The ACCC's GROCERYchoice website
Launch of the GROCERYchoice website
The GROCERYchoice website
was launched by the Australian Competition and Consumer Commission (ACCC) on 6
August 2008, the day after the release of the ACCC's report on its inquiry into
the competitiveness of retail prices for standard groceries.
The ACCC report had found that while the Australian grocery market was
'workably competitive', consumers would benefit from more vigorous
competition. It concluded that there were high barriers to entry and expansion
in the grocery market, limited incentives for the major supermarket chains to
compete aggressively on price, and limited price competition to the major
chains from the independent sector. The entry of ALDI in the eastern states
had provided a substantial beneficial impact on competition.
Announcing the launch of the website, the then Minister for Competition
Policy and Consumer Affairs, the Hon. Chris Bowen MP, said:
It will provide a monthly snapshot of grocery prices in 61
different baskets – meat and seafood, fruit and vegetables, dairy, bread and
cereals, drinks and snacks, general groceries, household and personal care; and
basic staples basket to allow comparisons with ALDI, who do not have a wide
enough range of goods to be compared with the other retailers on the different
The ACCC has undertaken considerable work to ensure that only
like for like goods are used for comparison purposes for these baskets. The
goods in the baskets will change from month to month, and be kept confidential
to ensure supermarkets cannot manipulate prices to artificially reduce their
prices in that basket while putting up prices on other goods.
The Minister noted some 'interesting facts' to come out of the first month
of surveys, including that Coles was the cheapest of the major supermarkets in
52 out of 61 regions. In the 40 out of 61 regions where ALDI was present, that
retailer had the cheapest prices on basic staple products, with a difference of
around 25 per cent compared to the next cheapest retailer.
Mr Bowen also suggested that the introduction of the website could
change consumers' shopping patterns, encouraging them to shop elsewhere, rather
than their 'usual' supermarket:
Well, what [the website] does is give people a guide to say,
well, in our region, ALDI, for example, is significantly cheaper. So people get
into a habit. I'm no different and I'm sure people in this room are no
different. You get into a habit. You go to the same supermarket time and time
again and you notice prices going up and you think that's not good.
But it's not a spur for you often to look around, to search
for cheaper prices. And if you do, you may get there and find that the prices
are no different. So this is a guide for people to say, well, in your region,
if choose to have a look at Woolworths, or Coles, or ALDI, or independents,
whatever the case may be in that region, you may find a difference in prices.
And then those people, as they should in a market economy, can make their own
choices based on convenience, customer service, quality, et cetera.
The Chairman of the ACCC, Mr Graeme Samuel, commented at the press
conference that GROCERYchoice would provide new information to consumers:
[GROCERYchoice] won't duplicate supermarket advertising; it
won't publish the weekly specials; it won't list grocery prices for individual
supermarkets. But this is about giving consumers something new that the
supermarket chains won't tell them: who is cheapest in each region overall.
The website's introductory page provided the following information:
GROCERYchoice ... provides practical grocery price information
to help consumers find the cheapest overall supermarket chain in their area.
With the large number of grocery items available at each supermarket, consumers
often find it difficult to determine which retailer offers the cheapest prices
overall. GROCERYchoice helps consumers compare the general price levels of
supermarket chains in their area ...
Price information is obtained from an independent monthly
survey of approximately 500 products from 600 supermarket outlets across
Australia. The results of each monthly survey will be made available on the
GROCERYchoice website on the first business day of the following month.
... The basket prices for each supermarket retailer represent
the average weekly basket price for that retailer within a specified region,
and not the price for a specific individual supermarket outlet.
Under the 'Meat & Seafood' and 'Fruit & Vegetables' basket categories,
the website added the caveat that:
The quality [of some meat products / fresh fruit and
vegetables] can vary between supermarket retailers over time. Some differences
in quality may exist and this should be considered when making price comparisons
for this basket.
The 61 regions
The GROCERYchoice website stated that:
... the  regions have been selected to ensure the survey is
conducted across geographically identifiable areas, which are relevant to the
lifestyles and shopping practices of Australian consumers.
The opening page allowed a consumer to enter their postcode,
or click on an interactive map of Australia to choose one of the 61 regions, in
order to see the basket price results for their local area. For example, the
way in which Queensland was divided into regions is shown below.
Clicking on the Brisbane region would allow the consumer to 'zoom in' on
another map, divided into a number of other smaller, more densely populated
regions. The larger, non-metropolitan regions shown in the map above were
counted as individual regions. Clicking on the 'North Queensland' region
(encompassing Cairns, Mount Isa and Cape York) would lead to a page showing the
price of typical grocery baskets for a range of retailers across that region.
