The Australian Workers Union (AWU) and the Retail Supply Chain Alliance (RSCA) have welcomed the government’s plan to reform the nation’s merger rules as an important first step in tackling abuse of market power by the supermarket duopoly.
The recently announced merger reforms align closely with a key recommendation in the AWU and RSCA’s submission to the ACCC Supermarkets Inquiry, which called on the government to empower the ACCC to assess large mergers before the fact and prohibit them if they are anti-competitive. One outcome of the reforms will be to limit the big supermarkets’ ability to buy up wholesalers and smaller independent supermarkets with the aim of increasing their market dominance and forcing more suppliers to deal with them directly.
AWU ³Ô¹ÏÍøÕ¾ Secretary Paul Farrow says the reforms are a good start, but more needs to be done to address the excess market power held by Australia’s supermarket duopoly.
“The big supermarkets’ stranglehold on Australia’s food and grocery market enables them to deal with suppliers in an unfair and anti-competitive manner, which impacts workers across the supply chain-at the checkout, in the packing sheds and on the farms,” he says.
“Because suppliers are so squeezed and their margins so thin, there is less capacity to offer higher wages, less investment to help workers drive up productivity, and more incentive to cut corners and do the wrong thing. In some cases the situation may even incentivise wage theft.
“The duopoly’s excess market power also enables the big supermarkets to drive up grocery prices, impacting working Australians who are already struggling with the cost-of-living crisis.
“While the merger reforms are a promising first step, we need systemic reform of the supermarket sector and the rules governing it. This will support better pay and conditions for the workers who grow our produce, pack our food and stock supermarket shelves-as well as lower grocery prices for everyone at the checkout.”
The submission by the AWU and RSCA-a joint initiative between the AWU, the Transport Workers’ Union and the Shop Distributive & Allied Employees Association-explored a number of issues relating to the ACCC’s Supermarkets Inquiry 2024-25.
Key findings included:
- Coles and Woolworths possess inordinate market power in much of Australia’s food and grocery supply chain, far greater than other retailers and the market leaders in equivalent jurisdictions. Collectively, these organisations account for 65% of Australia’s retail food and grocery market. No other retailer enjoys a share above 10%. By way of comparison, the United Kingdom’s two largest grocery retailers command 33% of the market. In the United States, the figure is 42%.
- As a result of the duopoly’s excess market power, the big supermarkets can and do deal with suppliers in an unfair and anti-competitive manner-adversely impacting the suppliers’ workforce. The imposition of unfair prices on suppliers impacts their capacity to offer higher wages and, in severe cases, may incentivise wage theft. It also stifles investment in suppliers-limiting productivity growth and further suppressing wages.
- The duopoly also impacts retail workers. These workers have little capacity to walk away from bargaining with Coles and Woolworths regardless of their tactics.
- It further impacts all working Australians in the form of higher grocery prices than a competitive and well-regulated market would provide.
- To address these issues, reforms to strengthen competition and fair trading law and empower the ACCC are needed.
As well as the recommendation detailed above, the submission calls on the Commonwealth to:
- amend the CCA to prohibit ‘unfair trading practices’
- amend the CCA to prohibit ‘charging excessive prices’ – with strict controls to guard against unintended market distortion
- amend the Food and Grocery Code of Conduct to empower the ACCC to impose penalties on major supermarkets for non-compliance.
