ACCC the competition killer

The AFR gets it.

Unconscionable behaviour in business, says the Australian Competition and Consumer Commission, goes beyond usual hard ­bargaining to become harsh or oppressive: something, it suggests, that should keep a manager with a good conscience awake at night. This rather fuzzy transgression is what the ACCC alleges that Coles has been up to in demanding 200 of its suppliers cough up a rebate of up to 1 per cent of their sales in exchange for using Coles’s new streamlined logistics system – or else be promptly booted off the shelves.

Coles says that it is a payment to share the benefits of their new logistics system. The ACCC says suppliers were given just days to assess whether the proposition could work for them: not so much a genuine offer as Coles simply using its weight as a duopolistic store chain, the kind of thing the ACCC classes as unconscionable bullying.

But the competition watchdog has to be careful not to blunt the gains by consumers from the genuine, price-slashing rivalry brought into Australian supermarket retailing since Wesfarmers bet the ranch in 2007 that it could turn Coles around. It seems unlikely that Coles managers have lain awake at night, because a hard-nosed approach to getting goods onto its shelves has been critical to this success. Coles has been willing to challenge some of the world’s biggest multinational suppliers to do so, as vigorous competition at the retail level has put overdue pressure on inefficiencies up the supply chain.

Such competition also has generated the innovation of petrol discounts for supermarket shoppers. Boiled down, the product the supermarkets are really selling is convenience. The ACCC has pounced on that, too, even at the risk of pushing up petrol prices, and inconvenience, for many shoppers.

This is not some trite point: more telling is the fact that no politician has ventured into a supermarket to denounce a ­dollar loaf of bread or litre of milk.

Coles has power but no monopoly.  ACCC is supposed to concentrate the unconscionable conduct part of its act on protecting consumers but instead, now that the socialists are even more ensconced in its management, they are trying to redefine competition.  The organisation needs to be downsized and redirected to its core responsibilities of addressing monopoly.

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27 Responses to ACCC the competition killer

  1. Badjack

    Both Coles and Woolworths have been screwing 2nd and 3rd tier suppliers for a long time. In the 1970’s I was an Account Exec for a supplier in the grocery industry and they were doing the screwing way back then, albeit with a little less refinement. It was a standard quote that the Coles and Woolies buyers were not conceived but rather they were shot against a wall and hatched. They did not have a human bone in their body.
    Their Managers manual included a section on how to open their store each morning….
    place key in lock and turn to the right’ …thats how smart Head Office thought their staff where.

  2. Johno

    If even the socialist media can see this, you have to wonder why a so called ‘liberal’ government doesn’t get it.

  3. ar

    The AFR gets it… could this be due to the strike?

  4. Rabz

    more telling is the fact that no politician has ventured into a supermarket to denounce a ­dollar loaf of bread or litre of milk.

    Err, why would they? They’d neither know nor care what either product would cost.

  5. Fibro

    Alan, you mention 1%. This is hardly the issue for suppliers as this is upfront and can be accounted for in cost structures. The ACCC shoudl be looking at the bigger rort- scan deals.

    I play in this field today. I am happy to be a competitive supplier and trade with them at agreed prices, agreed rebate levels and agreed ‘other terms’ What the ACCC will uncover I hope is the scan deal rort, which almost sent me broke.

    I agreed to a scan deal of 20% of for a 4 week period on 2 lines. For maths sake they were $1.00 each. So when Coles sell them I pay Coles $0.20 every time, when they sell at the agreed $1.00. What do they do? Raise the price the day prior to the promotion to $2.00 and then put it on sale at 20% discount, charging me back $0.40 per sale. The customer is completely duped that this is then on special which is another episode entirely, and my promotional costs have now doubled, and in this recent case, lost me a whole load of money.

    The 1% levy for the new system was accepted by everyone, and was nto exclusive to Coles. Both Wollies and Metcahs made the same slug, but in different words.

  6. Combine_Dave

    Does the ACCC need the proposed ABC treatment?

    Shut it down. Fire them all.

    (Especially as the Govies at the top of the ACCC seems to think it’s their role to impede competition?)

  7. Up The Workers!

    Who gave the A.C.C.C. a monopoly over deciding what constitutes a monopoly, in the first place?

    Can I turn a quick buck or three (million) by setting myself up in competition to the A.C.C.C.?

    If not, why not?

    Maybe I should complain to the A.C.C.C. about the anti-competitive restraint of trade corruptly imposed by the A.C.C.C.?

  8. .

