Project Framework

The project has three separate interlocking components, each to be completed over roughly one year of the first three years of the funding period:

1. Theoretical Perspectives on Competition Regulation

Exploring theoretical perspectives on the justifications for, and goals of, the regulation of Australia's retail grocery sector, this component of the project will look at the interests and systems that influence the regulatory process. Drawing on regulatory theories and the extensive literature that has developed in the US and Europe seeking to explain and prescribe the form and content of regulation theories underpinning competition law, this project explores application of such theories in the Australian context.

The researchers are examining the way in which the 'public interest' in Australian competition law has been defined, as reflected in the history of the development of the law, the text of the law itself, the approach taken to its interpretation and the debates regarding its amendment over time.

The research pays particular attention to the way in which competition law in this country has differentiated between the interests served by the prohibitions on anti-competitive conduct and the provisions that allow otherwise anti-competitive conduct to be proceed where the conduct delivers public benefits (e.g. environmental sustainability, small business protection, industrial harmony).

The researchers are also analysing the ways in which different interest groups have shaped Australia's competition law, including political parties, the adjudicatory agencies, business groups and the legal profession. They are keen to explore how tensions between the interests of these groups have influenced the goals, content and enforcement of competition law.

In particular, the researchers are interested in the long-running tension between the concerns of 'big' business and 'small' business and the ways in which this tension has affected legal debates.

In exploring these issues the researchers are conscious of the need to take account of the particular characteristics of the Australian economy, political system and legal traditions and examine how these systems have influenced and continue to influence competition regulation.

2. The Major Supermarket Chains as Regulatory Actors

This component of the project involves an in-depth empirical investigation of each of the major supermarket chains as the central actors in the grocery industry and the debate surrounding its regulation.

Coles and Woolworths were relatively minor players in the grocery trade in the 1960s. Thirty years later they dominate the industry and occupy powerful positions as economic, social and political actors in Australian society.

This research project aims to employ key frameworks and insights from strategic management and economic sociology to investigate how the major supermarket chains have outstripped local rivals and deterred foreign entrants (including the role that the competition regulatory framework has played in this) while seeking to protect their reputations as corporate citizens.

In analysing the strategic development of these grocery giants the researchers will pay close attention to the wide range of domestic and international forces that have shaped the grocery industry and retail sector more generally.

The project will investigate the implications of economic and social changes and the corresponding regulatory complexity for the major supermarket chains and their responses to them, including efforts by the chains themselves to influence the political and regulatory process and in certain contexts to act as private regulators.

The researchers are interested to explore efforts by the major supermarket chains to play not only a standard-setting role but as much, if not more, to exert a symbolic authority that legitimates their substantial power, builds trust and bolsters their social and cultural capital.

We will investigate the ways in which such efforts are shaped by the corporate structures, cultures, risk management and governance of these organisations, and the influence of their senior managers and important stakeholders, including shareholders and financiers.

3. Site Strategies and Supplier Relations – Case Studies

This component of the project focuses on case-studies relating to supermarket site strategies and supplier relations. These case studies have been selected because they allow examination of both horizontal and vertical relations in the grocery supply chain, raise challenging issues that test the limits and effectiveness of Australia's competition law, affect a wide range of market actors, and invoke broader social concerns.

Site strategies

Supermarket acquisitions of existing sites and the development of new sites for their stores, including the terms of shopping centre leases, raise issues of market concentration and barriers to entry that directly impact the abilities of retailers to compete effectively with the major chains.

To date the ACCC's response has been to closely scrutinise every proposed acquisition by Coles and Woolworths, examine restrictive provisions in leases and call for the explicit incorporation of competition considerations in local planning and zoning laws.

Yet supermarket site strategies have a far broader impact, significantly affecting the identity and amenity of neighbourhoods and communities relating, for example, to transport, trucking, employment, consumption patterns, ethical trade, social infrastructure and opportunities for social interaction.

The full range of issues that they raise are seen as beyond the reach of the competition and consumer laws, yet are crucial in influencing the general debate concerning the approach taken to and the effectiveness of grocery sector regulation.

Supplier relations

Buyer power has clearly enabled the major supermarket chains to generate significant efficiencies in the grocery supply chain.

However, there have been allegations about oppressive and unfair tactics by the major supermarket chains when negotiating terms with their suppliers.

Further, concerns have been raised about the consequences for product innovation as a result of the growth in supermarket private labels (also known as home brands or own brands). This is seen to reduce supplier incentives to innovate, with adverse consequences in the long run for the quality and choice available in groceries for consumers.

These issues have generated a range of responses, including ACCC investigations and litigation relating to breaches of the legal prohibition on unconscionable conduct and the implementation of an industry code of conduct in 2015 to regulate terms and conditions in supply contracts.

To some extent these responses have been influenced by recent similar developments in other jurisdictions, including the UK where a grocery code administered by a dedicated adjudicator was introduced in 2013 and in the EU where there have been several discussion papers and consultations concerning the introduction of unfair trading laws.

These developments suggest a growing consciousness amongst competition authorities that regulatory strategies based on competition law may not be sufficient to deal with the full spectrum of issues raised by the power of large supermarket chains.