Woolworths and Coles Grilled by Senate Over Alleged Price Gouging

Australia's supermarket giants Woolworths and Coles face intense scrutiny over price gouging and unfair supplier treatment, sparking a Senate inquiry with calls for greater transparency and accountability in the grocery industry.

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Dil Bar Irshad
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Woolworths and Coles Grilled by Senate Over Alleged Price Gouging

Woolworths and Coles Grilled by Senate Over Alleged Price Gouging

Australia's supermarket giants Woolworths and Coles faced intense scrutiny during a Senate inquiry into their pricing strategies amid accusations of price gouging and unfair treatment of suppliers. The inquiry, which took place on April 16, 2024, aimed to investigate whether the dominance of these two companies in the market is harmful to consumers and suppliers alike.

Woolworths CEO Brad Banducci faced the brunt of the questioning, with senators threatening him with jail time for failing to disclose the company's return on equity (ROE), a key measure of profitability. Despite repeated requests, Banducci evaded the question, insisting on discussing return on investment instead. He eventually admitted to not knowing Woolworths' ROE for the last financial year, suggesting it was not an important metric for the company.

Coles CEO Leah Weckert also faced tough questions during the hearing. She acknowledged that Coles had let down suppliers by underpricing wholesale goods and could improve its pricing and discounts. Weckert defended Coles' practices, stating that the company validates requests for price increases from suppliers and passes on the majority of those increases to customers, which has impacted profit margins .

Why this matters: The Senate inquiry highlights growing concerns over the market power held by Woolworths and Coles, which together control a significant share of Australia's grocery industry. The allegations of price gouging and unfair treatment of suppliers have far-reaching implications for consumers, farmers, and the wider economy.

Both Woolworths and Coles argued that the industry remains competitive despite their duopoly, citing the arrival of other major players like Aldi, Costco, and Amazon. However, critics maintain that the two companies' profit margins are unjustifiably high, particularly in light of the rising cost of living .

The inquiry also heard allegations of the supermarkets using their market power to set unfair supply deals with fruit and vegetable growers. One apple farmer claimed there had been no price increase in over a decade despite rising costs. Banducci acknowledged the possibility of issues in dealing with suppliers but denied allegations of 'land banking' to muscle out competition.

In response to the inquiry's findings, a review recommended making the voluntary food and grocery code of conduct mandatory, with financial penalties for breaches. The government has resisted calls for forcible dismantling of the duopoly, opting for a 'common sense approach' instead.

The Senate inquiry into supermarket pricing practices is ongoing, with further hearings expected in the coming weeks. As Woolworths and Coles face mounting pressure to address the allegations of price gouging and unfair treatment of suppliers, the spotlight remains on the need for greater transparency and accountability in Australia's grocery industry.

Key Takeaways

  • Senate inquiry scrutinized Woolworths and Coles over price gouging and supplier treatment
  • Woolworths CEO evaded questions on profitability, Coles CEO acknowledged underpricing suppliers
  • Concerns over market power and high profit margins of the supermarket duopoly
  • Allegations of unfair supply deals with farmers, despite rising costs
  • Recommendation to make grocery code mandatory, government resists dismantling duopoly