    I agreed to a scan deal of 20% of for a 4 week period on 2 lines. For maths sake they were $1.00 each. So when Coles sell them I pay Coles $0.20 every time, when they sell at the agreed $1.00. What do they do? Raise the price the day prior to the promotion to $2.00 and then put it on sale at 20% discount, charging me back $0.40 per sale. The customer is completely duped that this is then on special which is another episode entirely, and my promotional costs have now doubled, and in this recent case, lost me a whole load of money.

    This sounds fishy. Sounds like they’re skirting the edges of their contract or they’re doing something wrong.

  9. DaveR

    The real issue here is that in a market economy Coles and Woolworths should not be allowed to own +80% of the supermarket sector. And then they engage in practices to stop or restrict competitors from opening up in “their districts”!! And we are currently witnessing a program of removal of private branded goods and replacement with “homebrand” products. At a lower price? – not likely!

    Go ACCC!!

  10. .

    The real issue here is that in a market economy Coles and Woolworths should not be allowed to own +80% of the supermarket sector

    Then allow foreign competition – Aldi, CostCo etc.

    And then they engage in practices to stop or restrict competitors from opening up in “their districts”!!

    State governments and local councils have done this, regarding liquor licences.

  11. I don’t like Coles or the way they treat their suppliers, but in the absence of a monopoly, that point is moot. If the suppliers don’t want to cooperate with Coles, then they are free to compete against them. Too hard? Then quit yet bitchin!

  12. Diogenes

    There were fruit & veg farmers around an area I lived that reached for shotguns whenever you say Coles or Woolworths haven been bitten many times – eg having to convert packing lines to use the specific size box they want to use (there are already standard box sizes) , what appear to be generous contracts, but what actually happens is – 1st load accepted & paid for, 2nd load – about 10 is rejected for “quality” reasons & the whole load accepted if grower accepts a 20% drop in payment, the next time around 20% is rejected & and a 30% drop in payment rinse & repeat with ever increasing %s being “rejected”(the buyer’s QA inspector’s word is final). Buy this time the grower has sent the stuff 1000km & the cost of bringing it back is now more than it would be worth to bring it back & repack in “standard” boxes.

    There was also the exclusive beef contract that Coles was to sign with a grower in the New England (IIRC Dorothea McKellar’s family farm) which was used to get obtain bank finance to increase the size of the operation & a change to the kinds of facilities Coles wanted. When the time came Coles went “what contract? and family lost the farm, which was allegedly purchased by people with an interest in either Coles or one of its other established meat suppliers. (Dad used to tell of a similar story from the 60′s regarding Easter Eggs & one of the scions of the Meyer family ened up buying the operation very cheaply)

    According to council (which here is as dishonest as the day is long) there is another delightful tactic that Woolies are using on the Central Coast. They buy land that is NOT zoned commercial well away from a commercial district & submit a DA & application for rezoning. When council rightly rejects both, they appeal to State Planning Dept & council is “forced” to agree to a land swap with land it owns closer to the shopping strip(declaring an interest here – I live on land that will be directly affected by a land swap -m instead of an oval I will have a Woolies). Within 10 minutes drive of their proposed new store we already have 4 Coles one of which is literally 200m away , 1 Aldi (+ 3 being built) , and 2 Woolies, as well as 3 “strip” shopping centres with the usual bakers, butchers, fruit shops, newsagents etc etc. There is very very very little or no growth where we are hemmed in as we are by Lake Munmorah State Rec Reserve, 2 lakes, an ocean & land reserved for mining & power generation.

  13. jupes

    The real issue here is that in a market economy Coles and Woolworths should not be allowed to own +80% of the supermarket sector.

    What are you on about? In a market economy they can own whatever percentage of the market they can get.

  14. DaveA

    Coles want more money to pay for their efficiency improvement. What?

  15. Businessmen who sing the glories of free enterprise and then demand “fair” competition are enemies, not friends, of free markets.

    To them, “fair” competition is a euphemism for a price-fixing agreement.

    They are exemplifying Adam Smith’s remark that “People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.”

    For consumers, the more “unfair” the competition the better. That assures lowest prices and highest quality.

    Milton Friedman

  16. Nato

    On an aside, it’s a pretty damn sweet logistics system they’ve got running. I haven’t come across any system that could even scratch it for efficient use of resources. Machination and the specialization of labour tasks…Yes for management, but it’d take a wukka to last in any of the manual handling roles they offer.

  17. Simon

    All this speculation about monopolies is moot. At a store level products are sold ambiguously so as to cover losses, some are shrunk and others are just plain “disappeared” by managers not wanting wear the waste costs. Any figures that come from these stores should be considered speculative at best or contrived at worst. The advent of self service checkouts for example has seen 4 fold increase in the amount “carrots” apparently sold even though store ordering of same has remained largely static.
    Someone is paying for these store generated losses and of course it wont be just the Supermarket chain.
    At the moment suppliers are “cooperatively assisting” but for how long?

