We were all set to re-activate Stuntwatch for the Government’s response to the ACCC’s Grocery report, but the measures unveiled by Chris Bowen – while unlikely to do much about grocery prices – are actually measured and sensible. Bowen’s proposed initial response includes:

  • referring the anti-competitive impacts of state and local zoning and planning laws to COAG (remember the Australian Local Government Association is a member of COAG);
  • a mandatory nationally-consistent unit pricing regime and
  • enhancing the operation of the Horticulture Code of Conduct.

The grocery price website also launched today won’t exactly shake Woolies and Coles to their foundations. But better-informed consumers is a worthy goal, and at least there’ll be no regulatory intervention like the absurd Fuelwatch scheme to limit price movements.

The response has already been attacked, of course. The Australian – which has been running pieces in favour of Big Retail by Glenn Milne – was today explaining how greater competition among supermarkets didn’t provide lower prices. They’re usually hairy-chested economic rationalists at The Oz, but evidently the laws of economics don’t apply to the retail sector. Perhaps they and the punters they interviewed would prefer government-mandated price-fixing.

However, the response of Big Retail gives the game away. The Australian National Retailers Association attacked the unit pricing proposal, which Choice came out immediately to applaud. And Milne’s piece earlier this week gamely tried to argue the absurd Big Retail position that supermarket chains should be allowed to continue preventing competitors from setting up in malls and shopping centres, despite admitting it would mean lower rents – and therefore lower costs – for the supermarkets themselves. “There’s no guarantee this will be passed on to prices,” he sniffed. Sure. Higher costs to maintain a monopoly position should be preferred over lower costs in a competitive environment. I know which one consumers would prefer, Glenn.

ANRA also complains today about the most significant part of Bowen’s response. The Government is going to introduce a creeping acquisitions amendment to the Trade Practices Act.

For those not versed in the delights of competition law, creeping acquisitions are where a single acquisition, say by Woolies of an existing independent supermarket, is not of itself significant enough to trigger the “substantial lessening of competition” requirements of the TPA, but as part of several such acquisitions may end up significantly affecting competition. The ACCC has been concerned about creeping acquisitions in all sorts of markets for years. It closely considered the issue in the grocery inquiry, and couldn’t find any clear evidence that it was a live issue in supermarkets – contrary to the views of independent retailers. Even so, it recommended that the TPA be amended to ensure it could catch and stop it if it occurred.

If the Government proceeds with a creeping acquisitions amendment – Bowen says there’ll be a discussion paper next month – it will be significant and welcome extension of the TPA. In any number of sectors in Australia, there are smaller players who reckon dominant firms deliberately engage in a one-at-a-time acquisition strategy that flies below the ACCC’s radar. For an economy the size of ours, where there is already an inbuilt tendency to oligopoly, addressing creeping acquisitions will yield long-term benefits and at least give smaller players an assurance that the issue will looked at – which can’t happen at the moment.

None of this will particularly help the Government if grocery prices keep rising under pressure from droughts and global trade. Rudd and Swan are stuck with the perception that they would Do Something about grocery prices, just as they are with petrol prices. But at least they’ve avoided doing anything stupid, and to the extent that an improved TPA can better keep oligopolies at bay, there might even be some long-term benefits.

Peter Fray

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