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Odds & Sods
The ACCC Gets It Wrong on Groceries
Friday, 24th April, 2009  - David Farmer

Mid 2008 the Government received its report about competition in the grocery trade from the ACCC. It was very critical of the sole supplier to the independent trade Metcash showing in our view a complete lack of comprehension on how the trade works. We gave our views at ACCC Attacks the Hero.

On April 14th The Age carried a terrific interview with the CEO of the independent Ritchies supermarkets who are doing quite well battling Coles and Woolworths. Here are some of his remarks:

"The Australian Competition and Consumer Commission got it wrong in targeting independents supplier Metcash rather than either of the major chains in last year's grocery price inquiry."

"Harrison credits Metcash with allowing the independent grocery sector in Australia to compete with Coles and Woolworths, which between them claim about three-quarters of the market. In the 1990s, a chaotic mix of small competing suppliers made logistics difficult and hamstrung smaller stores from competing with the major chains, he says. Instead they engaged in corrosive tit-for-tat price competition with other independents.

"You've got to remember, in the early '90s, our market share (independents) got down to about 12 per cent - today it's at 20 per cent," he says.

"Metcash may be the only major distributor to independent stores, but Harrison argues it is necessary in order to achieve the scale needed to keep costs down.

"With one wholesaler, we've been able to amalgamate our buying power, and the deals we're getting from suppliers mean we can compete on price with the chains more effectively, and we never did that when we were splintered into two or three different groups."

"But Harrison is flummoxed by the competition watchdog's findings. "There's no doubt the ACCC took a set against Metcash. We were a bit surprised. Here we are, the only country in the world where there are chains that have got 75 per cent of market share and they made Metcash out to be the bad guy. I mean, fair dinkum. I, to this day, don't quite understand where they were heading with that."

With a watchdog like our ACCC you almost give up hope but then again this is the same ACCC that allowed Bunnings to take over a major competitor, BBC Hardware and its associated Hardwarehouse in 2001. At the time they reasoned there were thousands of other hardware stores and strong competing chains like Mitre10. Worse was to come as Bunnings was allowed to buy Mitre 10 stores from 2004 to 2006 and now consumers really have no strong competing choices and Mitre 10 is in all sorts of trouble.

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