Submission to the Senate Select Committee on Supermarket Prices

Sustain: The Australian Food Network works for the transition to a food system that supports flourishing communities, individuals, and ecosystems. We give people, councils, governments, and organisations the tools they need to help them become empowered food citizens, supporting healthy communities, people, and ecosystems.

Through this work, we have explored the role that major supermarket chains (MSC) play within the Australian food system. This includes conducting primary research (interviews, focus groups, and surveys) within many LGAs, investigating the role that MSCs play in their specific food security context. 

Our research, alongside that of other academic and food systems experts is presented in the following pages. It demonstrates the need for urgent policy reform around food retail to create a national food system that is equitable, healthy, and sustainable.

We welcome the inquiry on supermarket prices and acknowledge the conditions that have facilitated its necessity.

Our recommendations are as follows:

1) In line with recommendations one, two and three of the Inquiry into Food Security in Australia (Australian Food Story: Feeding the Nation and Beyond, 2023), we urge the Federal government to develop a comprehensive and integrated National Food Plan. This would also require the establishment of a Minister for Food and Portfolio for food security, advised by a National Food Council comprised of stakeholders and experts in First Nations food sovereignty, agricultural production, logistics, retail, health, climate, disaster resilience, education, and waste management (House Standing Committee on Agriculture, 2023).

We recommend investigating the Scottish Good Food Nation Act (2022) as a highly relevant and recent national precedent. Without a comprehensive plan and portfolio that has the power to make positive policy change across the food and farming system, we are likely to continue within the cycle of MSC inquiries every 10 years and ever-deteriorating terms of trade for farms and other suppliers to MSCs. This will have severely negative consequences for our medium and long-term national food security as well as for the integrity of our national food system.

2) The mandate and foundational economic assumptions of the ACCC must be revisited and redeveloped. As demonstrated in the ACCC and Federal law section of this submission, the ACCC is currently mandated and structured to prioritise consumer interests and the market exchange process, on the flawed assumption that there is equity of bargaining power between buyer (MSCs) and sellers (farmers, value-adders, others). This assumption defies the reality we are all familiar with, i.e. that the Australian grocery sector is a duopoly with excessive market power concentrated in the MSCs which have expanded their scale of operations dramatically in recent decades.

The power imbalance between MSCs and producers/suppliers has reached dramatic proportions to the benefit of the former and the detriment of the latter (see the examples in the draft submission from SECNA, Appendix 1). Without legislative authority to check this power asymmetry, the ACCC facilitates the ongoing and unsustainable financial pressures on producers and other suppliers, as well as enabling the continuing loss of retail diversity and fair competition for Australian consumers, thereby entrenching unfair duopoly price setting.

Germany, the UK, and Aotearoa have all expanded the remit of their competition watch dogs, having experienced these same issues.

3) Federal law must be reformed to replace the ineffective and self-regulatory approach to managing the MSCs with a mandatory framework. This requires that the Food and Grocery Code of Conduct (FGCC) becomes mandatory, and for it to be updated to ensure that negotiations and contractual arrangements between the MSCs and suppliers/producers are balanced and fair. As Dixon et al. (2020) note:

Government has been motivated to act or be seen to act on the concerns relating to the power of the MSCs in the supply chain but has also been ready to accept the assurances of the large chains that they are sufficiently motivated by competitive pressures to respond in ways that will win or win back the trust of other market participants.

As is evident from the catalysts that has led to the necessity of this inquiry (and as this submission highlights), the MSCs have continuously demonstrated their inability to self-regulate to ensure that food system actors, from producers to consumers, are given a fair deal. Therefore, government has a clear need and mandate to step in and take regulatory action to protect producers, suppliers, and consumers.

Such reforms will require greater scrutiny of the range of practices utilised by the MSCs to the disadvantage of their suppliers. This includes various forms of hidden fees, exorbitantly priced sales reports, compulsory discounts, and the ability to terminate supply contracts with no notice or compensation. Such changes would also bring the sector into alignment with other Australian statutory codes of conduct, ending the MSCs ability to self-regulate.

4) The Federal government should work with State, Territory, and local governments to amend planning frameworks to ensure that a diverse range of food retail options are promoted in new developments and protected in existing suburbs.

As elicited in the MSC-consumer dynamics section of this submission, despite the common misconception and the relentless marketing campaigns, MSCs are not the cheapest option for consumers, and only gain market dominance through employing several strategies (aggressive covenants, temporary price undercutting, land banking commercial property in new developments, etc.) that are only possible due to the capital they hold and can access. Consequently, consumers are forced to shop at these outlets due to convenience, with transport and time constraints often inhibiting consumers’ ability to shop elsewhere.

5) An investigation into food system resilience strategies must be conducted to ensure sustainable access to food in Australia amidst concurrent crises and shocks (climate, economic, geopolitical – all of which are likely to accelerate in the future). FoodPrint Melbourne has conducted such a study at the regional level amidst the pandemic, extreme climate events and global food crises. They found that a diversity of retail options and supply chains was vital to ensure food security (see graphic below – Murphey et al., 2022).

You can read our submission in full in this report (PDF download).