Independent retailers call for stronger laws to prevent Coles, Woolworths eliminating competition (ABC)

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The Federal Government's recently launched competition policy review has set the scene for a bloody battle over the increasing market dominance of supermarket giants Coles and Woolworths.

Among the proposals is one to beef up competition law by introducing an "effects test", which would enable regulators to take strong action if strategies of the big supermarkets have the effect of killing smaller competitors - even if the retail giants claim their actions were innocent.

Independent supermarkets say at the rate Coles and Woolworths are expanding, smaller competitors will become extinct unless action is taken and Australian consumers will then pay a very high price.

Local butcher in the northern Victorian shire of Bright, Peter Ricardi, says his business has struggled to survive since Woolworths opened in the town three years ago.

"When Woolworths came another butcher across the road, he just closed up," Mr Ricardi said.

"We dropped probably between 60 and 70 per cent. We had 10 staff, now we're back to three."

Woolworths built its 2,500-square-metre super store outside Bright's shopping strip, dividing the retail hub and sending local independent supermarket IGA to the wall.

"Most of the Ireland Street traders would acknowledge they've seen a downturn in sales and are struggling," IGA proprietor Nick Cook said.

"We've seen a butcher close. The dairy has lost probably 80 per cent of its business. We are 60 per cent down and struggling.

"[Woolworths] built a development which is really unsustainable, but they can support that on the turnover of a $50 billion plus company until they drive the competition out."

Soon after the opening of Bright's Woolworths, a Foodworks supermarket in the nearby town of Myrtleford collapsed.

"Forty staff members ended up losing their jobs because the store had no other choice but to shut the doors," Foodworks partner Brad Munroe said.

"It's cost me a lot financially but probably not as much as it's cost the staff in the town emotionally.

"They would have to leave the town to look for work, which doesn't do a lot for a small town like Myrtleford."

Industry experts call dominance by big retailers 'a growing trend'

Independent supermarket association Master Grocers Australia says the dominance of major supermarkets in Australia is unique.

"What we have seen is the growth in the market dominance of Coles and Woolworths. Their market power is unsurpassed. Nowhere else in the world have we seen such dominance," chief executive Jos de Bruin said.

Bright is typical of many rural and suburban centres across Australia where small retailers are going under, according to Michael Sherlock, founder of the Brumby's bakery chain.

"Fruit shops, butcher shops and delicatessens ... projecting forward over the next 10 years this trend is going to continue and you will see less and less of these specialty retailers in the market place," he said.

The big retailers have long argued they do not deliberately set out to kill competitors using predatory practices and are fiercely resisting competition laws that would help regulators to act.

Neither Woolworths nor Coles agreed to be interviewed to respond to claims they deliberately try to eliminate competition, instead deferring to their industry body, the Australian National Retailers Association (ANRA).

"We're very confident that there's a highly competitive marketplace out there and consumers are getting great prices as a result," ANRA chief executive Margie Osmond said.

"Coles and Woolworths are very large Australian companies. They employ hundreds of thousands of Australians and they are pivotal to the survival of a whole range of regional communities.

"They do a great job and they're proud Australian companies."

But former Australian Competition and Consumer Commission (ACCC) chairman Professor Allan Fels says the companies are aware that they wield enormous power.

"They say: 'I am a big fish and if I waggle my tail I may inadvertently kill small fish, so I shouldn't be guilty'," Professor Fels said.

"Big business knows what it's doing but you often can't prove it.

"The duo dominate retail across many fields and markets; they have enormous power."

Battle lines drawn between big and small business

Coles and Woolworths have a combined market share of more than 70 per cent and last year reaped revenues of $68 billion on food and liquor alone.

They currently have 170 new stores in the pipeline.

Aldi and independent stores only have about 10 per cent of the market each.

"What you are actually seeing here is a hugely competitive marketplace here in Australia. Prices are lower than they've been for years," ANRA's Ms Osmond said.

"The current legislation provides the ACCC with all the powers it needs.

"Certainly from the large retailer's perspective, we've been the subject of many reviews - and the most recent one, in fact, has said we've got a workably competitive environment."

But Mr Sherlock says in the long-term, consumers will be worse off.

"They're just taking more and more market share and as their competitors - the small operator competitors - disappear, the consumers will end up in the long run paying high prices," he said.

Professor Fels says any new competition laws are not going to be implemented without a fight from the big supermarkets.

"It's a real battle ground between big and small business," he said.

"Governments have not wanted to cave in to small business pressures when they know big business is against that change.

"When a powerful firm uses its power to harm competition and thereby harm the economy and small business and farmers and consumers - that's against the law in just about every country except Australia and New Zealand.

"I'd like to see the ACCC support an effects test. The time has come for this change."

http://au.news.yahoo.com/a/-/latest/23100529/independent-retailers-call-for-stronger-laws-to-prevent-coles-woolworths-eliminating-competition/