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Big supermarkets accused of ‘turf-out’ tactics to stifle competition

Wololworths says average prices for food dropped 0.2 per cent in the most recent quarter.

Wololworths says average prices for food dropped 0.2 per cent in the most recent quarter. Photo: Getty

The boss of the company behind IGA has accused major supermarkets of hoarding land and overpaying for properties to stifle competition.

Metcash chief executive Grant Ramage used an appearance before a parliamentary inquiry into supermarket prices to urge for measures to stop land banking.

The practice involves supermarket chains purchasing strategic areas of land, despite having no plans to develop them, as an attempt to stop a rival building a store on the property.

Ramage said it was a “reasonable assumption” that major chains were using the practice to lock out competitors.

“I don’t think land banking is particularly overt and obvious, it’s something that happens often under the radar; there’s no compulsion for [Coles and Woolworths] to divulge when they acquire land or property,” he told the Senate inquiry on Thursday.

“There is a long-time pattern and behaviour, which is anti-competitive, which seeks to close out markets and remove competitors from the markets, and we’ve seen that happen over a long period of time.

“Their sheer scale gives them the financial capability to do that. It gives them greater sway with developers, landlords and other parties, like state governments.”

Ramage said increased scrutiny on supermarkets’ land acquisitions was needed to crack down on the power of major players such as Coles and Woolworths.

Chalmers reacts to supermarket report

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“[It] removes critical scale from our network and they’re often prepared to pay significantly inflated prices, far more than any other independent would ever afford to pay,” he said.

“If they can’t buy the store, they try to buy the property. We have good examples where they then turf out the independent at the end of the lease, even when they already have multiple stores in that locality.”

Ramage said the strategy tied up sites that could otherwise be bought by competitors.

“The multiple examples of anti-competitive conduct mean that there is no single solution to addressing their unchecked growth and entrenched dominant position in Australia, but to prevent more of the same, action is needed now,” he said.

The inquiry comes after an interim review into the voluntary food and grocery code recommended it be made mandatory for supermarkets.

The code focuses on standards of conduct between supermarkets and suppliers, with the review also recommending increased penalties for companies that breach the rules.

However, it did not suggest implementing divestiture rules to break up large supermarkets as a way to increase competition.

But Ramage said changes to the code were unlikely to help reduce prices for consumers.

“[The code] governs the way we manage our dealings with suppliers, our contracts with them, how we manage cost increases ranging and so on. It doesn’t in any way talk to the effect on price,” he said.

“There’s more work needed to focus the code on the needs of those growers in their dealings, particularly with the duopoly.”

The Australia chief executive of discount supermarket Aldi, Anna McGrath, also appeared before the committee, warning divestiture powers could potentially increase costs for customers.

“We’re not supportive of divestiture because of the risk of unintended consequences,” she said.

“We’re supportive of the future intent [of the grocery code] and therefore the elements making it mandatory and also strengthening against the fear of retribution for suppliers.”

The German supermarket giant entered Australia in 2001 and has since gained a 10 per cent market share.

But while Aldi has expanded to almost 600 stores across Australia, McGrath confirmed the chain had no plans to expand to Tasmania. It and the Northern Territory are the only Australian jurisdictions where Aldi is yet to open.

“When we’re identifying where to expand, we do need to consider the additional costs and complexities that are involved, and therefore when it comes to Tasmania, that would largely be the supply chain elements,” she said.

“It’s not currently in our plan.”

The bosses of Coles and Woolworths will be grilled at the inquiry on Tuesday, following on from accusations of price gouging by the major supermarkets.

– AAP

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