Pricing Overhaul Needed To Curb Predators

The Age

Thursday July 12, 2007

Michelle Grattan and Kate Hagan

AS THE Government heaped scorn on Kevin Rudd's plan for an inquiry into grocery prices, Nationals senator Barnaby Joyce declared that what was needed was more radical - a Trade Practices Act overhaul to crack down on "predatory pricing".

Mr Rudd had to concede that his proposed Australian Competition and Consumer Commission grocery price inquiry and monitoring would not necessarily produce lower prices. "Will it lead definitively to lesser prices? I couldn't give that guarantee - I would never do that."

But he said: "The best thing you can do in terms of keeping prices down is to make sure that competition is at its strongest."

Treasurer Peter Costello said Mr Rudd "hasn't done his homework". He said the Australian Bureau of Statistics had been monitoring grocery prices "for decades", as it compiled the consumer price index.

Mr Costello said monitoring showed that under the Labor government, prices rose 5.2 per cent a year compared with 2.4 per cent under the Coalition.

John Howard said the best way to keep prices down was to keep inflation down. "Under this Government, inflation has been half what it was under the Labor government."

Senator Joyce welcomed the fresh attention on issues of the over-centralisation of retail marketing. But he said there had been "umpteen" inquiries into groceries and fuel and what Mr Rudd should be proposing are tougher laws against predatory pricing and other "unconscionable conduct". "This is the ability of big business . . . to exploit the weaker - whether the weaker are selling their vegetables to big business or renting shopping space from big landlords."

Family First senator Steve Fielding also said something tougher than an inquiry was needed.

A former chief of the ACCC, Allan Fels, said it would be useful to have the consumer watchdog turn the spotlight on how much competition there was within the groceries business - but an inquiry would need to focus on the underlying state of competition rather than principally on margins.

Mr Rudd said the cost of fruit and vegetables in Melbourne had sky-rocketed - increasing at nearly three times the rate of inflation.

He said we needed to know the factors driving up prices of groceries and whether they were due to unfair practices of fixable causes. "Consumers have the right to be well informed," he said. "Policymakers need the best available evidence on which to move forward to address concerns that Australians have."

Shoppers facing unexplained price hikes - and farmers who receive as little as 10 per cent of their outlay at the checkout - have welcomed Labor's plan for an inquiry into the supermarket industry.

Choice spokeswoman Ria Voorhaar said a "virtual duopoly" by Woolworths and Coles needed examination in light of a recent survey that uncovered "huge price increases" for basic goods since 2003.

University of NSW Associate Professor Frank Zumbo said "ongoing allegations of anti-competitive conduct" by the major supermarkets needed to be tested, particularly in an industry with a "very high level of concentration".

An expert on competition law, he said one allegation centred on predatory pricing, which involves selling below cost to drive out competitors.

Woolworths chief executive, Michael Luscombe, said he welcomed any government policy that would "correct the many myths and assumptions about supermarket pricing and the competitive structure of Australia's food retail industry". -- With AAP

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© 2007 The Age

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