Woolworths Chief executive officer Michael Luscombe fronted the ACCC inquiry yesterday to talk about some of the most hated corporate practices in Australia today.
Australia’s two retail giants (Coles is due to give its evidence next week) are coming under intense scrutiny for alleged anti-competitive behaviour, predatory pricing, price gouging and more. Some people, like radio host Alan Jones, go so far as to blame them for inflation.
Yesterday was never going to be comfortable for Luscombe and no doubt his minders and spin doctors had him rehearsed to within an inch of his life.
Their overall message was an old standby: “Woolworths’ prices and profits reflected its concern for customers, staff and shareholders.”
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Well, no kidding. Just about every corporate CEO in Australia uses this one from time to time. But what does it tell you. There is a sausage factory but they’re not letting on about how the sausages are actually made. The real point is who gets what share of the benefits of competition and productivity improvements.
Luscombe also said he believed that “competition was a good thing”. This must have warmed the hearts of the ACCC. But Woolworths also owned up to: “a number of methods by which they exercised pressure on rivals, including the lodgement of 22 objections over the past five years to planning applications from rival retailers. (Woolworths) also routinely negotiated lock-out clauses with shopping centre landlords that precluded the entry of competitors over the term of a 20-year lease.”
Clearly, Luscombe’s belief in competition comes with qualifications.
Luscombe gave the issue of price collusion a wide berth and denied any knowledge whatsoever about the way his main competitor, Coles, sets its prices. No gaps in the defence there. Any slip-ups could be potentially disastrous in this area.
Sometimes, it got a little too uncomfortable and Luscombe opted to answer several questions in camera, that is, away from public scrutiny. This included the all important predatory pricing question: “does Woolworths sell below cost price in order to match competitors?”
This is the key point with many small businesses that are driving this debate and they will be deeply suspicious of Luscombe’s non-response. Opting for secrecy is never a good look in these circumstances.
One of the great favourites of TV current affairs programs is the idea that supermarkets charge their customers on a capacity to pay basis; that is, rich suburbs pay more. Woolworths were ready for this one with a neat policy response: “Woolworths is heading towards having items at the same price nationally, with the exception of high-cost delivery areas.”
Of course, this pretty much admits that they are guilty as charged on this issue but it does take much of the sting out of it.