By Samuel Poon
CANBERRA, Aug. 9 (Xinhua) -- The Australian Competition and Consumer Commission (ACCC), the country's competition regulator and national consumer law champion, has all but declared war on Coles and Woolworths, the two biggest supermarkets in Australia.
ACCC Chairman Rod Sims said they are now gathering evidence to prove that the "big two"have misused their "market power" by bullying food manufacturers.
However, his predecessor, former ACCC chairman Graeme Samuel argued that Australia's supermarket sector does not need tougher regulation.
Speaking at a recent conference on competition among supermarkets, Samuel said the sector was as"workably competitive" today as it was in 2008 when the ACCC conducted its last major review into Coles and Woolworths.
Samuel cited the introduction to the ACCC's 2008 grocery report which stated that many industry participants had failed, even under cover of anonymity, to provide evidence of harsh treatment from Coles and Woolworths.
Professor Samuel was a member of the ACCC's inquiry into the competitiveness of the grocery industry in 2008.
That inquiry found that the industry was "workably competitive. "
However, in the last few years scrutiny and criticism of the market power held by the major chains have increased and there are renewed calls for a major overhaul of competition laws to give regulators more power to limit their growth.
Samuel said Coles and Woolworths'market share is high by world standards. The two accounted for around 75 percent of packaged grocery sales.
Together with wholesaler Metcash, which accounts for about 20 percent of the market including though IGA supermarkets, the"big three"comprise 95 percent of grocery sales, making Australia one of the most concentrated markets in the world.
High concentration often signals a lack of competition but that doesn't seem to be the case for supermarkets in Australia. Big supermarkets' profits were not as high as those of retailers such as Tesco in the United Kingdom and Walmart in the United States.
Samuel argued that"neither the Australian grocery industry nor the competition law regime is broken."
With the exception of unconscionable conduct provisions, existing competition laws are well able to deal with the supermarkets, experts said.
Alexandra Merrett of the University of Melbourne Law School said putting caps on supermarket shares would likely have the unwelcome effect of forcing up prices because this would be the only way for Coles and Woolworths to grow profits.
Problems with the big two's market power appeared to be episodic rather than systemic, she said, And while consumers may be suffering from less product choice and innovation, their behavior in buying home branded products suggested they valued lower prices more. "How much are we willing to pay to value choice? We value, to a degree, Australian-made products but overwhelmingly we choose cheap imports,"she said.
Craig Woolford, a retail analyst at Citigroup, said the past decade had been good for supermarkets and their shareholders but pressure from Costco and ALDI and more government scrutiny posed problems. "The pace of growth that we have been able to see over past decade will be very difficult to see over the next decade,"he said.
The supermarket chains grow organically and by takeovers. But as recent ACCC decisions show, Australian merger laws are able to handle both types of acquisition.
The ACCC has successfully argued that relevant markets are local and they can stop creeping acquisitions of independent grocers if there is a significant competition concern.