The Australian Competition and Consumer Commission has conceded there is not much it can do about claims of anti-competitive behaviour by Coles and Woolworths.
The consumer watchdog’s chair Rod Sims told the Australasian Convenience and Petroleum Marketers Association Annual Conference yesterday there was a fine line between combative capitalism that benefits society and law breaking behaviour which damages society.
Sims said the ACCC was considering Master Grocers Australia’s recent report, which claims Woolworths and Coles are opening oversized and unprofitable stores in marginal sites just to kill off smaller competitors.
Get business news first
Sign up to SmartCompany’s daily newsletter
However, he indicated it would be difficult to pursue the claims made by the MGA.
“In order to meet the tests of conduct being against the law and anti-competitive, it has to be behaviour which is deliberately meant to damage competition,” said Sims.
“The fact that a new store will operate at a loss in its early days is usually considered normal commercial behaviour.”
Jos de Bruin, the chief executive of MGA, told SmartCompany he continued to be concerned by the “anti-competitive practices” of Coles and Woolworths and says Sims comments were “not particularly enlightening” on the topic.
“It’s clear to us that the ACCC are finding that the existing regulations are onerous and complex and it is very difficult to build a case and it is very costly,” he says.
“We are very appreciative of what the ACCC are doing but the big guys have stolen a massive march in supermarkets, liquor, hardware, fuel and office goods.”
De Bruin warns the “unabated growth” of Coles and Woolworths has caused real uncertainty and taken away confidence for MGA members to invest in their businesses and expand and embark on greenfield sites.
“There is a clear and present danger; there is an immediate concern. If we don’t do something now, in five or 10 years’ time all we will be doing is walking into Coles or Woolworths stores,” he says.
De Bruin says it is not just independent supermarkets which are affected by the dominance of Coles and Woolworths but entire communities because of the vast range that the supermarket giants stock, with everything from crockery to flowers.
“We’re not just talking about independent supermarkets. We are talking about florists, cleaners, homewares stores, it has an effect on the whole community,” says De Bruin.
The MGA is calling for government action both at a federal and local level.
“We are saying Coles and Woolworths are dominant now, and we are saying there should be a balance in retail floorspace so everyone can compete,” he says.
“If the government can push through a carbon tax I’m sure there is a way that our government can create a level playing field.
“We need to harness what local governments do in every state. They need to take ownership to say it is not a badge of honour to get a Coles or Woolworths in town because, if it is inappropriate, it is going to have dramatic effect on local communities.”
A spokesperson for Coles told SmartCompany that it has 749 stores while IGA/Metcash, which the MGA represents, has 1,365 stores.
Metcash’s 2012 annual report advises that it opened 58 new IGA stores in the last financial year while, in the same period, Coles opened 19 new stores and closed 11.
“Coles is not in the business of opening unprofitable stores, we only open stores where we believe there is customer demand for our offer,” said the spokesperson.
Woolworths declined to comment.