In the same way, clicking on the region of Western Victoria—spanning Swan
Hill, Avoca and Warrnambool—would lead to a page showing the following table:
Coles / BI-LO
Woolworths / Safeway
Meat & Seafood Basket
Fruit & Vegetable Basket
Bread & Cereals Basket
Drinks & Snacks Basket
General Groceries Basket
Household & Personal Care Basket
Total of above baskets
Basic Staples Basket
As is the case with all budget bids, Treasury provided the Government
with advice as to the merits or otherwise of the GROCERYchoice proposal.
However, this did not involve detailed economic modelling nor quantitative
analysis prior to the allocation of funds for the website.
The ACCC undertook a scoping study, looking at different ways to set up
the website, with 'obvious trade-offs in cost [and] reliability' and provided
options to the Government as to the website's parameters (e.g. regional sample
surveys were recommended in preference to individual census monitoring of every
The website that was launched in August 2008 was 'fairly close' to what the
ACCC had put to the government as being preferable.
In its February 2008 advice to the Minister on how best to establish a
dedicated website to monitor and compare grocery prices, the ACCC provided
details of its recommended model. The size and content of the baskets would be
determined and weighted using data from the Australian Bureau of Statistics' Household
Expenditure Survey as well as sales volume data to ensure that the dollar
figures displayed on the website reflected approximate weekly expenditure by a
typical household. The ACCC proposed that:
... about 30 to 50 items would be selected for each sub-basket
in each month, so that in any month about 300 to 400 of the 500 items are used
in the basket, and 100 to 200 are not. Over time, the contents of each basket
is rotated through the entire list of 500 items, so that it changes gradually
over time thereby assisting in maintaining basket confidentiality, but making
sure the baskets can be sensibly compared over time.
The ACCC recommended that 500 items per store struck an appropriate
balance between the need for a representative basket and the cost of data
The advice to the Minister also showed that the ACCC had considered
options which involved the monitoring and publishing of prices of around 50 individual
products at individual stores (either a fixed list or a varied product list
from week to week):
The principal advantage of both these options is that they
would provide information on the prices of individual products on a
store-by-store basis and in that sense would be highly transparent.
The principal disadvantage of such options would be that very
large quantities of data and other information would need to be regularly
collected and processed.
The ACCC considered that the disadvantages (outlined below)
substantially outweighed the advantages of these alternative options and
ultimately recommended against individual product and store monitoring:
The monitoring system could be beholden to the continuing
good will of the participating supermarkets, as it would only be effective with
prompt, accurate and regular provision of data by the stores.
The burden of data provision would likely be significant for
smaller supermarket chains. Coles and Woolworths would likely be able to comply
readily with such a data request. However, such a request would likely be
burdensome on individual IGA stores (which is essentially a decentralised
franchise operation) and other independent supermarkets, and possibly
unworkable for ALDI (which does not stock many of the items that would be
considered standard in the other chains). The likely result would therefore be
exclusion of IGA and ALDI (and other independents) from individual store
A further disadvantage of [the fixed list option would be
creation of] incentives for chains and stores to manipulate the prices of those
items, in attempts to be cheaper than competitors.
The committee heard that prior to the 2007 election, the ACCC had sought
advice from Informed Sources, a data collection agency, on the likely budget
for a grocery price monitoring website:
They asked us to give them an estimate: if they were asked by
government to put in place some sort of grocery monitoring, how many stores and
what number of products did we think it might be across Australia? We gave
them an estimate of those costs, and it ranged between $2 million and $2.5
Table 2.1 is taken from Budget Paper No. 2 of the 2008–09 Budget and shows that $12.86 million was appropriated for GROCERYchoice:
Table 2.1 GROCERYchoice 2008–09 Budget appropriation
Treasury tabled a breakdown of total payments made to date in relation
to the GROCERYchoice website ($7.7 million), which is at Appendix 3. Treasury
estimated that the contingent liability associated with the termination of the
contract with CHOICE was around $700 000 but advised that this amount had
not yet been settled with CHOICE.
Around $73 000 has been spent on legal costs in relation to the
GROCERYchoice website contract. Treasury stated that legal advice for the
period December 2008 to February 2009 had been mainly for the purpose of
assistance in drafting the contract. From June 2009, ongoing legal advice has
been sought on a number of matters:
- advice on possible contract amendments which were not ultimately
- advice on the Government's right to terminate the GROCERYchoice
website contract; and
Treasury's rights and obligations following the termination and
matters flowing from it.
The ACCC spent $3.6 million before responsibility for the website was
transferred to Treasury, along with the remaining $9.2 million in funding.
