Back in April PWF wrote about a couple of young Melbourne entrepreneurs taking on the Coles/Woolies duopoly, while our leaders do not very much at all.
William Scott, 27, and Jordan Muir, 26, had seen an opportunity to cut out the middleman and provide fresh Australian produce to a market that wants to support Australian farmers and their communities, so they started Aussie Farmers Direct home delivery – milk, OJ, bread, eggs etc – cheaper than supermarkets. They won 6500 customers in 12 months, with 1000 signing up each month in Victoria.
Today The Age reports that Coles/Woolies have 79 per cent of our grocery market, up from 35 per cent in 1975 and Independent grocers are seeking stricter rules to limit big chains. Compare this level of market domination with Sainsbury’s and Tesco in the UK – 48 per cent of that market – and Wal-Mart and Kroger in the US who control 20 per cent.
The National Association of Retail Grocers of Australia (NARGA) Price Waterhouse Cooper report gives grounds for NARGA’s John Cummings to say independent stores are being acquired by ‘creeping acquisition’ and this is approved by the competition regulator because of inadequacies in the law, ie the Trade Practices Act needs strengthening to prevent further consolidation.
In April PWF argued:
“The ACCC’s Graeme Samuel says:
‘The Commission cannot interpret its responsibility to promote competition to mean the protection of individual companies and the outlawing of vigorous, legitimate competition – even where that competition causes difficulties for individual firms….the distinction between promoting competition and protecting consumers (is) confused and blurred by some sectors…’
So, because the independent grocers in IGA/Metcash and Australian growers – who can’t win shelf space from cheap imports – are ’simply competing’ the ACCC will not interfere…
you have to scratch your head if respected Harvard economist Professor Michael Porter holds that (Executive Summary):
‘strong domestic rivalry between firms contributes to national prosperity in terms of GDP per capita’
if American antitrust laws – those which make unfair trade practices illegal – have the power to intervene if something seems amiss (eg growers’ margins going down while consumer prices rise), why is the ACCC not looking at Competition Law in the same light as the American Antitrust Institute:
‘Antitrust laws speak in general terms, thereby leaving a lot of room for discretion on the part of administrators and judges. As something more akin to art than science, antitrust is subject to swings in political ideology and economic theory.’
Andrew Simms, in ‘Tescopoly – How one shop came out on top and why it matters’ (2007) quotes respected North American urban planner and social activist Jane Jacobs:
“The degree of diversity in either natural or economic systems determines whether or not benefits actually ‘stick’ where they are needed…but, as a handful or brands capture ever more market share, diversity is being lost both in the US…in the UK. Where Wal-Mart leads in suffocating markets, Tesco follows.
Trends like this don’t just attack small businesses; they also threaten choice and diversity…
High Street homogenisation is just one manifestation of the march of cultural uniformity.” (Page 41).
Andrew Simms is Policy Director of the award winning UK think-and-do tank, New Economics Foundation. He says the UK Competition Commission found that Tesco in particular paid 4 per cent below the industry average and when it investigated supermarkets’ manipulation of prices and their treatment of suppliers, it found pricing practices that ‘gave rise to a complex monopoly situation’ that ‘operated against the public interest’ (Pages 130-131). For example:
These sorts of practices are now being reported in Australia.