small group of companies have control over an industry, and follow each other’s behaviours to maximise their profits.
The ACCC says an oligopoly gives companies “influence over prices”. It can also lead to less “incentive” to make their prices competitive.
Coles and Woolworths control around two-thirds of the supermarket sector. Both companies reported billion-dollar profits in the 2023/24 financial year.
The ACCC cited Aldi and Costco as examples of an oligopoly held by Woolworths and Coles.
It said Aldi took over 20 years to secure 9% of Australia’s supermarket industry, while Costco has opened 15 stores since launching in 2009.
The ACCC said this shows the “difficulty” faced by smaller players, as a “significant investment” is needed when “entering and expanding” in the supermarket sector.
Land banking
Some witnesses flagged concerns the supermarket giants could be land banking — holding onto vacant property to block others from developing it.
The ACCC heard allegations that Woolworths has 110 undeveloped sites, Coles has 42, and Aldi has 13. However, these claims have not been proven.
Reasons for the undeveloped sites could include waiting for development approvals and rezoning for commercial activity, building setbacks, or waiting for local population growth.
The watchdog said it will investigate land banking further in its final report.
Consumers
As part of the inquiry, the ACCC held a survey on supermarket prices and access. It received over 21,000 responses from consumers.
Over three-quarters of households earning under $500 a week are spending more than 20% of their after-tax income on groceries. This is also the case for more than half of households earning between $500 to $749 a week.
A third of consumers living in remote areas said the main factor in their choice of supermarket was having “no other option”.
ACCC Deputy Chair Mick Keogh said the survey results also showed consumers “are losing trust in the sale price claims by supermarket.”
Nearly half of consumers said they always or often compare grocery prices before shopping.
That’s compared to less than a fifth of consumers in 2008, according to ACCC research.
What’s next?
The ACCC inquiry will now analyse the cost and supply chain of 14 general supermarket products. It will look into market dynamics, at a producer and retailer level. These are the products the ACCC will investigate:
- Beef
- Chicken
- Pork
- Bananas
- Apples
- Strawberries
- Cucumbers
- Potatoes
- Eggs
- Milk
- Cereal
- Biscuits
- Pet food
- Dishwashing tablets
