Supermarket behaviour under scrutiny

The aim of the market study is to look into how competitive the supermarket space is in New...
Photo: ODT files.
Many shoppers and some grocery producers may have high hopes for the market study into supermarket practices announced this week by the Government.

Minister of Commerce and Consumer Affairs David Clark says the study, expected to take a year, will look at whether the sector is as competitive as it could be.

There will be at least five aspects to it: the structure of the grocery industry at both wholesale and retail levels, the nature of grocery industry competition at both levels, the pricing practices of the major grocery retailers, the grocery procurement practices of those retailers, and the price, quality, product range and service offerings for retail customers.

The announcement comes when the case of Pak’nSave Mangere being fined $78,000 for charging a higher price at the checkout for some items than the promotional price advertised or displayed at the supermarket shelf is still fresh in our minds.

Mystery shoppers from the Commerce Commission picked up the Fair Trading Act breaches in 2018. Despite being immediately notified of the price discrepancies, immediate steps to remedy the situation were not taken.

That case prompted many to wonder how common such discrepancies are and if customers need to be more vigilant at checking their receipts and raising any concerns with stores.

Dr Clark says if issues affecting competition are identified in the study, the Government will consider the necessary changes to bring about better outcomes for consumers.

Quite what that might mean was not spelled out by his press statement, although in a television interview he said if the industry practices were stopping competitors coming in, the Government could act.

As he pointed out, many suspicions about supermarket behaviour arise from the fact we have two major players cornering most of the market.

Food and Grocery Council chief executive Katherine Rich has been blunt about her members’ concerns, calling for a compulsory industry code of conduct to stop what she calls the ‘‘egregious behaviour’’ of rogues.

She says supplying the grocery market is never for the faint-hearted, but her descriptions of some of the goings-on would not be out of place in the Wild West.

The power of the duopoly means most suppliers have little or no negotiation power and are forced into a take it or leave it situation — if they are not prepared to take it their product is deleted. This could lose the producer between 45% and 55% of their sales, she says.

To get products on the shelf, a gross margin of between 30% and 45% had to be offered to the supermarket, and there would be a variety of additional costs levied.

In some cases, this could include the producer having to cover the cost of their stock stolen in the store, something they would have had no control over.

People are too scared to complain because they do not want their products deleted and nobody is willing to speak out, an environment she says the Commerce Commission, which will be undertaking the study announced by Dr Clark, is aware of.

Australia has a voluntary code of conduct for the relationship between suppliers and supermarkets, but Ms Rich would prefer a mandatory code here overseen by the Commerce Commission.

She does not see it as a cure-all, but it could stop the worst behaviour.

Although Ms Rich says it is a minority behaving badly, we agree with her view sunlight will be the best disinfectant.

Whether that sunlight will result in cheaper prices at the checkout remains to be seen, but Dr Clark said if the study finds anti-competitive practices or ‘‘other mischief’’ is going on, he would expect cheaper prices to result.

A year seems a long time to wait for an outcome, but in the meantime, we hope the mere fact of the study may scare some of the rogues into some self-reflection and better behaviour.

 

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