The breakdown of the $3.6 million expended by the ACCC was explained as
$486,000 was in salaries; $64,000 was in salary oncosts;
$60,000 was the accommodation and fit-out for the relevant staff involved; $1.4
million was for the data set-up and the data collection ... and $1.5 million was
for the development and establishment of the website and the associated IT
Collection of information for the
In its advice to the Minister in February 2008, the ACCC stated that it
had considered whether collection of price data should be done by survey or by
requesting scanner data directly from retailers. Its recommendation was to
undertake independent price surveys, noting that requests to supply data may be
burdensome on smaller independent supermarkets. The ACCC also suggested that
the use of scanner data could be seen (in the eyes of the public) to compromise
the perceived independence of the monitoring process.
The ACCC was questioned about the collection of price information and
the length of time it would remain on the GROCERYchoice website. The
information would be collected over one month and then would be displayed on
the website for one month. When asked whether it was possible that the
information on the website could be up two months old, the ACCC responded:
At the time that it goes on the website it would be about two
weeks old ... You would have the survey completed, say, on day one and within two
weeks of that the information would go on the website. It would remain on the
website for a month, but in the meantime the next survey would be undertaken
and that would overtake.
Further discussion of the outsourcing of the data collection for
GROCERYchoice appears later in this chapter.
The level of usage of the website
Treasury provided the following information on the number of website
hits and page views recorded:
Table 2.2: Hits
and page views on the GROCERYchoice website
Page views ('000)
Treasury advised that page views are the best indicator of the usage of
the website, as one page view is equal to one webpage, and a hit is equal to
one graphic. The number of hits is therefore greater than the number of pages
launched and also varies depending on the number of graphics on
The 'Survey Methodology' webpage explained
how the price data collected was used to create the prices for various baskets:
Each of the product prices in the basket are ... multiplied by
an appropriate expenditure weight, reflecting the importance, in terms of
average weekly expenditure, of that product compared to all products within the
basket. These data are then aggregated by supermarket retailer and region to
create the various basket prices.
To ensure the quality and integrity of the data published, the website
stated that the ACCC had engaged 'an independent product tester':
...to ensure that the grocery products in each of the baskets
across supermarket retailers are of the same quality and therefore allow
meaningful price comparisons to be made. This is necessary because the various
baskets include a range of private label products that need to be matched to
other brand or private label products available from other supermarket
Regarding the basket prices on the website, the ACCC was asked what
mechanisms were in place to ensure that a grocery retailer could not engage in
deliberate manipulation of prices to ensure that its basket of goods would be
misleadingly presented best on the site. The ACCC responded:
To prevent the manipulation of the price survey and the
published results the list of specific products and supermarkets included in
the survey remain confidential to the ACCC. The sample of products and
supermarkets included within the survey are also changed on a regular basis.
In addition to this, while there are approximately 500
products included in the price survey each month, a smaller sample of these
products are used to calculate the basket prices published on the website.
Changes to this sample are made so that the products contributing to the basket
prices are not the same each month.
Referring to a caveat on the GROCERYchoice website (Note: the towns
and suburbs included on the maps do not necessarily reflect where the
GROCERYchoice survey is undertaken), Senator Bushby at Senate Estimates
hearings raised the issue of different stores of the same supermarket chain
pricing differently in various suburbs, asking:
Given the size of the regions – even the metropolitan regions
that span a dozen or more major suburbs – how is a reasonable shopper meant to
decipher the cheapest 'chain' in their area when the actual supermarket sampled
may have been 10 stores away, or even hundreds of kilometres away?
The ACCC acknowledged that:
Prices can vary between stores within the same group or
chain, reflecting in particular the proximity to other local competitors. For
example, if a Coles store and a Woolworths store in the survey are in close
proximity, the relative prices at both are likely to be affected. This is taken
into consideration when selecting the supermarkets for the GROCERYchoice survey
so that the average for the region is a representation of relative overall
grocery price levels for each supermarket chain in that region.
(The practice of 'geographic price discrimination', where a different
price is charged for the same product at different retail locations, is the
subject of a bill currently before the Senate Economics Legislation Committee.
The Trade Practices Amendment (Guaranteed Lowest Prices – Blacktown Amendment)
Bill 2009 would require major supermarket chains to charge the same prices at
any two locations within 35 kilometres of each other. If this bill were
passed, or if other chains followed ALDI's lead and voluntarily adopted
national pricing, it would make a GROCERYchoice website both much more useful
and cheaper to compile.)
The ACCC also stated that stores in regional and rural areas could be
compared on the grounds on that they had:
...many similarities, including on the one hand the higher cost
of transporting dry grocery products from central warehouses, and on the other
the ability to locally source fresh produce.
Evidence of the website's effect on grocery prices
For the six months from July to December 2008, the ACCC's website
published price data in 61 regions per month. Of the 366 regional data
collections, Woolworths was the cheapest in 198 regions, Coles was the cheapest
in 160 regions and independent supermarkets were the cheapest in eight regions.
