Allegations that supermarkets in Australia are misusing their market power through land banking are being examined as the government looks to implement stricter measures to address potential issues. This practice has been observed in the UK over the last few decades and in the USA during the 1960s, 70s, and 80s, where similar concerns about competition arose.
The federal government has promised to work with states and territories to stop land banking, a practice where companies buy land without any plans to develop it, making it difficult for competitors to enter the market. Additionally, the government is allocating $30 million for the consumer watchdog to investigate any wrongdoing in the supermarket sector.
An inquiry by the Australian Competition and Consumer Commission (ACCC) has raised concerns about land banking and its effects on competition, suggesting that it may prevent other supermarket chains from growing their market share.
The ACCC’s interim report highlighted that grocery prices in Australia have increased by 20% over the past five years. However, it also noted that food price growth is similar to inflation for other goods and services, and Australia’s food price inflation is lower than in many OECD countries.
Prime Minister Anthony Albanese has announced that supermarkets will face tougher penalties through a new mandatory code of conduct, replacing the previous voluntary guidelines that governed the relationship between supermarkets and suppliers. “We’re giving the ACCC a stronger tool,” he said in an interview with ABC Radio. “This new code will bring in serious fines for supermarkets that break the rules.”
Albanese pointed out a disconnect between the goals of supermarket CEOs, who aim to maximize profits for shareholders, and the needs of customers. “Good practice will lead to happier customers who are more likely to shop at their stores,” he noted, emphasizing the duopoly in Australia’s supermarket industry, where Coles and Woolworths hold about 67% of the market share.
In response to these allegations, a spokesperson for Woolworths explained that the company faces long delays for development approvals. “It usually takes five to seven years to build new stores, and sometimes even longer,” they stated, explaining that land is purchased to fit this timeline and to meet population growth.
A representative from Coles reaffirmed the company’s commitment to keeping prices low, mentioning that there is often limited guidance on promotions and pricing in some areas. “We will keep working with the federal government and the ACCC as they look into pricing and supermarket practices,” they added, welcoming any clarity this process may bring to the retail industry.
