Rudd Government in spotlight over Grocery Choice backflip

Posted by Daniel Palmer on 29th June 2009

Prime Minister Kevin Rudd has disputed claims that he has failed in a bid to increase competition in the grocery sector.

The banishing of the controversial Grocery Choice website on Friday without consultation with its developer – consumer group Choice – has put the government in the spotlight for breaking an election promise. There have also been reports that Choice will sue the Federal Government – which appears unlikely – and calls for a Senate Inquiry by Independent Senator Nick Xenophon and the Greens.

Mr Rudd told reporters today that a number of other measures had been introduced in his time as Prime Minister that would offer a benefit to Australian consumers, such as new predatory pricing powers to the ACCC and the imminent introduction of compulsory unit pricing.

“The Government has been very active on the whole question (of supermarket competition),” he argued.

However, skeptics have reason to be cynical on such a claim. After all, it could be argued that unit pricing can be advantageous to supermarket chains like Coles and Woolworths as it highlights the lower cost of their private label goods – presenting them with an opportunity to further push their higher margin goods. The major retailers actually made steps toward introducing unit pricing before the Federal Government had even lifted a finger on the issue. And, as for the predatory pricing legislation, the ACCC has yet to launch a single prosecution. The Rudd Government could claim that it has scared companies off the practice but how could anyone tell?

There remains the prospect of creeping acquisitions legislation and new planning laws but nothing has been concluded on those matters.

Mr Rudd added that the government was continuing discussions with retailers regarding the creation of an industry-run grocery price website.

“I’m confident the minister will work a proposal through with the industry over time,” he said. “It will just take time.”

Choice was particularly critical of the decision on Friday, implying that the power of the major supermarkets had driven the decision. The consumer group is currently mulling over the options available to it, including pushing ahead with the introduction of the site.

Meanwhile, a Senate Inquiry appears to have the support of the minor parties and the Opposition. Greens Leader Bob Brown is planning to ensure executives from Coles and Woolworths are required to give evidence as the likely inquiry looks into a backdown on an election promise, the possible influence of the major supermarket chains and the timing of the announcement (it was made just five days before the site was due to go live, just as Parliament entered a Winter recess and on a day when it was always going to be overshadowed by the death of Michael Jackson).

It is rumoured that around $7 million has been spent on the website by Choice since they took control from the ACCC.

Grocery Choice may be dead but we certainly haven’t heard the end of it.