The general consensus from retailers was that the website, while
operating under the ACCC, did not have any discernible effect on grocery
Senator BARNETT—Did it have any impact whatsoever in
terms of putting downward pressure on grocery prices which was, I think it is
fair to say, the government’s intent prior to the election? Presumably, this
was a response to Labor’s promise prior to the election? Was there any evidence
of downward pressure on grocery prices?
Mrs Osmond—Not to my knowledge. The thing that will
affect prices is competition in the marketplace.
At Senate Estimates, the ACCC responded to questions about the whether
the website had any measurable effect on grocery prices while under its
... over the three-month period of the site having had its
surveys and the results of the surveys shown on the website, there has been a
change in the relative positions of Coles and Woolworths ... In the first survey
... in 52 out of 61 of the regions in Australia, Coles was cheaper than
In the last survey Woolworths was cheaper than Coles in 59
out of 61 sites. That suggests that there has been some movement on the part of
Woolworths in its pricing practices, and we are aware ... that there were certain
indications given at senior management level at Woolworths that they were not
happy with being priced at a higher price than Coles on the GROCERYchoice site.
We have also seen a closing of the gap between the independents and Coles and
Woolworths in some of the pricing differences that have been present.
This is suggestive of GROCERYchoice putting downward pressure on
prices. The ACCC expected it would do so, albeit to a modest extent:
To the extent that the GROCERYchoice website is intended to
provide transparency to consumers and thus increase the competitive process, it
would have a small influence. But you will recall the opening paragraphs of the
grocery inquiry noted that the issue of competition was but a very small
factor, like one-twentieth of the influence over grocery price increases over
the past five years.
Professor Allan Fels, the former ACCC Chairman, and Professor David
Cousins, recently commented that 'despite its severe limitations' the grocery
price monitoring activity undertaken by the ACCC:
...seemed to have some beneficial impact for consumers, as the
major suppliers seemed to respond to the favourable publicity for ALDI's low
prices by also attempting to be the lowest price setters in a region.
Value of the website to consumers
At Senate Estimates hearings, the ACCC was asked whether the
introduction of the website had 'tipped the balance of large chains versus
consumers in favour of the latter.' The ACCC responded:
Consumers now have an indication of which supermarket chain
offers the cheapest prices across-the-board and not simply the lowest prices of
'specials.' This information was not previously provided by supermarket chains.
The ACCC also argued that despite the website not disclosing from which
individual supermarkets the samples were taken, GROCERYchoice was still useful
The survey is designed so that consumers do not necessarily
need to know the individual supermarkets included in the survey in order to
make use of the information provided. The basket prices presented on the
website reflect the average price for a retailer within a specified region and
not the price for an individual supermarket outlet. Over time the website
provides a picture of which supermarket chain offers the cheapest prices in a
The relevance of the website was questioned by Senator Joyce:
Senator JOYCE—As you are aware, Woolworths have said
themselves that they have up to 4,000 price changes in a week. How relevant is
your GROCERYchoice website when that is the fact—when it is at a snapshot in
time and when one of these organisations asserts that they can have 4,000 price
changes within their basket of goods in a week?
Mr Samuel—It depends on what is sought to be achieved
by the website. If you look at the changes in relative pricing that I
identified before between Coles, Woolworths, the independents and ALDI then the
fact that there are changes each week in respect of so-called specials and
other items would not be that relevant. What this does is provide a snapshot
comparison on a monthly basis of pricing across 500 products. Those products
are not known to the stores concerned. It does give an indication of their
relative competitive pricing levels.
The ACCC also stated that despite the fact the data on the website could
be up to four weeks old, 'the website provides a statistically significant
indication of the comparison of the supermarkets as to who is more or less
A recent analysis of grocery prices at Coles and Woolworths stores in
the Canberra region suggests that an 'average' figure for a chain is not
necessarily of assistance to shoppers. For example, while the two chains'
average prices throughout the region were similar, a more detailed analysis
revealed that one chain was cheaper in one part of Canberra, while the other
was cheaper in another area.
Senator Xenophon suggested to the ACCC that the data on the website,
given that it was only updated monthly, had the potential to be misleading to
Senator XENOPHON— ... for instance, in the first
month, Woolworths could be the cheapest overall chain in a region and that led
to consumers going to Woolworths in the next month. But what happens if in the
next month Coles was the cheapest? It is a bit of a dud deal for consumers.
Mr Cassidy—That was one of the trade-offs in the
design of the website and the amount of money to be spent on it. Clearly, the
more regular the information, the less chance of a consumer going to one store
when the price relativity has shifted.
