If the PM thinks this supermarket sweep is enough,he’s off his trolley

If Australian consumers and suppliers are to realise the benefits of real choice,our supermarket sector requires fundamental reform that goes way beyond a Code Of Conduct review.

Announcing theFood and Grocery Code Of Conduct review this week,Prime Minister Anthony Albanese said:“We’ve made looking after consumers a key priority over the past 18 months,and we’ll keep looking at every option to make sure Australians aren’t paying more than they should or getting less than they deserve. If there are further steps that are needed,then the government will not hesitate to take action.”

This last sentence is vital to ensuring changes take place because only focusing on a review of the Code will not pick up all the relevant issues. As a starting point,we need to understand that the Code represents stunningly poor public policy. Remember,it was put in place in response to the appalling treatment by the supermarkets of their suppliers:pay us money now,to which we are not entitled under any contract,with an explicit or implied threat of being delisted.

For starters,there are no penalties applied if the Code is breached. Imagine if our traffic laws said the speed limit was 100km/h but if you exceed this there is no penalty. Such an approach only brings contempt for our laws. Second,supplier complaints inevitably end up with the supermarkets. What supplier will complain when they risk retaliation that would put their entire business at risk?

Finally,theCode is voluntary,so the supermarkets can walk away when they wish. It is unfathomable that such poor policy exists. It favours large businesses over small businesses and farmers. Hopefully changes to address these flaws in the Code can be quickly dealt with in this review.

However,to see whether lower supplier prices are being passed on to consumers,and to come up with any further solutions that may be required,the Code review will need information-gathering powers. How have the supplier and retail prices moved through time,why and how often? What considerations affect supermarket price setting? What targets are set for category managers? Why have supermarket profits increased recently;through an increase in margins between what is paid to suppliers and the prices charged to consumers,or through efficiencies? Getting this information voluntarily from the supermarkets will not work.

But much more will be needed to meet the prime minister’s stated objectives. Australia’s supermarket sector isextremely concentrated by international standards. Coles and Woolworths have a combined market share of at least 70 per cent.Aldi is the next largest player with a share of about 10 per cent.

The United Kingdom has five major players in its grocery industry with a combined market share of about 75 per cent. Their top two supermarkets have a combined market share of 43 per cent. Germany’s four largest supermarkets have a combined market share of just under 70 per cent. The United States’ four largest supermarkets have a combined market share of 34 per cent.