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Will multiple inquiries into supermarkets make groceries cheaper?

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Several inquiries are underway into the practices of Australia's supermarkets, and how they set the prices of groceries.
Will a string of inquiries into Australia's supermarkets bring down the cost of groceries?

There are a string of inquiries taking place at the same time into the practices of Australian supermarkets, including how they set the prices of their groceries.

Coles and Woolworths control roughly two-thirds of Australia’s supermarket sector. Each company reported profits of more than $1 billion in the last financial year.

However, the supermarket giants have faced mounting accusations of unfairly increasing their prices during a cost of living crisis.

It’s prompted several formal investigations, including a Federal Senate inquiry and an independent review by the competition watchdog.

But will these inquiries bring down the cost at the checkout anytime soon?

Rising prices

Food and household goods have become more expensive over the past two years, amid a wider pattern of growing inflation.

According to the Australian Bureau of Statistics (ABS), the price of food and non-alcoholic beverages had risen by 4.5% in December 2023 compared to the same time in 2022.

Supermarkets have recently been accused of adding to inflation by setting their prices higher than necessary.

Duopoly

The dominance of Coles and Woolworths in the supermarket sector has been described as a “duopoly” — meaning customers essentially have two choices of where they buy groceries.

This gives supermarkets significant power over how they price their products.

In other countries, increased competition from multiple supermarket chains means groceries are priced more competitively, leading to lower costs.

Senate inquiry

A Federal Senate inquiry into Coles and Woolworths is now underway. It was proposed by the Greens and secured the Labor Government’s support last year.

Its main focus is to determine if supermarkets are “price gouging” — unreasonably increasing the cost of their products.

The inquiry will do this by examining a range of factors, including the link between rising supermarket profits and the growing cost of essentials, and whether supermarkets are falsely advertising “discounts” for products.

Farmers and growers have told the inquiry the wholesale price of fruit and vegetables hasn’t gone up in 15 years despite in-store prices increasing.

That means supermarkets are selling produce for a higher profit margin, but farmers are not benefiting from these increased prices.

The National Farmers Federation said some growers have “horror stories” to share about “unfair, unethical, and often abusive” behaviour by supermarkets.

The inquiry’s report due is due on 7 May.

ACCC review

Another review has been launched after Nationals leader David Littleproud called for the ACCC to investigate alleged anti-competitive behaviour by retailers.

The 12-month review will be conducted independently of the government. Its focus will be on understanding how supermarkets set their prices.

Given the length of the ACCC inquiry, it’s hoped the findings will provide a more in-depth analysis than the Senate inquiry. The ACCC report is due on 28 February 2025.

Other inquiries

A government-commissioned review of the ‘Food and Grocery Code of Conduct’ is also underway. The code is voluntary, meaning supermarkets don’t have to opt in to its terms, designed to improve the relationship between suppliers and supermarkets.

Its report, due 30 June, is expected to discuss the possibility of making the code mandatory and attaching fines for breaches.

Last week, Queensland Premier Steven Miles also established a Parliamentary committee to investigate supermarket pricing across the state.

What will happen?

Each review will hand down findings and recommendations in a final report — the first of which is due in May.

Australia Institute Chief Economist Dr Greg Jericho suggested the inquiries should lead to a permanent body with the power to regularly review supermarket prices.

Independent MP Monique Ryan said without competition, prices will remain high. She wants the government to consider reforms to diversify the supermarket industry. Ryan also suggested regulations like tougher penalties for misleading prices.

Supermarkets response

In a submission to the Senate inquiry, Coles said it understands the cost of living strains Australians are under. It said it tries to “deliver value to our customers and is committed to helping lower the cost of living”.

Woolworths gave a similar statement, saying the company is “acutely aware of the pressure inflation is placing on our customers”.

It added that it takes “steps to provide affordable grocery products for all Australians”.

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