THE ACCC is considering seeking legislation to limit the steady increase in market power of the leading supermarket chains following their steady acquisition of smaller retailers, which is limiting competition in key markets.
In his strongest comments since taking over as the chairman of the Australian Competition and Consumer Commission nearly a year ago, Rod Sims has signalled concerns over creeping takeovers by Coles and Woolworths, which may be leading to reduced consumer choice.
Existing competition legislation does not place a cap on market shares or allow the ACCC to assess the cumulative impact of previous acquisitions when studying new acquisition proposals.
His concerns come at a time when the large chains are boosting their position in the liquor, grocery and home improvement sectors, in particular, ”which raises competition concerns”, he said.
”Barriers to entry for other chains or buying groups to replicate the strong market position of Wesfarmers [Coles] and Woolworths are becoming increasingly high,” Mr Sims said yesterday. ”Added to this often are local barriers associated with, for example, access to sites.”
As a result, the ACCC wants to ensure that further acquisitions do not lead to retail or wholesale industry structures that may reduce market competition, or choice, for consumers.
”Because of these concerns, the ACCC has been paying increased attention to incremental acquisitions to identify which acquisitions require review and, of those which raise competition concerns,” he said.
”I don’t think any other country in the world has an effective law here, which just shows it is difficult,” Mr Sims said yesterday of any legislative response to creeping takeovers.
”It is not an easy area of law, to
actually construct a law that works effectively in the marketplace in all circumstances, because if you had a creeping acquisition law it would apply to all sectors. So, doing something that does more good than harm is difficult to construct.”
The ACCC will be in a better position to judge how big a problem the issue of creeping takeovers and rising market power is in the next six months or so, he said.
But, as an interim step, the ACCC is to speed up its review of acquisition proposals in the retailing sector by seeking earlier disclosure of plans by retailers, which will then be reviewed by a special team, which will provide a quicker decision.
”Our processes can be streamlined,” Mr Sims said. ”This can, however, only occur with appropriate notification, co-operation and upfront information.”
The ongoing acquisition of smaller retailers is giving the major chains ”substantial economies of scale and scope in, for example, distribution logistics centres and advertising as well as brand promotion”.
This is making it more difficult for competitors to emerge which, together with the difficulty of gaining access to sites, is entrenching the power of Coles and Woolworths.
”When the major supermarket chains acquire an independent player, they remove an alternative from the market, with potentially a different product range and service offering,” Mr Sims said.
”That competition is unlikely to be replicated by either a chain or new independent given local and/or national entry barriers.”
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