Supermarkets

The size of Coles and Woolworths means that they can offer lower prices than their independent rivals and push them out of business. Once the competition has gone, Coles and Woolworths can raise their prices again, making people pay more for groceries. This is known as predatory pricing.

Fewer independent stores mean less competition and higher prices.

Because Coles and Woolworths are so powerful, they can also dictate to producers and suppliers and force them to accept low prices for their products. Australian producers are struggling because there is no one else to sell to, so they are forced to accept bad deals from Coles and Woolworths.

But what about Coles and Woolworths’ low price deals?

The low prices Coles and Woolworths are offering for some basics, like bread and milk, mean that producers are often getting a raw deal.

A good example of the repurcussions of this is the recent 'milk price war', which saw both Coles and Woolworths drop the price of their 1L generic brand milk to just $1. While this seems like a great deal for consumers, Coles and Woolworths are likely to be recouping their losses on these products by raising the cost of other items in their stores.

These low prices also make it harder for independent stores to compete, which means less competition and higher prices in the long term.

Many dairy farmers have been struggling for years as a result of harsh climate conditions (drought, floods and so on) and poor economic conditions, but these below cost prices at the supermarket mean they are ultimately paid a lower price for their product. But given the lack of supermarket competition, dairy farmers often have no choice but to accept below cost prices for their products.

Without a strong dairy industry, Australians will end up paying more for fresh milk and other dairy products. We may even end up in a situation similar to parts of Europe, where fresh milk is a luxury and UHT milk is the norm.

As a result of this and many other issues, I have introduced several Private Senator’s Bills to try and address competition issues in Australia.

I am also doing my best to put pressure on the Australian Competition and Consumer Commission because of their weak decisions in relation to Coles and Woolworths’ anti-competitive behaviour.

With Lower House Independent, Bob Katter, I also recently introduced legislation which will require supermarkets to display an average farmgate price on shelves and signage, to highlight the differences between what farmers are paid for their produce and what consumers pay in the supermarkets.

So who owns what?

Woolworths and Wesfarmers (the owners of Coles) also have considerable interests in other sectors. 

The video below from ABCTV's The Hungry Beast also gives you a good idea of how concentrated Australia's grocery sector is, and how this compares to other developed countries.

• Constitutional Corporations (Farm Gate to Plate) Bill 2011 Explanatory Memorandum
   
• Nick's Second Reading Speech, 13 September 2011