AFGC joins Choice in calls for supermarket ombudsman

Posted by Nicole Eckersley on 29th April 2011

Grocery AisleCHOICE and the Australian Food and Grocery Council (AFGC) have united forces to call for the establishment of a Supermarket Ombudsman as a part of a joint submission to Senate Economics Committee’s inquiry into the impacts of supermarket price decisions on the dairy industry.

The groups, often in fierce opposition to eachother, have agreed that an Ombudsman would help create a level playing field in the highly-concentrated retail and supermarket industry and provide “much-needed leadership” in reforming the sector to benefit consumers and the wider industry.

CHOICE has long supported the introduction of regulatory mechanisms on the supermarket industry, and the AFGC said that the “urgent need” for an ombudsman had become apparent during the recent supermarket price wars. Two leading grocery companies – Goodman Fielder and George Weston Foods – this week cited the supermarket pricing war as a factor in expected lower results this year.

Nick Stace, CEO of CHOICE, said the agreement with AFGC was exceptional in bringing together two organisations who sometimes featured on different sides of policy debates, but who had a common interest in addressing the perceived lack of competition in the market as there is only two supermarket players who control up to 80 per cent of the packaged food and grocery market.

AFGC Chief Executive Kate Carnell said there was an urgent need for a Supermarket Ombudsman following the recent aggressive price discounting by major supermarkets, pointing to the issue of market power and its impacts on industry.

CHOICE and the AFGC believe the Ombudsman would promote transparency in pricing and fairness along the supply chain and provide recourse for those participants in the food and grocery sector who lack market power, particularly small business, small-to-medium food manufacturers and consumers.

“CHOICE believes cheaper groceries are a fundamentally good thing, but we question whether recent actions from the major supermarkets are a sign of genuine competition or a short-term strategy that may erode competition further and see price rises in the future. We believe real leadership is needed to address the whole-of-market problems that arise when one or two players drive the industry, whether that is retailers or suppliers,” said Stace.

“This is all about creating a level playing field for manufacturers and consumers. If the current ‘price war’ continues, the profitability of Australian food manufacturing sector, including farmers, will be eroded and the result could be a significant loss of both processors and producers,” Carnell said.

According to the groups, an Ombudsman would help promote genuine competition by ensuring that regulators enforced their rules, and where these were found lacking, by suggesting changes. The role would also support consumer education on unit pricing and be proactive in investigating what is happening in the market.