Coles and Woolworths seem to take turns offering items on sale, showing that they are more concerned with protecting their market power than competing against each other, Australia Institute research has revealed.
The ACCC this week launched legal action against Coles and Woolworths for misleading consumers through discount pricing claims on hundreds of products at a time when inflation was at its highest. However, this is not the only way the two major supermarkets work to keep their profit margins high.
Key points:
- Rather than setting prices due to demand, or to compete against each other, it appears Coles and Woolworths often take turns offering specials.
- This ensures that they are never undercut by their duopoly partner and that they are effectively working together to compete against other grocery companies.
- Independent grocers are therefore always competing for customers who know such items are on sale at one of the two main supermarkets.
- The most egregious example of this is for the popular soft drink brands of Coke and Pepsi.
“This is not what competition looks like. Australia’s grocery sector is so dominated by Coles and Woolworths that it seems they find it more profitable to work with each other than compete,” said Greg Jericho, Chief Economist at the Australia institute.
“This ‘sales dance’ from Coles and Woolworths shows that they do not set prices to cover costs, as they have argued during the period of rising inflation over the past 3 years.
“The primary goal of this pricing strategy appears to be the entrenchment of their duopoly power, which in turn reduces competition across the country and drives up prices and inflation for regular consumers.
“The allegations by the ACCC this week of illusionary sales prices are unfortunately just the tip of the iceberg. Coles and Woolworths regularly operate in ways that disadvantage consumers by reducing competition of other operators in the food sector.”