However, it could be argued that if the major supermarket chains did cut
prices in response to the way they were represented on the GROCERYchoice
website from month to month, there still may have been a good outcome for
The ACCC also stated that the website was designed to provide
information on grocery prices alone but noted that:
The website specifically mentions that price is only one of
the factors considered by consumers when deciding on where to shop. Consumers
can take price information on the website into account with a range of other
factors important to them when determining where to shop, including the
location and accessibility of supermarkets to them, the quality of fresh
produce, the product and produce range, and their assessment of the quality of
At Senate Estimates, the ACCC was asked whether it could guarantee that it
was not favouring ALDI or the larger retailers through the GROCERYchoice
website. Mr Samuel told the committee:
I can guarantee that the survey process is a process that is
bound by protocols of integrity and that there is no favouring or disfavouring
of particular groups ...
As I said when the website was first launched, there are
likely to be three reactions. One is to say, 'We're not faring well with this
website and we will simply ignore it.' That probably does not go down too well
with consumers. The other reaction is to adjust the price to become more
competitive and that appears ... to be what Woolworths has done over the
past three months ... The third, and you would say almost the most obvious,
course of action for those who are not faring well with the website is to
denigrate it in every possible way. It has been pretty clear where the
denigration has been coming from, but that is part of the process.
While accepting that the ACCC's 'mystery' basket approach was intended
to prevent 'gaming' by retailers to achieve the perception of a cheaper store, the
National Association of Retail Grocers of Australia (NARGA) argued that this
also ensured that the information on the website was essentially irrelevant to
... no consumer was in a position to judge from the information
on the website that a basket they might wish to purchase actually coincided
with any of the items in the supposedly cheapest basket publicised.
The Retail Traders' Association of Western Australia asserted that the
original GROCERYchoice website did not take into account consumers' shopping
behaviour and displayed information that was effectively meaningless:
Understanding the consumer's habits would also have shown the
complexity of the project. Consumers by nature do not travel extensive
distances for food and grocery necessities and generally restrict their
shopping for these items to within a 5 to 10 kilometre radius of their homes.
... To be useful to the consumer, the price information must be
real-time, accurate and relevant to the shopping precincts they frequent.
Averages, historical data and other non-specific pricing data are useless, even
misleading and totally irrelevant.
The assessment of the ACCC website by Associate Professor Frank Zumbo,
of the School of Business Law and Taxation at the University of New South
Wales, was scathing:
...I have to say with considerable disappointment that
GROCERYchoice website as operated by the ACCC was a complete waste of
taxpayers’ money ... Fundamentally the website was flawed in its design. The information
was too generalised. The thing we need to remember is that consumers shop
locally. The GROCERYchoice website as operated by ACCC was broken into 61
regions which were very large regions ... It went from one side of the Sydney
metropolitan area to the other side, some of the regions, and the reality is
that consumers operate on a three to five kilometre radius ... Information was
out of date; it was only collected once a month.
The ACCC's GROCERYchoice website was designed to fulfil a hollow
election promise to put downward pressure on grocery prices. However, it is
clear that the aims of the website were never going to be achievable, with the
sharply declining number of hits demonstrating that GROCERYchoice was of little
or no use to consumers. The poorly-designed ACCC website collected data by
regions, some of them covering tens of thousands of square kilometres, bearing
no resemblance to real-world consumer shopping patterns.
Data collection - Informed Sources and Retail*Facts
The ACCC outsourced the data collection for GROCERYchoice to Retail*Facts,
an arm of The Bailey Group Pty Ltd, which is a sales and marketing company.
NARGA's submission pointed out that the ACCC's report of consultancy
contracts let during the 2007–08 financial year to the value of $10 000 or more
lists The Bailey Group as having conducted a 'Research Survey on Grocery Prices'.
The cost of this 'restricted source' contract is listed as $5 135 650
(NARGA notes it was the largest consultancy for the year, about
ten times that of the second biggest.)
NARGA commented at an inquiry hearing that a more realistic figure for the data
collection contract would have been 'well under $1 million.'
A submission from Informed Sources, a data collection agency, also
called into question the ACCC's decision to award the data collection contract to
its commercial rival, Retail*Facts:
The ACCC quickly and in our view correctly determined that
there were two Australian companies who had the demonstrable experience,
capability and management coverage to collect the data necessary to feed the
- Informed Sources – a
company that, at the time, was in a heated debate with the ACCC, its Chairman
and the Government over the potential introduction of FuelWatch. In addition to
its collection capabilities, this company had extensive experience in the
construction and running of a consumer pricing awareness portal
(MotorMouth.com.au). Informed Sources bid $1.975M (excl GST) for collection of
data for the GROCERY Choice website.
