The n consumer watchdog has demanded biggest supermarkets come clean on ‘shrinkflation’ and the practice of cycling prices to give the illusion of discounts.
The results of a 12-month inquiry by the n Competition & Consumer Commission (ACCC) published this week showed that both supermarkets have increased their margins in recent years, especially Woolworths.
The ACCC said a key concern raised by consumers throughout the inquiry was the lack of notice of price increases and, in particular, instances of ‘shrinkflation’, where a product’s size decreases but the price either remains the same or increases.
The ACCC is recommending that supermarkets be required to publish notifications when ‘shrinkflation’ or price rises occur.
‘This information would, at a minimum, be required to be published in proximity to the product ticket on shelves, and on the webpage for the product,’ it said.
‘By giving consumers this transparency over what are effectively price increases, consumers would be better able to ‘vote with their feet’ and switch to cheaper alternatives if that is their preference.’
The inquiry also found the specials offered by the supermarkets were part were part of ‘high-low’ pricing strategy that gave the illusion of bigger discounts rather than a consistent lower price.
It also found the two major supermarkets appeared to be talking to one another rather than competing – when a product was discounted at one store it was a higher price at the other and then it would swap over.
‘Through our analysis, we have observed a phenomenon of regular cyclical specials for particular products alternating between Coles and Woolworths.’
Coles and Woolworths are among the most profitable supermarkets in the world, the consumer watchdog also found.
Average profits had risen to as high as 43 per cent for potatoes, 38 per cent for cucumbers and 35 per cent for bananas, with suppliers left in a weak bargaining position.
The report released on Friday found that there is far less competition in than overseas, making the supermarket sector ‘oligopolistic’.
‘Coles and Woolworths have limited incentive to compete vigorously with each other on price,’ it said.
‘We have not observed Coles and Woolworths seeking to substantially discount prices below each other in aggregate.’
It added that ‘Aldi, Coles and Woolworths appear to be among the most profitable supermarket businesses globally’.
‘Coles’ and Woolworths’ market shares are increasing and they face no rivals of comparable scope and scale.’
But the ACCC didn’t declare that Coles and Woolworths had a duopoly, and stopped short of calling grocery prices ‘excessive’.
It also didn’t lay the blame for a cost of living crisis at the supermarkets’ feet.
Politicians including Anthony Albanese lashed out at supermarkets during soaring inflation after Covid.
But the ACCC found that while grocery prices have risen 24 per cent over the past five years, other goods and services have also increased by 22 per cent.
No smoking gun was found for allegations of price gouging, with the report instead suggesting there was room for more competition in the industry.
‘If the market shares and associated market power of Coles and Woolworths continue to increase in the future, their margins as a percentage of grocery prices can also be expected to continue to grow.’
The watchdog made 20 recommendations, which included making pricing data public, and more scrutiny of discounting claims.
‘s grocery trade is dominated by Woolworths with 38 per cent of sales, Coles (20 per cent), Aldi (9 per cent) and Metcash-linked independents such as Foodland and IGA (7 per cent).
For competition:
– Large chains to publish prices online
– Very large chains to provide dynamic pricing via API
– Steamline planning and zoning
– Importance of new merger laws and specific treatment of supermarket acquisitions
For suppliers:
– Enhanced forecasts
– Transparency of weekly tendering
– Transparency of rebates
– Food and Grocery Code enhancements
For consumers:
– Regulation of promotional tickets
– Shrinkflation notifications
– Transparency of loyalty program value
– Review of loyalty programs in three years
For remote :
– Support community-owned supermarkets
– Complaints handling
– All stores to display prices in-store
– Fair trading bodies to monitor display of prices and complaint information