Little support for grocery market cap call

Debate over whether major supermarkets should have their market share limited by a formal cap was a key focus of the first day of hearings conducted by the grocery prices inquiry yesterday.

Peter Kell, chief executive of consumer advocacy group Choice and the first to appear before the Australian Competition and Consumer inquiry in Sydney, made the call.

“A cap on market share when it comes to the major players is something the ACCC needs to look at very seriously,” Kell said.

Kell also urged the inquiry to recommend a food and grocery consumer price index to be published by the Australian Bureau of Statistics each quarter and mandatory unit pricing.

“In an environment of rising prices, it is vitally important that consumers can have confidence that the prices they are being charged for essential foods and groceries are fair, and are not the result of market power, particularly in relation to the two major grocery chains in Australia,” Kell said.

The idea of a formal cap on market share is controversial and participants on both sides of the debate question its workability.

Ken Henrick, the chief executive of independent retailers advocacy group the National Association of Retail Grocers Australia, says market concentration problems wouldn’t be best solved by a formal cap.

“We think a cap is impractical, it wouldn’t work and we’ve never argued for it. A cap doesn’t take account of population shifts, competition levels and all sorts of other complexities, it’s just impossible to see how it would work in practice,” Henrick says.

The lobby group for large supermarket chains, the Australian National Retail Association, also rejected the cap call.

“A market cap will destroy competition, not promote it,” ANRA chief executive Margy Osmond says.

The ACCC inquiry hearings continue today, with representatives of health-care product maker Kimberly-Clark Australia and property developer Stockland scheduled to appear.