- Retail*Facts – a respected company with an extensive network of
collection staff but (based on documents obtained under FOI) with the potential
to fail the ACCC’s [request for quotation] needs for confidentiality/anonymity
because of the deployment of that network and its likely overlap with its
existing collection services for big Supermarket companies. Retail*Facts bid
$4.669M (excl GST) for collection of data for the GROCERY Choice website.
Informed Sources asserted that the ACCC spent 2.3 times the amount of
money necessary on its data collection tender.
The ACCC gave evidence that it had been under some time pressure to
develop and launch the GROCERYchoice website:
Mr Cassidy—The government was keen for the website to
be up and running as soon as possible ... We were working with an indicative time
of having the first collection done so it could be released in early August.
... Senator BARNETT—So the government gave itself a
self-imposed deadline to require it to be established within that six-week
period. Did you advise them of the obvious cost differential? Did you advise
the government of the implications of their push to rush this forward and to
have it up and running so quickly?
Mr Wing—No. It was a policy and we had a budget so we
just ran within that.
The ACCC supplemented its response to the committee's question as to why
it did not inform the Government of the cost difference, stating:
The procurement was conducted in accordance with Commonwealth
Government procurement policies regarding value-for-money ...
The ACCC did not advise the Government of the difference in
price between the two quotes because while they were both assessed to be within
the budget for the program, only the Retail*Facts quote adequately provided for
the delivery of services within the timeframe required.
Due to the timeframe set by the Government, the ACCC had some doubts as to
whether Informed Sources had a data collection team that was 'ready to go'. It
was also noted that the ACCC had received several quotes and in the end had
accepted the second cheapest tender:
We received a number of quotes ranging in price from about $2
million to well over $10 million. Our concern was very much that there was
quite a major collection to be done—with approximately 600 supermarkets and
approximately 500 products per supermarket—right across Australia and the first
one would have to be up within six or seven weeks ... We looked very closely at
the proposals by Informed Sources and others. At the end of the day, we were
not convinced that there was a ready-to-go field force and we thought a fair
amount of recruitment would have to be done. That was a great concern—that is,
that there would be a great risk to the ability to deliver the data and
high-quality data in time.
Senator Barnett suggested that the ACCC based its decision on the
Government's 'non-discretionary and non-flexible' deadline for implementation,
to which the ACCC responded:
Yes. When we say ‘non-discretionary’, we were given a task
and we did it, so it was not actually in our frame of reference or thinking, if
you like, to sit there and think, ‘Well, perhaps we should push this back for
six weeks or whatever.’ It is like a lot of times where agencies or departments
are given a task by the government and they say this is what they have.
Senator Pratt raised the possibility that the ACCC could not have had
any foresight about which of the organisations tendering may or may not have
been able to meet the prescribed timelines:
Senator PRATT—So it is quite usual in a tender process
that you have to judge the tenderer according to the criteria in the tender?
There are no second chances; if you do not make the standard then you fall
away? You have to turn to your other tenderers to meet the tender, don’t you?
Mr Brocklehurst—Effectively that is the process in
terms of the risk management decision you have to make: the quality of the tender,
the submission, whether the times can be met, costs and so forth. It is all
done as a risk management answer, effectively, in terms of who the preferred provider would be.
Informed Sources' view is that the GROCERYchoice initiative was a
'failure of process' on a number of levels. Mr Alan Cadd, Managing Director of
Informed Sources, argued that excessive haste and the need to meet an
'illusory' deadline contributed to poor decision-making and design:
...there appears to have been a misinterpretation of the
minister’s objective of having a GROCERYchoice website operating ‘as early as 1
August 2008’. That became ‘absolute implementation by 1 August’. In all of the
freedom of information papers that we have been able to obtain, this simple
policy interpretation has caused an unnecessary reduction in the time
available, leading to rushed decisions and poor design. Surely, a reasonable
approach would have been for a practical assessment of the time frame and for
the departmental head to approach the minister with alternatives to reconfirm
time frames against costs.
He also referred to an 'inappropriate culture when handling taxpayers'
money' at the ACCC, stating:
If there is one positive to come out of GROCERYchoice, it
should be that every government employee in every department henceforth
realises that the Westminster system is founded on a strong public service able
to suggest and recommend to ministers best courses of action and not merely
that they should spend the money if it is within budget. In our opinion, this
was the ultimate failure of process.
