Coalition supermarket policy would hurt regional Australians
Forced divestiture of stores by supermarket giants Coles and Woolworths could only lead to higher grocery prices in locations where the cost of transportation is high writes Craig Emerson.
Ah, the Nationals are at it again – insisting on a supermarket policy that is against the interests of Australians living in regional and remote areas.
Forced divestiture of stores by supermarket giants Coles and Woolworths could only lead to higher grocery prices in locations where the cost of transportation is high.
You don’t need to take my word for it – although I conducted a full review of the Food and Grocery Code of Conduct, all of whose recommendations were accepted by the Albanese government and are being implemented.
My report rejected forced divestiture as a penalty for anti-competitive conduct, as has Prime Minister Anthony Albanese.
Rather, I recommended maximum penalties for major breaches of the mandatory code of conduct of $10 million, 10 per cent of annual turnover or three times the benefit gained, whichever is the greatest.
But the Greens teamed up with the Coalition and sought to legislate forced divestiture.
A decision to order divestment of stores would be for the courts, not for the government of the day or the ACCC. That’s because of the separation of powers between the government and the courts, as required by the Constitution.
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Coles and Woolworths dominate the Australian supermarket industry. Aldi and wholesaler Metcash, which supplies IGA stores, are much smaller players.
A court contemplating forcing Coles or Woolworths to sell some of its stores would ask the obvious question – who would be the prospective buyer? How would forcing Coles to sell to Woolworths, or Woolworths to Coles, fix anything? It certainly wouldn’t increase competition.
Advocates of forced divestiture argue that Coles or Woolworths would be required to offload stores to a foreign buyer.
But who says foreign supermarket chains would be interested? There’s no law stopping them from entering the market now, but for better or worse, richer or poorer, they are staying away in droves.
Maybe they just can’t see the sense in starting up a supermarket chain in Australia, far from their home base in America or Europe?
Perhaps an email from a court inviting them to Australia would do the trick, but probably not.
It’s true that German company Aldi moved into Australia at the turn of the century and is still here, and expanding its footprint. Maybe Coles or Woolworths could be ordered to sell some of their stores to Aldi?
But Aldi has a smaller range of items than Coles and Woolworths. It is a popular chain, but many shoppers don’t buy exclusively from Aldi, going instead to Coles or Woolworths to complete their weekly shopping.
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If Aldi wants to expand its store footprint but is being held back by restrictive state and local planning and zoning laws, those restrictions should be relaxed. Overly restrictive, anti-competitive planning and zoning laws are definitely on the Albanese government’s competition policy agenda.
IGA stores offer convenience and personal service, but also have a more limited range and, on average, are more expensive than the large supermarket chains.
The biggest losers from the Nationals-Liberals-Greens forced divestiture policy would be people living in regional and remote Australia.
The major supermarkets have uniform pricing policies for non-perishable items. And even for perishable fruit and vegetables and meat and fish, they can have uniform pricing for an entire state.
Effectively, Coles and Woolworths shoppers in the big cities are subsidising those living in regional and remote areas, where transport costs are much greater.
The ACCC’s February 2025 report of its inquiry into supermarkets, having examined the uniform pricing policies of Coles and Woolworths, found that: “Prices actually paid by consumers are broadly consistent with the pricing policies the supermarkets have outlined”.
It follows that if there was forced divestiture of the local Coles or Woolworths supermarket in a regional or remote location, shoppers in these places would be obliged to pay higher prices for their groceries, owing to higher transport costs.
They no longer would benefit from the subsidies paid by their city cousins.
Shire leaders in the Kimberley region of Western Australia have expressed concern about forced divestiture.
Shire president Chris Mitchell said smaller retailers would find it difficult to keep the shelves filled amid high demand if bigger supermarkets were sold off. He is smarter than the average mayor, Boo Boo!
The Albanese government has announced it will ensure the costs of 30 essential products in more than 76 remote stores are the same as those paid by shoppers in the big cities.
For forced divestiture to occur, the ACCC would need to recommend it to the Federal Court. The Federal Court would then need to weigh the evidence and conclude that divestiture was in the public interest and especially in the interests of shoppers at the stores that were to be sold.
Shoppers in regional and remote Australia could only be disadvantaged by the forced divestiture legislation being pursued by the Nationals-Liberal-Green alliance on this.
As a bipartisan policy of the Nationals and the Liberals, forced divestiture would harm voters in regional and remote Australia, but hey, it sounds tough, and it seems that’s all that matters to them.
Craig Emerson was Minister for Small Business and Minister for Competition Policy and Consumer Affairs in the Rudd government.
