Woolworths Found Guilty

July 1 2006

The Federal Court has found Woolworths guilty of breaches of the Trade Practices Act in that, between 1997 and 2000, Woolworths struck agreements with four liquor license applicants in NSW not to oppose their license applications if they restricted their supply of takeaway liquor.

The court heard during the trial that Woolworths had forced liquor licensees to agree to terms such as not to display liquor for sale on their premises or not to permit customers to attend the premises to buy liquor, but to only accept mail orders. 

Woolworths responded with a media statement arguing it was engaged in a 'common practice'.

It is the ACCC's second court win against Woolworths this year. 

In February Safeway, which is owned by Woolworths, was fined a record $8.9 million for fixing prices in the bread market. 

It was found guilty of ceasing to receive bread products from bakeries such as Tip Top, Buttercup and Sunicrust if they also supplied bread to retailers who sold it. 

Roger Corbet responded with: "Woolworths is committed to compliance with all its legal obligations in the various activities in which it is engaged."

Pressuring Suppliers

July 2003:

Woolies has so far spent more than $10 million fighting an ACCC victory in the Federal Court alleging its Victorian arm Safeway engaged in price fixing and misuse of market power in stopping the likes of Tip Top bakeries from selling factory seconds and discounts at this stall at Preston markets. 

The bakeries were simply dropped by the supermarket as suppliers until the small retailers ceased discounting. Woolworths chief executive Roger Corbet's comment:
"We don't deliberately undercut our small competitors."

Predatory Pricing

Predatory pricing occurs when a company sets an unrealistically low price for the purpose of forcing a competitor to withdraw from the market.

This leaves the company with less competition, which means it can disregard market forces, raise prices and exploit consumers.

Price cutting or underselling competitors is not necessarily predatory pricing, but when such techniques are used by a business with substantial market power for the purpose of getting rid of competitors, it is considered to be a misuse of that market power.

Pressuring Competition

Back in 2003,  the wholesale price for Victoria Bitter was $30.04. Woolworth's liquor arm, Dan Murphy's, were selling retail for less than $29. CUB strenuously denied it discounted VB to the likes of Woolies and Woollies stated they only sold some items below cost to match competitors. But Dan Murphy's stated flatly that they were selling VB below cost, as they do with other key items to, quote - "aggressively drive sales" in a soft market. Alan McKenzie, of the Retail Grocer's' Association also stated concern about the use of intimidation or coercion by the major chains to extract better prices and trading terms for themselves compared to those of their smaller competitors. 

Pressuring The Labels

Supermarkets impose various fees on their suppliers’ own branded products, such as slotting fees (paid to the supermarket for the privilege of occupying its shelf space) and failure fees (paid to the supermarket as penalties when the sales targets set by the supermarket are not achieved by the supplier). These fees now present a higher barrier for external suppliers competing with the house brand owned by the supermarket itself when the house brand is preferred for the same shelf-space and is exempted from such fees. 

The end result of such market dominance is sure to be the loss of future business for many of Australia’s suppliers of supermarket product lines, and the entrenching of limited competition that will allow future prices to be dictated by the supermarket

Pressuring sellers

July 2005

Following allegations that Coles and Woolworths imposed secrecy deals on independent retailers wishing to sell (they receive a bid from the big retailer only if they promise not to seek out alternative offers), the  ACCC instituted a voluntary charter to curtail the practice. Its voluntary nature ensures that penalties cannot be imposed for breaches of the terms.

Fred Harrison, national chairman of the Independent Grocers of Australia, claims the charter is another example of the ACCC going halfway in its job of protecting the independents.

"The ACCC should adopt a policy where independent retailers offering the same price as the chains for an independent outlet which is up for sale, should be given precedence - so as to protect the independent sector," he said.

Pressuring the ACCC?

Aug 31 2005

The proposed acquisition of eight Action stores by Australia's largest supermarket chain Woolworths Ltd raises competition concerns, the Australian Competition and Consumer Commission (ACCC) said.

Woolworths is set to gain ownership of the eight Action stores located in Queensland and Western Australia as part of its $3.3 billion carve-up of Perth-based rival Foodland Associated Ltd with grocery wholesaler Metcash Trading Ltd.

"The ACCC has formed the preliminary view that the proposed acquisition is likely to substantially lessen competition in retail markets in the local areas of Mudgeeraba and Mermaid Waters in Queensland and Willetton, Spearwood, Noranda, Maddington, Woodvale and Kalgoorlie in Western Australia," the ACCC said in a statement.

Less than 2 months later, it had changed its mind...

19 October 2005

The ACCC will not oppose Woolworths' proposed acquisition of 19 Action supermarkets, ACCC Chairman, Mr Graeme Samuel, said today.
 "Eight local markets were initially identified as raising competition concerns in the ACCC's Statement of Issues on 31 August 2005", Mr Samuel said.

"Woolworths will now not proceed with the acquisition of one of the stores identified, Spearwood in Perth.

In the case of the remaining six stores: Noranda, Maddington Village, Woodvale, Southlands Willetton (WA); Mermaid Beach and Mudgeeraba (Qld); and the Kalgoorlie (WA) development site, the ACCC has decided that the proposed acquisition is not likely to substantially lessen competition.

(emphasis mine)

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