Major supermarkets should be forcibly broken up if they engage in anti-competitive behaviour, and new rules designed to strengthen regulation and prevent price gouging should be pursued, a Senate inquiry has recommended.
In policies designed to empower shoppers and small suppliers against Australia’s dominant food retailers, the Greens-chaired inquiry made 14 recommendations, including measures to make product unit prices clearer and grocery promotions less confusing.
The inquiry’s final report, released on Tuesday, found that “a clear majority of inquiry participants advised that divestiture powers would be an important ‘final step’ in competition regulation, to be drawn upon when all else fails”.
The Greens senator Nick McKim, who chaired the committee, said the report offered “serious proposals to tackle the price of food, and the profiteering that has done so much harm to the people of Australia”.
“Chief among these is the recommendation that price gouging be made illegal,” McKim said.
“This would mean that corporations couldn’t just arbitrarily increase prices without facing consequences from the courts. This would be a significant new power to stop unreasonable pricing that has been rampant for years because of a lack of competition.”
While supermarkets strongly deny that they price gouge, it is also not generally illegal to do so. The proposed changes would require amendments to competition and consumer laws to prohibit excessive prices.
The Senate inquiry investigated how major supermarkets set prices and use their dominant market power, with testimony provided by the big chains as well as suppliers and consumer groups.
The inquiry was primarily focused on Coles and Woolworths, which collectively control two-thirds of the market.
Some of the findings pit the Greens-led Senate committee against the Labor government, which opposes legislative changes that would allow for court-enforced divestiture of assets.
The committee report fell down party lines, with the Greens and independents pushing for the divesture changes and stronger competition powers, while Labor senators remained opposed to the market break-up recommendations.
The Coalition published a dissenting report which said the “best policy solution to the inflation crisis is for government to rein in spending and put in place policies that reduce costs for businesses”.
The Coalition has not disclosed its formal position on divestiture powers.
Relentless price rises for essential items, from food to housing and utilities, have emerged as a central political issue for the next federal election, and cost relief is set to feature prominently in next week’s federal budget.
Australia’s big supermarkets have consistently opposed reforms that could lead to the forced sale of stores.
They have also repeatedly defended their practices and blamed the rising cost of groceries on price increases imposed by major global food brands and general inflationary pressures.
A Woolworths spokesperson said the retailer would review the report and “continue to engage constructively with the other inquiries and reviews under way”.
“In the meantime, grocery inflation is coming down in our supermarkets and we continue to work hard to help customers find the best possible value, while also taking care of our team and doing the right thing with our suppliers,” the spokesperson said.
The supermarket sector is also subject to a 12-month probe by the competition regulator, which is underway.
The committee recommendations come against a backdrop of relentless price rises for basic goods, but robust profits for those which sell them, including major chains Coles and Woolworths.
The Senate committee wants the government to set up a commission “to examine prices and price setting practices of industries across the economy”, and make the code of conduct that oversees the supermarkets mandatory. The latter measure is generally supported by the groceries sector.
The inquiry has also recommended measures designed to: address food wastage; provide additional resources and powers to the competition regulator; and prevent land banking.
The inquiry hearings were marked by an intense exchange between McKim and the outgoing Woolworths chief executive, Brad Banducci, who repeatedly declined to answer a question about a specific profit metric.
The Greens senator warned Banducci that he may be found in contempt, which carries a penalty of up to six months’ imprisonment.
The inquiry report notes it will not pursue the matter further.
“However, the committee reminds all those engaging with the Senate about the powers of committees to compel the production of documents, the answering of questions and the appearance of witnesses,” the report said.
