IGA head urges end to supermarket land grab

Andrew Brown |

Australia’s major supermarkets have been accused of land banking in order to lock out cmpetitors.
Australia’s major supermarkets have been accused of land banking in order to lock out cmpetitors.

The company in charge of IGA has called for rules preventing major supermarkets hoarding land as a way to prevent competition.

Metcash chief executive Grant Ramage used an appearance before a parliamentary inquiry into supermarket prices to urge for measures to stop land banking.

The practice involves supermarket chains purchasing strategic areas of land despite having no plans to develop them, as an attempt to stop a rival building a store on the property.

Mr Ramage said it was a “reasonable assumption” that major chains were using the practice to lock out competitors.

“I don’t think land banking is particularly overt and obvious, it’s something that happens often under the radar; there’s no compulsion for (Coles and Woolworths) to divulge when they acquire land or property,” he told the inquiry on Thursday.

“There is a long-time pattern and behaviour which is anti-competitive which seeks to close out markets and removed competitors from the markets and we’ve seen that happen over a long period of time.

“Their sheer scale gives them the financial capability to do that. It gives them greater sway with developers, landlords and other parties, like state governments.”

Woolworths and Coles supermarket signage (file)
Major supermarkets aren’t required to divulge when they acquire land or property. (Joel Carrett/AAP PHOTOS)

Mr Ramage said increased scrutiny of land acquisitions by supermarkets was needed to crack down on the power of major players like Coles and Woolworths.

The inquiry comes after an interim review into the voluntary food and grocery code recommended it be made mandatory for supermarkets.

The code focuses on standards of conduct between supermarkets and suppliers, with the review also recommending increased penalties for companies that breach the rules.

However it did not suggest implementing divestiture rules to break up large supermarkets as a way to increase competition.

But Mr Ramage said changes to the code were unlikely to bring a reduction in prices at the checkout.

“(The code) governs the way we manage our dealings with suppliers, our contracts with them, how we manage cost increases ranging and so on. It doesn’t in any way talk to the effect on price,” he said.

“There’s more work needed to focus the code on the needs of those growers in their dealings, particularly with the duopoly.”

The Australia chief executive of supermarket Aldi Anna McGrath also appeared before the committee, warning divestiture powers could potentially increase costs for customers.

Aldi supermarket in Melbourne (file)
Aldi now operates almost 600 stores across Australia. (Joel Carrett/AAP PHOTOS)

“We’re not supportive of divestiture because of the risk of unintended consequences,” she said.

“We’re supportive of the future intent (of the grocery code) and therefore the elements making it mandatory and also strengthening against the fear of retribution for suppliers.”

The German supermarket giant entered Australia in 2001 and has since gained a 10 per cent market share.

But while Aldi has expanded to almost 600 stores across Australia, Ms McGrath confirmed the chain had no plans to expand to Tasmania, the only jurisdiction without a store aside from the Northern Territory.

“When we’re identifying where to expand, we do need to consider the additional costs and complexities that are involved, and therefore when it comes to Tasmania, that would largely be the supply chain elements,” she said.

“It’s not currently in our plan.”

The heads of Coles and Woolworths will be grilled at the inquiry on Tuesday, following on from accusations of price gouging by the major supermarkets.

AAP