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Woolworths’ (ASX:WOW) share price was firmly up +5.6% approaching the final hour of trades on Friday afternoon following a long-awaited report from the ACCC, effectively concluding a year-long supermarket inquiry process.
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And it looks like Australia’s supermarket duopoly is simply going to walk away with a slap on the wrist. Thus the price action.
Coles’ (ASX:COL) share price was up +4.6% at the same time. If ALDI was listed on the ASX, you could bet it would be too.
So what did the ACCC end up saying about the supermarkets?
The regulator – whose job is to regulate – said not much can be done. There is no “silver bullet,” according to the agency you’d presume are there to manufacture them.
A list of recommendations – of course – came down with ACCC’s report. The regulator was quick to note supermarket profit margins in Australia – for Coles, Woolies, and IGA – are well above many international counterparts.
That’s about as close as the regulator got, in my view, to saying anything of real substance.
Two recommendations in the ACCC’s report stand out to me as good ideas.
The first is a recommendation supermarkets be forced to provide justification for why shelved items are priced the way they are.
Whether this would be little cardboard slips describing the price underneath items on supermarket shelves, or something related to a QR-code-scanning app, would be a choice for Woolies and Coles to make.
Another good recommendation is the supermarkets be forced to give farmers and other producers demand forecasts, presumably over the next six to twelve months.
It’s well known Australia’s supermarket duopoly holds great power over farmers broadly, and often, negotiations are carried out with deliberately manufactured urgency to put producers under pressure.
Of course, these recommendations sound pretty good – some great ideas from the ACCC here – but they’re completely worthless unless they’re legislated.
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And despite a lot of talking in Canberra about how these supermarkets need to be brought into line, right now at least, nobody is meaningfully rushing to table any bills.
So, for now, we can probably expect these defensive stocks to remain just that.
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