CHOICE slams liquor pricing rort

Posted by Nicole Eckersley on 31st May 2010

Shelf of beer in supermarketConsumer group CHOICE has found that consumers are paying up to 40% more for alcohol at liquor outlets next to supermarkets, and that aggressive pricing policies by the big retailers may be driving smaller competitors out of business.

A survey of eleven retailers, including those owned by Coles and Woolworths, found that the bottle shops owned by the major retailers – BWS, Dan Murphy’s and Woolworths Liquor for Woolworths, and Liquorland, Vintage Cellars and 1st Choice Liquor for Coles – had driven down prices for consumers, but that their low prices were running the competition out of town.

“Sometimes we advertise below-cost prices to compete,” admits Andrew Reitzer, Chief Executive of Metcash, which owns Australia’s largest liquor wholesaler and supplies 17,000 licensed outlets. “The two major chains are opening ‘big box’ outlets that murder the competition on price.”

The survey also found that prices varied wildly according to where the outlet was placed.

“In one of the most dramatic examples, VB cost 40 per cent more in Woolworths Liquor than in Dan Murphy’s – even though both of these retailers are owned by Woolworths,” Choice spokesman Christopher Zinn said.

“Woolworths Liquor outlets are usually situated adjacent to their supermarkets so the cost of convenience can be an expensive one.”

“If a business is engaged in predatory pricing – that is, below-cost pricing designed to damage or drive competitors from the market – then the Australian Competition and Consumer Commission (ACCC) can act under our competition laws,” CHOICE was told by Dr Craig Emerson, Minister for Competition Policy and Consumer Affairs. “A court dealing with a predatory pricing case does not have to be satisfied that the accused business can recover its losses after it sees its rival out of the market. At the same time, however, we need to be careful about stopping businesses offering consumers lower prices. Sometimes complaints are made in the name of protecting existing businesses from competition.”

The ACCC told CHOICE it would take any evidence of below-cost pricing being used to damage competitors seriously. “Where there is information to suggest this is occurring, the ACCC will investigate,” a spokesperson said.

The full CHOICE article is available at the CHOICE website.