As the government considers price gouging restrictions and $10 million penalties for major supermarkets, the industry group representing Coles and Woolworths says the plan is likely to layer more red tape on business.
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The Treasury on Monday released draft legislation for its proposed price gouging ban, which it says will prevent major supermarkets from levelling excessive charges at the checkout.
In a statement, Assistant Minister for Productivity, Competition, Charities and Treasury Andrew Leigh said it is difficult for new supermarkets to enter the sector.
The government fears without adequate competition, major supermarkets have little incentive to compete on price, allowing them to lift prices beyond what is necessary to turn a reasonable profit.
Given the time, cost, and risk associated with launching new challengers capable of challenging the incumbents, the government hopes regulations banning price gouging would act as a consumer safeguard.
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No hard price caps are set out in the draft legislation.
Instead, it proposes a blanket prohibition against supplying groceries at an excessive price, with the Australian Competition and Consumer Commission (ACCC) empowered to launch court action against alleged price-gougers.
To establish what counts as price gouging, supermarket businesses with turnover above $30 billion will be required to keep track of prices, costs and other factors affecting grocery sales.
“The new record-keeping obligations will put Australia’s largest supermarkets on notice that their pricing conduct is being scrutinised, which will help constrain them from excessive pricing even in the absence of workable competition,” according to an explanatory note from the Treasury.
Should the courts find a supermarket liable for price gouging, or failing to keep adequate records, they could face penalties of up to $10 million, three times the value of benefit gained by the breach, or 10% of turnover accrued in the 12 months preceding the breach.
Consultation on the proposed measures is open until November 3.
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The plan has already earned the ire of the Australian Retailers Association (ARA) and the National Retail Association (NRA).
Responding to the draft legislation, ARA CEO Chris Rodwell on Monday said the price gouging plan will do little to encourage new entrants capable of challenging the big two supermarkets.
“It’s critical the government prioritise tackling structural barriers to entry, planning and zoning restrictions, and the massive regulatory and tax inconsistencies that limit competition and keep prices high,” he said.
The record-keeping requirements of the plan also cut across the government’s goal of reducing red tape, he added.
“Adding another layer of red tape will not lower prices but rather increase compliance cost and complexity,” he said.
The draft legislation follows the ACCC’s own review of the supermarket sector, which found Coles and Woolworths were among the most profitable supermarkets worldwide.
But the report stopped short of accusing them of out-and-out price gouging.
“We have seen eight taxpayer-funded reports fail to find evidence of price gouging,” said Rodwell, claiming the major supermarkets are committed to driving down business costs and passing savings to consumers.
The ARA and NRA will consult with the government over the measures.
