The Federal Government has been told to learn from an “episode of waste and mismanagement” in reference to the GroceryChoice debacle, while the role of the ACCC has come under fire. A leading retail representative has also been criticised in a Senate Inquiry report, with calls for an investigation into a possible breach of the Trade Practices Act.

The Inquiry had been launched to look at the handling of the price monitoring website GroceryChoice, an election promise of the Rudd Government.

The lead-up

The website, set-up following the release of the Australian Competition and Consumer Commission’s Grocery Price Inquiry report, was attacked last year for being irrelevant when it was run by the competition watchdog. As a result, consumer group Choice was called in to develop an improved site.

In June, just a few days prior to the new site being due to go live, the Federal Government pulled a surprise by scrapping the site altogether. The news infuriated Choice, who claimed that the major retailers had influenced the decision in a meeting between the Australian National Retailers Association (which represents Coles, Woolworths and Franklins) and Competition Minister Dr Craig Emerson (for a summary of events click here).

With the Government on the back foot a Senate Inquiry was instigated, the report from which was tabled last night.

The findings

“This inquiry has revealed that the Government’s GROCERYchoice initiative was characterised by waste and mismanagement,” it advised. “It was designed to fulfil a hollow election promise to put downward pressure on grocery prices. However, it is clear that the aims of the website were not going to be achievable.”

The report said that the original site, run by the ACCC, was “poorly-designed” and bore “no resemblance to real-world consumer shopping patterns”. Beyond this, the Senate Economics Reference Committee called into question the tender process of the ACCC – which is rather alarming given their position as ‘competition watchdog’.

“The committee has serious concerns about the thoroughness of the ACCC’s evaluation process for the GROCERYchoice data collection contract,” the summary read. “The time pressure that the Government placed on the ACCC to launch the website clearly led to hasty decision-making and little consideration of the potential saving to the taxpayer of $2.7 million (the cost differential between the two data collection bids).”

“It appears that at least $2.7 million could have been saved if the Government had been more flexible and kept its eye on the ball. The launch date for the website was arbitrary and politically motivated.”

In relation to this finding the Senate report recommended that the Commonwealth Auditor -General investigate the tender process undertaken by the ACCC, labelling the ACCC’s “decision not to undertake any in-field checks of Retail*Facts’ (the agency chosen to provide the data) price collection, as authorised by the contract” as “particularly concerning”.

Industry-run website?

The Economic Reference Committee echoed calls from Choice earlier in the week in requesting details on progress made toward an industry-run website. Upon announcement of abandoning the site, Dr Emerson advised that discussions would be held with supermarkets in relation to the possibility of an industry-run website. Nothing has been mentioned since.

The committee was disappointed with the handling of the site by Dr Emerson, arguing that he “demonstrated a lack of professionalism” in not offering Choice forewarning and the right to respond.

“His behaviour lacked a clear sense of transparency or fair play, having not had the courtesy to speak to representatives of Choice prior to publicly announcing that the Government was terminating its contractual arrangements,” they noted.

Initial website unfair

Another of the concerns raised was the impact of the site on independent retailers. Smaller retailers were critical of the site upon launch, arguing that it generalised the prices of the independent sector and provided unfair comparisons. According to the report these assertions were valid and the website was “prejudicial”.

The report said that the ACCC particularly owed independent retailers in Tasmania an apology for the “unfair” comparison to major supermarkets that led to the publishing of negative press in Tasmania’s Mercury.

ANRA to be investigated?

The allegations tabled by Choice regarding possible interference from retail body ANRA could be the subject of further investigation. The committee recommended the ACCC look into the possibility of breaches of the Trade Practices Act in the role played by ANRA during negotiations with Choice about the price monitoring website.

ANRA has disputed claims by Choice that their role in negotiations may have been anti-competitive and Labor Senators said there was no evidence of any Trade Practices Act breach.

Reckless spending
“Overall, the committee believes that GROCERYchoice was a shocking waste of taxpayers’ money, clearly demonstrating the Government’s apparent disregard for obtaining value for money,” they concluded.

The total cost to date of the “failed experiment” is $7.7 million with an estimated contingent liability of $700,000, depending on the outcomes of negotiations with Choice regarding money owed in relation to termination of their contract.

It was suggested that the Federal Government had not learnt from the FuelWatch failure and the committee requested that they take heed of this failure to ensure “inappropriate and careless spending” does not occur again.

The full report and response of Labor Senators can be read here. The Labor Senators maintained that the GroceryChoice website has been “worthwhile”.