By Byron Kaye
SYDNEY (Reuters) -Australia’s two dominant supermarket chains have declared stakes in more than 150 undeveloped development sites, the antitrust regulator said, adding it was investigating whether land banking was harming competition in the sector.
The Australian Competition and Consumer Commission (ACCC) said Woolworths and Coles, which together sell two-thirds of the country’s groceries, are effectively an oligopoly and is examining the effects of their grip on supermarket real estate.
The regulator had received comments from market participants concerned that the supermarket giants were buying land to prevent rivals from acquiring it, “creating or increasing barriers to entry or expansion”, according to an interim report on supermarket prices published on Thursday.
A final report is expected in February 2025.
The land bank investigation reveals another element of public, government and regulatory pressure on the two companies that have faced intense scrutiny during two years of soaring energy, mortgage and food costs.
The federal government has said it will introduce a mandatory code of conduct on the way major supermarkets treat their suppliers, while the ACCC charged both companies on September 23 with deliberately raising prices to lure shoppers with false discounts.
Woolworths and Coles had told the ACCC in their price review submissions that they could hold plots for long periods due to difficulties in obtaining planning permission, construction delays and slower-than-expected population growth, the regulator said.
In a statement, Woolworths said it would review the ACCC report in detail and submit comments in the coming months.
The ACCC said in the report that it had not formed an opinion on whether land banking – the practice of purchasing land for future use – was taking place in the sector, but that it would consider the matter further in the run-up to the final report .
The regulator says that in the current context, land banking occurs when a supermarket purchases land with no intention of developing that land or earlier than necessary to develop that land and/or to deter competitors from developing land in these locations.
It said Woolworths, the No. 1 grocer, had interests in 110 sites intended for future use in supermarkets, while No. 2 player Coles had interests in 42 sites. It was not specified what stage of development the sites were at.
Australia’s third-largest supermarket chain, Germany’s ALDI, had 9% of the supermarket market after 20 years, with just 13 potential locations, the ACCC said.
“Our preliminary view is that Coles and Woolworths have competitive advantages in acquiring new sites as they may be the most attractive tenants for suitable locations and have the financial capacity to outbid other potential tenants,” the interim report said.
“We are considering whether this could impact barriers to entry and expansion for competitors, including smaller, independent supermarkets.”
