1 Background

1 Background 1.1 Introduction There has been significant public concern regarding the competitiveness of retail prices in the grocery industry in Australia and the pricing of household grocery products. In particular there is concern that Australia has a highly concentrated grocery industry, and while inflation has been low in Australia over the last few years, grocery food prices have increased at a significantly higher rate than the headline inflation rate. In response to these concerns, the Assistant Treasurer and Minister for Competition Policy and Consumers Affairs wrote to the Australian Competition and Consumer Commission (ACCC) on 22 January 2008, directing the ACCC to hold a public inquiry under Part VIIA of the Trade Practices Act 1974 (the Act) into the competitiveness of retail prices for standard groceries. A copy of this letter is at appendix A. 1.2 Terms of reference The instrument attached to the Assistant Treasurer and Minister for Competition Policy and Consumers Affairs’ letter stated: I, Chris Bowen, Assistant Treasurer and Minister for Competition Policy and Consumer Affairs, pursuant to section 95H(2) the Trade Practices Act 1974, hereby require the Australian Competition and Consumer Commission to hold an inquiry into the competitiveness of retail prices for standard groceries. 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 on inputs along the supply chain for standard grocery lines • any impediments to efficient pricing of inputs along the supply chain, and • 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. In undertaking this inquiry the Commission will consult with retailers, businesses along the supply chain, farmers, consumers groups and other interested parties. This is not to be an inquiry in relation to the supply of grocery items by any particular person or persons. The inquiry is to be completed and a report submitted to me by 31 July 2008. The inquiry commenced on Wednesday, 30 January 2008 with the publication of an inquiry notice in the Gazette and in newspapers. Report of the ACCC inquiry into the competitiveness of retail prices for standard groceries 1 The inquiry was conducted by the Chairman of the ACCC, Mr Graeme Samuel, and Commissioners, Mr John Martin and Dr Stephen King. 1.3 Outline of the inquiry process As noted above, the inquiry into the competitiveness of retail prices for standard groceries was held in accordance with Part VIIA of the Act. Part VIIA empowers the ACCC to conduct monitoring/surveillance activity and, where necessary, to conduct a public inquiry. It gives the ACCC powers similar to those of the Prices Surveillance Authority by introducing into the Act provisions that were formerly part of the Prices Surveillance Act 1983.1 This is the second inquiry conducted by the ACCC under these provisions.2 1.3.1 Submissions The ACCC released an issues paper on 11 February 2008.3 It outlined the issues on which the ACCC was seeking information and comments and described how submissions to the inquiry could be made. The ACCC received over 250 public submissions from interested parties or persons. A wide range of organisations and people made submissions, including the major grocery retailers, suppliers, farmers, industry representative groups, government bodies and interested members of the public. A list of parties who made public submissions to the inquiry is at appendix B. All public submissions were placed on the ACCC’s website. A number of parties also provided submissions which they requested be treated as confidential. The ACCC’s approach to information for which parties requested confidentiality is discussed below. 1.3.2 Request for information and documents The ACCC also exercised the information-gathering powers of the Act. Among other things, these provisions enable the ACCC to obtain information and documents (s. 95ZK of the Act) and summon a person to appear at an inquiry to give evidence and produce documents (s. 95S of the Act). The ACCC also made a large number of informal requests for information and purchased raw data from a variety of industry data providers. The ACCC did not use external consultants to analyse data, documents or any other information. 1.3.3 Hearings/public consultation As stated, the inquiry was conducted by the ACCC in public hearings. These hearings commenced on 1 April 2008 and finished on 2 June 2008. Twenty-two hearings were conducted across all Australian capital cities and in several regional towns. Seventy-seven scheduled witnesses gave evidence to the inquiry during these hearings. A list of organisations and individuals that gave evidence at the hearings is at appendix C. 1 These amendments were introduced in 2004. 2 On 15 June 2007 the former Treasurer agreed to the holding of a price inquiry by the ACCC into the price of unleaded petrol pursuant to s. 95H(2) of the Act. The ACCC’s report of the inquiry was provided to the Assistant Treasure and Minister for Competition Policy and Consumer Affairs on 14 December 2007. The report was publicly released on 17 December 2007. Copies of the report are available from the ACCC’s website, www.accc.gov.au. 3 ACCC, Inquiry into the competitiveness of retail prices for standard groceries: issues paper, 11 February 2008. The issues paper is available from the ACCC’s website, www.accc.gov.au. 2 Report of the ACCC inquiry into the competitiveness of retail prices for standard groceries Many witnesses who gave evidence to the ACCC were questioned by counsel assisting the inquiry, Mr Damien O’Donovan, a lawyer on a long-term secondment to the ACCC from the Australian Government Solicitor. Witnesses were also questioned by the inquiry members and, on occasion, ACCC staff. Many witnesses at the hearings were summoned to appear under s. 95S of the Act and did not attend voluntarily. In general the ACCC summonsed all supplier companies. Therefore, no conclusions can be drawn regarding a company’s willingness to participate in the inquiry from the company appearing at the hearings. Some of the material covered in hearing sessions was confidential and commercially sensitive; therefore, parts of the hearings were not open to the public. Generally, questioning started in public, but sessions moved into a confidential phase when the questioning moved onto confidential material relating to the witness. Transcripts of the public parts of the hearings are available on the ACCC website. The ACCC also disclosed some aspects of the confidential components of the transcripts after hearings where it considered that some of the material should be in the public domain and that such disclosure would be in the public interest. In these instances the ACCC consulted with the relevant witness before doing so. 1.3.4 Treatment of confidential information While the inquiry was a public process, some parties sought to provide the ACCC with information on a confidential basis. In this respect, the ACCC had to be able to investigate issues that are commercially sensitive to witnesses and interested parties providing submissions without damaging the organisation’s competitive position and commercial relationships. In assessing requests for information not to be disclosed because of confidentiality, the ACCC considered whether it was desirable to conduct hearings or receive evidence and submissions in private or to maintain the confidentiality of evidence received. In doing so, the ACCC assessed whether disclosure would damage the provider’s competitive position and/or whether disclosure would be in the public interest. The ACCC was very mindful of the fact that some organisations were concerned about recriminations if they were seen to be assisting the inquiry. Throughout the inquiry the ACCC publicly emphasised that all supplier witnesses were summonsed, so that no conclusions could be drawn from the fact that an organisation was giving evidence. Furthermore, the ACCC agreed to accept information on an entirely confidential basis where it considered the commercial position of the organisation would be damaged if the fact that the organisation was providing information were disclosed. In relation to submissions, there were some occasions where, although an organisation claimed confidentiality over the information in some parts of its submission, the ACCC considered that it would be in the public interest for the information to be disclosed. In each case the ACCC provided the relevant organisation with an opportunity to comment on possible disclosure. In some cases, the organisation provided further explanation to justify their confidentiality claim and the ACCC accepted the information on this basis. In other cases, the organisation agreed to release the information as part of a submission or as a new submission. If agreement could not be reached, the ACCC also provided an opportunity for the organisation to withdraw the submission or information, but on no occasion was it necessary for any information or submissions to be withdrawn. Report of the ACCC inquiry into the competitiveness of retail prices for standard groceries 3 Similarly, in relation to the information and documents obtained by the ACCC using its information gathering powers, there were some occasions where organisations claimed confidentiality over a great deal of the information and documents obtained. However, there were some occasions where the ACCC considered that it might be in the public interest for this information, or for evidence received during a hearing conducted in private, to be disclosed.

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