Supermarket pile-on is going to cause real harm

**PAYWALL:**

If the supermarkets are guilty, then throw the book at them. But it’s populist politics that is really at work here.

Who could be surprised? We have an election looming in the next nine months. We have sticky inflation and the resultant painful cost of living and interest rates. So someone needs to be blamed.

Supermarkets are the latest in the conga line of culprits blamed for the cost-of-living crisis. First, the Reserve Bank copped it briefly. Next in the blame game queue are the supermarkets – the duopoly of Coles and Woolworths – let’s not even acknowledge the presence of Aldi, Costco, IGA and other independents, and the ubiquitous Amazon.

And so the pile-on begins. They are accused of “price gouging” by politicians and my predecessor at the ACCC, Allan Fels, but no evidence is produced to validate these claims. Fels, the Nationals and the Greens, with the tacit support of the Liberals, want the ACCC to have the power to break up the major supermarket chains. In fact, this motley group would seek to break up any big business that behaves “anti-competitively”. It seems being big is bad.

The pile-on became a tsunami this week, after the ACCC launched legal proceedings against the supermarket chains alleging deceptive conduct in their pricing strategies. The fact that these are, at this stage, allegations to be tested in our courts, hasn’t stopped politicians from all sides, the media and former regulators, from ripping into the supermarkets on the basis that the ACCC claims have been proven.

Let me address some myths out there, not to defend the supermarkets, but hopefully to inject some rational analysis into the discussion.

First, the proposed Food and Grocery Code of Conduct. Despite claims made by some politicians, this has no impact on prices at the supermarket checkout counter – except as a possible constraint on supplier-demanded price increases. It is a code to regulate the trading relationship between the major supermarkets, including Aldi and Metcash (as a wholesaler) and their suppliers.

The code primarily seeks to ensure that these relationships are conducted in good faith. It imposes a mediation and arbitration process on negotiations between suppliers and the supermarkets to resolve disputes. Unless the farmers are directly supplying to the supermarkets, the code will not apply to them and their dealings with, for example, processors. Importantly, the code does not address the shelf pricing practices of the supermarkets.

If the supermarkets are exonerated … can we expect those who have been engaged in the pile-on to apologise?

The Choice comparison of the cost of baskets of supermarket products would have more credibility if it detailed the contents of each basket of goods to enable us to be sure that there is a like-for-like comparison.

Aldi’s packaged goods are predominantly home-brand products, while Coles and Woolworths predominantly sell branded products, with inherent higher costs associated with the marketing of the label. This is why home brands are cheaper than branded products, often with little to differentiate between the two in terms of quality.

The recent court actions launched by the ACCC will be very interesting to watch as they unfold. If the ACCC is vindicated by the courts in its allegations of deceptive conduct, the big supermarkets will deserve all that the courts throw at them – and should be excoriated in the strongest of terms.

But there could be another explanation for the facts as detailed in the ACCC court documents as to what occurred through late 2022 and early 2023. It is possible that through that time, when inflation had peaked at 7.82 per cent, the suppliers demanded price increases, to which the supermarkets acceded.

But these increases necessitated resultant increases in shelf prices. And then the supermarkets detected resistance to these products from customers. So they then reduced the prices, in the form of specials, to attract customer purchases. Deceptive conduct or savvy marketing? That will be for the courts to decide.

The truly credible inquiry and resultant report will be the formal ACCC price inquiry requested by the Treasurer in 2023 and to be released this year. It should be a thorough examination of supermarket prices and will either prove or debunk the allegations of “price-gouging”.

But will all this make any difference to the continued supermarket pile-on? Of course not, until at least inflation and interest rates start to fall. And if the supermarkets are exonerated in terms of the allegations of price-gouging and deceptive pricing practices, can we expect those who have been engaged in the pile-on to apologise for the reputational damage that has been and will continue to be sustained by the supermarkets?

Of course not – that is the nature of the populism that has invaded our political discourse over the past 12 months and will continue unabated until the next election and probably beyond.

It’s almost like people have no trust in the ACCC or govt organisations to investigate and hold companies like this responsible for their actions and therefore won’t care when these companies are “exonerated,” for all their vile scummery.

Colesworth really reaching with this one.