Grocery inquiry terms of reference released

The Rudd Government has directed the Australian Consumer and Competition Commission to commence a wide-ranging inquiry into grocery prices.

Assistant Treasurer Chris Bowen announced the terms of reference this morning.

The inquiry will consider the current structure of the grocery industry at the supply, wholesale and retail level, including mergers and acquisitions by the national retailers; the nature of competition and the pricing practices in the grocery industry; and factors influencing efficient pricing of inputs along the supply chain, according to the minister’s media release.

Bowen has also asked the ACCC to advise him by the end of February on how the ACCC may deliver a periodic survey of grocery prices at supermarkets for a typical shopping basket; and how best to establish a dedicated website on grocery prices as well as any other methods that could be used to provide information to the public.

Matters to be taken into consideration by the inquiry shall include, but not be restricted to:

• The current structure of the grocery industry at the supply, wholesale and retail levels including mergers and acquisitions by the national retailers.
• The nature of competition at the supply, wholesale, and retail levels of the grocery industry.
• The competitive position of small and independent retailers.
• The pricing practices of the national grocery retailers and the representation of grocery prices to consumers.
• Factors influencing the pricing of inputs along the supply chain for standard grocery items.
• Any impediments to efficient pricing of inputs along the supply chain.
• The effectiveness of the Horticulture Code of Conduct, and whether the inclusion of other major buyers such as retailers would improve the effectiveness of the code.

The ACCC is required to report to the Minister by 31 July 2008.

Associate Professor Frank Zumbo from the UNSW School of Business Law & Taxation says the inquiry is welcome. “Food inflation continues to be an issue and we need complete transparency in this very key sector of the economy…

“We’re keen to see if there are any anti-comp practices in the industry that are producing food inflation.”

Michael Luscombe, chief executive of Woolworths, and the newly elected chairman the Australian National Retailers Association, warned last week that any monitoring regime that became too onerous would likely result in higher costs for shoppers.

He said rising grocery prices were part of a worldwide trend and fierce competition within retailing was keeping the pressure on profit margins and costs.