Despite countless inquiries over several decades that have concluded there is no need to legislate to prevent so-called ‘’creeping’’ acquisitions by the major supermarket chains the issue is, yet again, back on the national agenda.
Today it was Australian Competition and Consumer Commission chairman, Rod Sims, who raised the issue, devoting a significant slab of an address to CEDA to the topic and making it clear the commission is paying increased attention to ‘’incremental’’ acquisitions in the grocery, liquor, home improvement and petrol sectors.
This is a hoary old issue that has been continuously looked at by federal parliamentary committees and by the ACCC itself. They have consistently concluded that restricting the chains would damage the interests of consumers and the economy.
Get daily business news.
The latest stories, funding information, and expert advice. Free to sign up.
The debate took on a quite aggressive tone recently when Master Grocers Australia said it had evidence that Woolworths and Coles were opening over-sized and unprofitable stores in marginal sites just to kill off smaller competitors. It promised to release a report supporting its claims next month.
It doesn’t, of course, make any sense that either Woolworths or the Wesfarmers-owned Coles would deliberately create unprofitable stores in order to drive small supermarkets out of marginal locations, but the smaller independent banner groups are finding themselves caught in the cross-fire of the price-driven battle between Woolworths and the newly-competitive and very aggressive Coles.
Without the scale of the chains, which have ploughed billions of dollars into improving their productivity and their offerings, the independents have been steadily ceding share to the majors – and more recently Aldi – over recent decades. That can happen in competitive markets.
Sims explained the ACCC’s rekindled interest in the issue of creeping acquisitions by saying they were important at both the local and national level.
The chains, he said, were increasing their participation in the liquor, grocery and home improvement sectors, particularly via small acquisitions, a trend that benefitted from their substantial economies of scale and scope. Barriers to entry for groups wanting to replicate their market positions were increasingly high and there were often local barriers like access to sites.
When they acquired an independent player they removed an alternative from the market with a potentially different product range and service offering, reducing consumer choice as well as competition generally, he said. That competition was unlikely to be replaced by another entrant.
All that’s true, but there is no law against incremental acquisitions and, indeed, federal parliament has, as indicated, considered the issue and rejected it.