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The power of two: squaring off with Australia's large supermarket chains

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  • David K. Round

Abstract

The level and nature of competition in supermarket retailing in Australia has been hotly debated as a policy issue in recent times. The creeping acquisitions of smaller groups by Coles and Woolworths have led to several investigations amid claims that consumers will be disadvantaged by the growth of the two big chains. Yet little convincing evidence has been found to support these assertions. Although on occasions the big two may have used their power vertically to squeeze suppliers, consumers have experienced highly competitive retail markets. In this paper, it is argued that it is market conduct, not structure, that should be the prime focus of regulatory and policy interest, and that recent corporate activity may lead to a third force in supermarket retailing in Australia that could not only ensure continued competitiveness in the industry, but could also help to constrain the successful exercise of vertical market power by the two big chains. Accordingly, it is argued that intervention as a general policy in supermarket retailing would not be socially efficient, at least not until a wide range of objective and quantitative assessments have been carried out on the operation of the supermarket sector.

Suggested Citation

  • David K. Round, 2006. "The power of two: squaring off with Australia's large supermarket chains," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 50(1), pages 51-64, March.
    • Handle: RePEc:bla:ajarec:v:50:y:2006:i:1:p:51-64
    DOI: 10.1111/j.1467-8489.2006.00319.x
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    References listed on IDEAS

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    1. Smith, Rhonda L., 2006. "The Australian grocery industry: a competition perspective," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 50(1), pages 1-18, March.
    2. Cotterill, Ronald W., 2006. "Antitrust analysis of supermarkets: global concerns playing out in local markets," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 50(1), pages 1-16, March.
    3. Rhonda L. Smith, 2006. "The Australian grocery industry: a competition perspective," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 50(1), pages 33-50, March.
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    Cited by:

    1. Umberger, Wendy J. & Scott, Emily M. & Stringer, Randy, 2008. "Australian Consumers' Concerns and Preferences for Food Policy Alternatives," 2008 Annual Meeting, July 27-29, 2008, Orlando, Florida 6174, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    2. John Freebairn, 2018. "Effects of supermarket monopsony pricing on agriculture," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 62(4), pages 548-562, October.

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