There are laws against acquisitions that substantially lessen competition in a market and against abuses of market power but unless the market is going to be defined in terms of a suburb, or less, it is difficult to see how they can or should be used to effectively cap the chains’ footprints.
Sims said the sector was reaching a ‘’critical decision point.’’
‘’Either we can ignore the many current local acquisitions by Wesfarmers and Woolworths and in, say, five years see what market structures we have in key sectors or we can examine each local acquisition now, as best we can and within our legislation, to see if there is a substantial lessening of competition.’’
‘’By opposing those acquisitions which substantially lessen competition in a local market … we hope to not only assist local communities by protecting competition but also ensure better national market structures than would otherwise emerge.’’
It is unclear how trying to slow the expansion of the two most efficient supermarket operators – lessening their ability to compete with less efficient operators – benefits competition. The most recent ACCC inquiry into grocery retailing, in 2008, was more critical of the independents’ wholesaler, Metcash and its margins than it was of the two big chains.
The reality is that they do compete ferociously and have driven food price deflation, creating considerable consumer benefit, while greatly improving the productivity of the supermarket sector. If more competition is needed in grocery retailing the answer doesn’t lie with independent operators but with making it easier for Aldi to gain access to sites and encouraging Costco’s expansion.
The chains are far more worried about competition from those two groups than small supermarket operators.
Trying to limit the expansion of the chains equates to protectionist measures for less competitive businesses, which isn’t in the best interests of the community or economy. It would also, perversely, adversely impact the value of the independents’ own businesses if the chains – the most deep-pocketed of potential buyers – were somehow prevented from making incremental acquisitions.
By itself the extra scrutiny from the ACCC and a strengthening of its voluntary regime under which Woolworths and Wesfarmers give it notice of impending acquisitions, isn’t particularly harmful or threatening.
The fact that the issue still has legs, that the independents are revving up their campaign again and that the ‘’David versus twin Goliaths’’ and urban giants versus regional battlers characterisation of it might well resonate within this peculiar national parliament that we have should, however, give the chains some cause for concern.
This article first appeared on Business Spectator.
