Big Supermarkets Have a Dairying History

Revelations this week that big supermarkets may have been faking their price cuts and specials will come as no shock to dairy farmers.

Australian Competition and Consumer Commission has said they are prosecuting both Coles and Woolworths in the Federal Court. It is alleged that the supermarkets raised their prices on a range of items, and then reduced those prices claiming they were now discounted or on special. The fake discounts kept prices at or above the long-term prices for those items – actually a price increase disguised as a discount.

The ACCC says that the conduct they are taking to court involved 266 products for Woolworths at different times across 20 months, and 245 products for Coles at different times across 15 months, and has provided details of several case studies. These included a $3.50 product having its price increased to $5.00 for 22 days, then reduced to $4.50, and promoted as a price cut.

In response to this news, the Prime Minister has said he will prioritise a new mandatory food and grocery code of conduct and introduce legislation by the end of the year imposing multimillion-dollar penalties against supermarket giants who breach the rules.  This new food and grocery code is due to commence in April next year. eastAUSmilk has made several strong submissions to government in support of making that code mandatory, and strengthening it through properly addressing bullying, amongst other changes.

eastAUSmilk is often told by the big supermarkets that they acknowledge the pain caused when they drove farmers to bankruptcy and suicide during the dollar-a-lite milk era, but they say that’s all in the past. They say they’ve changed, but if the ACCC succeeds in their action, it will confirm that the culture of the big supermarkets is the same, and they’ve just shifted targets. In fact, there’s been no review of their business strategies based on the harm they did with dollar-a-litre milk, no update of their internal code of ethics – they’ve just moved on to other ways of making massive profits, and could change strategies again at any time they chose.

eastAUSmilk has called for changes to the Dairy Industry Code to address the impact of big supermarket pricing and margins on the dairy supply chain.  The Commonwealth government has promised to begin their review of the Dairy Industry Code in September, but we expect this to be delayed – slightly – because of the reshuffled Agriculture portfolio.

Mike Smith, eastAUSmilk Government Relations Manager

Codes and Competition on Agenda

EastAUSmilk has in the last week held multiple meetings with Commonwealth public servants and politicians to discuss the Dairy Industry Code, Fruit and Vegetable Code, competition policy, and the needs of the dairy industry.

In Canberra and in Brisbane, Chief Executive Officer Eric Danzi and Government Relations Manager Mike Smith met with senior officials from Treasury and from the Department of Agriculture, Fisheries and Forestry, as well as the Assistant Minister for Competition Charities and Treasury, Dr Andrew Leigh.

While eastAUSmilk has made substantial submissions to several of the inquiries currently underway into the behaviour of major supermarkets, we needed to understand where the multiple reviews of supermarkets are going, and what the next steps are likely to be. Also discussed were both the recent eastAUSmilk submission on the review of the Dairy Industry Code, and what comes next for that review.

Everyone we spoke with was very keen for information about how the market really operates, rather than dry economic theory, and we were able to provide many examples of anti-competitive behaviour and bullying, along the supply chain.

We also invested time, in some of our meetings, in explaining why farmers are demanding change in the priorities of Dairy Australia, and discussing some pressing research and extension needs which are not being addressed.

In light of these discussions, eastAUSmilk has responded to the recent Interim Report of the Review of the Food and Grocery Code, by calling for more detail on how big supermarkets must change to eliminate bullying and retaliatory behaviour towards suppliers, reshaped our call for supply chain margins to be monitored, and tackled the need for the uncompetitive outcomes of national pricing and preferential pricing for private label products to be addressed.

Department of Agriculture, Fisheries and Forestry told us that once they have fully digested the submissions made in response to their recent Dairy Industry Code discussion paper, they will be making recommendations to Government about the scope of the full second review of the Code, and how it will be conducted. They have not yet fully examined and evaluated those submissions, but Minister Murray Watt recently committed that the second review will fully commence in September this year.

By Mike Smith, eastAUSmilk Government Relations Manager

Everyone’s Talking about the Big Supermarkets

Last week, the Queensland government announced a Parliamentary Supermarket Pricing Select Committee, chaired by Member of Parliament Tom Smith, whose Bundaberg electorate is one of Queensland’s biggest food bowls. The Committee is to look at impediments to fair pricing, including impediments to the profitability of primary producers, and report by 21 May 2024.

As well as the current consultation about the Dairy Industry Code there are now seven inquiries under way, all looking at the bad behaviour of big supermarkets.

eastAUSmilk members know supermarkets have enormous influence on farmgate prices, which is why we have made submissions to several of the these inquiries. It is clearly in the interests of eastAUSmilk members, and the dairy industry a whole, for the relationship between supermarkets, all of their suppliers, and the whole supply chain, to be cleaned up.

We’ve made submissions to the Senate Select Committee on Supermarket Prices and to the Food and Grocery Code of Conduct Review, and the Australian Competition and Consumer Commission has also commenced an examination of the pricing practices of the supermarkets and the relationship between wholesale, including farmgate, and retail prices – our submission to them is due in early April.

The Food and Grocery Code of Conduct is voluntary, which means it isn’t applied properly nor enforced, so in our submissions we’ve been saying it should be mandatory, like the dairy code. We’re also urging that margins up and down the supermarket supply chain need to be monitored.

We discovered during our submission research that processors are terrified to raise complaints or problems with supermarkets, because they fear retaliation, so we’ve also urged that retaliation needs to be directly addressed in these reviews. Because we know the processors, and many other supermarket suppliers, won’t raise bad behaviour in their submissions to these inquiries for fear of retaliation, we have made a point of doing that work for them. If the retaliation issue is addressed, arising from any of these supermarket reviews, we would expect that the dairy code and industry will see the issue similarly addressed for dairy farmers.

By Mike Smith, eastAUSmilk Government Relations Manager