ACCC aims to prevent market dominance

One of the roles of the Australian Competition and Consumer Commission (ACCC) is to ensure that too much monopoly power isn't created through mergers or acquisitions. A often quoted example of too much monopoly power is the retail grocery sector in Australia.

Coles and Woolworth's dominate the grocery market with around 80% market share. While this is actually falling as chains like Aldi enter the market by world standards this is a very high share for two companies. The potential for consumers to pay higher prices, or suppliers to be 'bullied' is significant.

Therefore the ACCC is looking at the possibility of Coles acquiring greater market share in the ACT by buying nine Supabarn stores. Although the 'big two' have a lower market share in the ACT than in the rest of Australia (Coles has just 21% of the ACT market) the ACCC don't think it's a good idea to allow Coles to increase their share by as much as they wish to.

The ACCC won't block the entire deal, but will insist some stores of the Supabarn chain go to other retailers. This will allow some of the smaller players to grow and increase competition in the market. That's good for consumers.

The final ACCC decision is expected on Thursday.

The International Business Times covers the story here

This article is relevant to both IB and VCE students on the matter of market structure, concentration ratios and policy to reduce market failure.