  18. Pyrmonter

    I’d have a lot more time for Coles and Woolies, and a lot less for the suppliers, if there was evidence of freely available sites for another entrant to the industry. Instead, both firms seek to exclude competitors, most egregiously in liquor (where the licensing laws encourage this sort of thing), but in other grocery lines as well

  19. Combine_Dave

    The real issue here is that in a market economy Coles and Woolworths should not be allowed to own +80% of the supermarket sector

    Then allow foreign competition – Aldi, CostCo etc.

    Exactly.

    The solution to a lack of competition (and I’m not sure this is actually the case here), is more competition, not less. Strangely the ACCC seems to have forgotten this.

  20. Combine_Dave

    Someone is paying for these store generated losses and of course it wont be just the Supermarket chain.
    At the moment suppliers are “cooperatively assisting” but for how long?

    Well if you are supplying a product to the domestic market that people don’t want…

    Export overseas?

  21. Tim of Kilsyth

    If you have ever done business with Coles or Woolworths as a supplier you will be cheering the ACCC as hard as you can. It is long overdue as as Fibro said, if it were only about 1% extra rebate no one would have complained. The 1 % is the proverbial tip of the iceberg.
    The one dollar milk and bread is completely unsustainable and bad for the supply chain long term. Yes by all means do not protect inefficiency but you have to leave some margin for the supplier or they all go broke.

  22. Infidel Tiger

    Yes by all means do not protect inefficiency but you have to leave some margin for the supplier or they all go broke.

    How will they all go broke? Surely only the inefficient ones will.

    Disturbing to see that this site has attracted commenters who are pro tax and pro protectionism. I mean I know these whack jobs exist, but can’t Catallaxy at least be a sanctuary from the feeble minded?

  23. Dave Wane

    Yet another case of a taxpayer-funded body poking its nose into something that is none of their business. And the great unwashed, but nevertheless brainwashed ever since Whitlam and his descendants polluted their brains with the nonsense that government is here to “help”, gives three cheers when these socialist-style interventions take place. These deals are clearly: “take it or leave it”. And anyone who has ever been in business, whether large or small, must make “take it or leave it” decisions regularly. One simply evaluates the benefits and any pitfalls and arrives at a position to again “take it or leave it”. No need for any socialist taxpayer-funded bureaucrat to get anywhere near this kind of stuff. At the risk of getting off the topic, it “ain’t” just the ACCC. The abundance of local, territory, state and federal bodies that carry out similar unnecessary interventions into stuff that is none of their business is breathtaking. Even the blue between Packer and Gyngell is now, apparently, a police matter! Does anyone remember what FREEDOM felt like? I must be too old, because I still vaguely do. And I will be 61 in July.

  24. Dave,

    “Does anyone remember what FREEDOM felt like?” I remeber taking my .22 to school for “show’n tell”. Nice little 15 shot semi-auto “cracker”. When I tell people this? now? All I get is “oooohhhhhh AAaaaahhh”. Like I’m some serial killer wanna be.

    Yeh, I do remember what freedom was like. Freedom enough to be responsible with a deadly weapon on my back when I was 12! Oh, BTW, I learnt how to drive at 12 as well. Was “told” to play senior cricket at 14, to “See what the boy was made of”. These days? The pushing and encouragement I got? Would be considered child abuse! I’m the psycho? For wanting those freedoms back? LMAO

    Dave, Keep your wits about you. Stay healthy! You’ll be needed, to re-assemble this lot when it all falls apart on ‘em. ;-)

  25. Helen

    If farmers think they are getting screwed, then sell direct to the consumer. Get a ware house in each city and bring produce in in its bulk bags/boxes, and let the city people come to these sites for cheaper and fresher and in season / low food miles food. Take advantage of what the city person is interested in right now, and give it to them. They will come and serve themselves, and feel good about it, and farmers get what they ask for in terms of food prices. Don’t oversupply, just what is in season and close by, like a big kind of city market – maybe only on weekends to start with – and left over food, donate to charity or take home to feed the pigs.

    Sell the story of the farmer with the food. Close the divide. Take turns to do ‘shifts’ at the ware house, maybe once every few months, or once a year, depends on how busy it is. Smile. Let city people be your friends. Let others (organic butchers, etc) in on licence. Call it Farmer’s Food Barn, or Farmer Direct, or something. Start small, do it properly and build.

    Don’t just whinge, do something about it.

  26. Pedro

    I heard on the radio that the ACCC is taking the view that unconscionable means unfair. If so, holy (wholely?) shit

  27. .

    Jesus H Christ. “Unfair”? Subjective, much?!

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