Evidence a super slam
Whistleblower says big grocery is a ‘risk-free’ business
An industry whistleblower has blown the lid open on the shelf pricing tactics supermarket chains are using to the detriment of consumers and to muscle out food suppliers.
Abdel Badoura told Monday’s inquiry into supermarkets that he witnessed “firsthand” Coles and Woolworths’ market manipulation after a decade of sitting in on price negotiations with suppliers.
He said the big chains exploited their duopoly to push around suppliers seeking a price increase.
“Coles and Woolworths are running risk-free businesses, they are propped up by suppliers who are paying for the majority of their expenses, with the Australian public being overcharged at every step,” Mr Badoura told senators.
“They have gotten away with this for years due to the lack of competition in the market and their market power abuse. As a result, you consistently see high recommended prices compared to other countries on the same products.”
Mr Badoura said in his experience, Coles and Woolworths would either reject or partially accept price increases and then determine a “gap” used to get suppliers to invest more money into their business.
“So in circumstances where a supplier has indicated their costs have increased, the supermarkets then seek to extract more money, ultimately compounding price increases for customers,” he said.
“Third, supermarkets will play games and delay until the last minute, at which they finally align on some form of payment and incremental investment from the supplier in the form of promotions, margins or advertising support.
“Because Coles and Woolworths set margin percentage expectations, they know that with every price increase they stand to make millions.”
Former ACCC head Allan Fels meanwhile told Monday’s hearing that it would be sensible for Australia to adopt divestiture laws similar to the US to reduce harms to consumers and smaller businesses.
A separate review on supermarkets rubbished calls for divestiture powers, which would force supermarkets to sell stores if they had too much market share.
In his interim report, former Labor minister Craig Emerson argued that divestiture powers would trigger job losses and intensify market concentration.
Professor Fels however blasted Dr Emerson’s interim report as “lacking depth” and said deregulation would rather expand markets and jobs.
“In Australia we’ve broken up gas and electricity and some other public enterprises and that’s led to an expansion,” he said. “I was surprised at him (Dr Emerson) commenting on divestiture … He just picked up sort of line one of the standard big retailer response without really going into it with any depth.”