Responding to this criticism, the ACCC suggested there was a degree of
hypocrisy in Informed Sources' willingness to tender for an initiative that the
company believed was 'fundamentally flawed' and not worth pursuing as a public
policy objective (see Informed Sources' comments on the effectiveness of
GROCERYchoice in chapter 8):
I find it a little bit hypocritical for these people to come
in and say that we should learn on what they regard as folly when they were
more than happy to put in a bid and take the money for what they considered was
folly. I find a certain—I would not want to say lack of integrity, but it is a
bit hard to join the dots there when we are being accused of one thing and yet
the company accusing us were going ahead more than happily in putting in a bid
for what they think is a nonsense and a folly, and they were more than happy to
take taxpayers’ money if we had chosen them.
Informed Sources criticised the ACCC's tender process as 'the most
rushed and frantic assessment process of something as significant as this that
we have ever been involved in'.
It appeared that the ACCC 'did not know what they were going to do, and that
was reflected in the RFQ (request for quotation)':
All we had to do was provide the data to them. It was not in
any way clear about what the baskets were and what the collection points were.
We had an almost ridiculous circuitous argument with them. They asked, 'Where
have you got staff?' And we asked, 'Where do you intend collecting this data?' They said, 'We don't know yet.' I said, 'Let us see where you are going to
collect this data, what supermarkets you are going to collect this data in, and
then we can answer your questions about field force.' But that never
transpired. That was right up until days before the decision was made.
Informed Sources stated that its bid for the contract, despite being the
cheapest, had included a normal 40 per cent mark-up, and that based on the
company's previous track record (including data collection for the introduction
of the GST), there was no reason for the ACCC to doubt that Informed Sources
was capable of delivering on the contract:
We were so confident with our ability and indeed with the
prospect that Retail*Facts would not be chosen because of their Woolworths
affiliation that we had no reason whatsoever to drop our
The apparent haste with which the ACCC designed and tendered for the
GROCERYchoice data collection was also criticised by Associate Professor Zumbo:
That is just astounding ... Was the government ever told that
their haste would cost taxpayers that additional $2.7 million? How long was the
delay: was it a week, two weeks, three weeks? ... I just cannot believe that the
haste can justify the huge additional expense ...
Use of a separate field force
The ACCC's key concern in its assessment of the two bids ultimately
hinged upon the issue of recruitment of a data collection field force. Informed
Sources' submission drew upon the ACCC's tender evaluation documentation
(obtained under the Freedom of Information Act 1982) which suggested
that Retail*Facts won the contract primarily on the basis that it would be able
to use its existing team of data collectors, whereas it was too risky to engage
Informed Sources given that they were proposing to recruit an entirely new
field force. Informed Sources argues that this decision effectively glossed
over the crucial issues of confidentiality and anonymity:
The Informed Sources’ approach was to deploy a completely
independent field staff team specifically employed and appropriately
constrained with confidentiality provisions to ensure no unintended signalling
of the survey to watchful retailers or suppliers. The winning tender’s approach
was favoured (at least in part) by the ACCC panel because it made use of existing
staff. Many of these Retail*Facts staff would have had long term relationships
in the retail industry and indeed could have had dual or multiple working
relationships and responsibilities. A merchandiser who worked in a supermarket
for a supplier who now works for Retail*Facts simply can not turn off the
existing friendships and working relationships built with the supermarket and
the supplier over many years of service. “Chinese walls” in this case would be
impossible to police and leakage of GROCERY Choice survey details highly
Conversely, the Informed Sources’ approach would have seen a
dedicated team whose job it was to avoid detection with no crossover of
At the hearing, Informed Sources stated that, as well as dispatching a
completely separate field force, further measures would have been put in place
to ensure confidentiality:
We would have also clouded the products that they were
collecting with non-collection products so that they would not have been able
to determine which products were available. We also would have probably done
some random collections at other times during the month, again, to try and
confuse the issue. If these people were only being dispatched once a month then
that would be too big a signal. All of those audit type provisions are just a
natural way of doing business for Informed Sources.
Asked to respond to Informed Sources' claims, the ACCC stated:
We made what we considered to be a well-informed judgment ...
Even today I do not think anything Informed Sources have said would change our
concern over whether they had the ability to actually get the workforce on the
ground in the time they had suggested.
Senator Xenophon questioned the ACCC on whether Informed Sources'
previous track record was taken into account when assessing their GROCERYchoice
tender. The ACCC replied:
Definitely. We would not have put as much work into assessing
them, we would not have invited them back and we would not have asked the
supplementary questions if we did not feel that on one level they were
technically capable of doing the job. We went to those extra steps because of
that. There is a notion that we did not go a bit further. We could have just
looked at the initial proposal and said it is going to be a problem because
they did not have the people on the ground. We could have gone straight to
Retail*Facts. But we did not—and that was because of our relationship.
