Australian Dairy Farmers has applauded the ACCC’s announcement on Monday, September 23 to pursue the questionable pricing tactics used by the two companies.
That same day Woolworths reduced its homebrand milk by five cents.
ADF president Ben Bennett said the ACCC action was a clear signal that the two supermarket chains had too much power.
“Coles and Woolworths must understand that these moves, on the back of processors reducing prices to farmers, have real-world consequences for rural communities and the future of Australian dairy production,” Mr Bennett said.
"This price cut undermines the long-term sustainability of the dairy industry; (it) may seem trivial to consumers, but for dairy farmers it can mean the difference between staying afloat or shutting down.”
The ACCC is acting on evidence suggesting both supermarkets have been inflating prices to create the illusion of discounts.
RMIT associate professor in finance Angel Zhong said Australia’s market was often characterised by the dominance of a few large companies across various sectors.
“This concentration of market power can lead to reduced competition, higher prices and fewer choices for consumers,” Dr Zhong said.
"It is essential for regulatory bodies to closely monitor and address anti-competitive behaviours.
“Imposing significant penalties for breaches can deter companies from engaging in practices that harm consumers and the overall market."
According to a recent ABARES report, milk production values were already expected to fall by $570 million to $5.5 billion, with most of this decline reflecting reduced farmgate milk prices.
Mr Bennett said price cutting by the major supermarkets put immense pressure on dairy farmers.
“In no other industry can a pricing decision by management wipe half a billion dollars in value from an entire sector — most of which is directly tied to the returns that farmers receive,” Mr Bennett said.
“These decisions have been made by major retailers and processors without adequate regard for the broader industry implications.”