However, the track record of Informed Sources was ultimately only one
aspect of the risk judgment made by the ACCC in relation to its tender
When we get the tenders like that, we cannot sit there and
just say, ‘Okay, we have all these doubts, so we’ll run with somebody’s track
record.’ If in six weeks or two months time they were not able to provide that
work, that would be end of my job. The thing is that you sit there and you have
to make those judgments in terms of the information in front of you. You can
quantify some risks. Most risks are more a qualitative judgment.
The ACCC also assured the committee that Informed Sources' comments in
relation to the GROCERYchoice data collection tender would in no way prejudice
any future tender bids or arrangements with the ACCC.
Confidentiality and conflict of
The committee questioned the ACCC about Retail*Facts' simultaneous data
collection contract with Woolworths, the safeguards in place to prevent any
inappropriate disclosure of information, and the potential for conflicts of interest
with such arrangements. Acknowledging that it would have been a serious concern
if the information collected for the GROCERYchoice website was being leaked to
Woolworths, the ACCC said that Retail*Facts had provided confidentiality
undertakings for each of their data collectors:
It is not realistic to think, ‘If someone else is using
somebody to do something then we will not.’ That is why we have safeguards and
obligations in our contracts about confidentiality and so forth. It would
almost be inevitable that some of the same data was being collected. Given we
are collecting across 500 grocery items, there would be some commonality but
only some in the sense that Woolworths or whoever else would be interested in
some of the same items and some different items.
The committee questioned Woolworths about the nature of the data
collection activities contracted out to Retail*Facts:
...they provide a backup mechanism to our stores that do price
checking with their local competition. So they have a range of stores and a
range of different baskets that our data collection guys ask them to go out and
do price checking on. They also do other work for us, like compliance checking
to make sure that stores are putting the right tickets on the right products
with the right specials on the right day of the week ...
...there are only a few companies in Australia that specialise
in that sort of work, obviously, and there are only a few who do it very well.
You want to get it right, because if they give you the wrong price and you set
your price wrong then you are out in the marketplace and your customer misses
out. I could only assume that they have in place the right sort of framework to
be able to service multiple clients with the right confidentiality. We
definitely demand it of them when they are doing work for us. If any supplier
is doing work for us and a major competitor we have got all the right
contractual arrangements in place, obviously.
Woolworths also stated that it had not been aware that Retail*Facts had
been doing work for the ACCC's GROCERYchoice website. Woolworths was not
necessarily surprised, however, that Retail*Facts had also been engaged by the
ACCC given that there are few companies in Australia that undertake data collection
Mr Robert Hadler, General Manager of Corporate Affairs at Coles, said that in
his view it was 'unusual' for the same data collectors to be doing price
collecting for both Woolworths and the ACCC.
Mr Andrew Hall, Director of Corporate and Public Affairs at Woolworths,
I do not know whether I would say it is unusual. Again, I
would probably just put it in the context that the value of our contract with
them is far less than the value of what I heard the ACCC was spending on them.
Given the size of the price monitoring that I know they would have to have
undertaken already for GROCERYchoice 1, one would assume that they were using a
workforce far in excess of the people that they were using for us.
Senator Xenophon questioned the ACCC further on the issue of
Senator XENOPHON—But would that contractual obligation
also say, ‘We don’t want you collecting data for Woolworths at the same time’?
Mr Cassidy—No, we did not impose that sort of
Senator XENOPHON—Do you think you should have?
Mr Cassidy—No, I do not think that is commercial
Senator XENOPHON—Did the ACCC review the Retail*Facts
data collection processes—for instance, did the ACCC ever accompany Retail*Facts
teams during data collection runs?
Senator XENOPHON—Do you think you should have?
Mr Wing—No, we contracted people to do this work.
Senator XENOPHON—I am not sure whether I am missing
something here. You have the same team collecting data that could have
conceivably collected data for both Woolworths and GROCERYchoice and you do not
see any potential conflicts of interest there?
Mr Cassidy—Yes, and that is why we had confidentiality
requirements in the contractual arrangement.
Senator XENOPHON—Is there any way that the ACCC could ever
find out if there was any leakage of confidential information by Retail*Facts
to Woolworths? How would you know?
Mr Cassidy—That is a good question. Basically, what we
want to protect is what was in our basket. Over a period of time of running the
website if we started to suspect that the prices on our baskets were being
manipulated then we would start to wonder how the information as to exactly
what is in our baskets got out. In the time we have been running the website,
we had no indication of that and we were crossmatching the data looking for
outriders and for data which did not seem to be consistent. We saw no evidence
that there was any manipulation going on or that any information had leaked.
The ACCC stated that the majority of collectors for GROCERYchoice were
not used to collect price information for Woolworths:
There were a very small number of exceptions to this in
remote regional areas. However, in these limited instances the price
collections for the ACCC and Woolworths were undertaken in different weeks and
were never performed in the same store.
Price collectors had access to the ACCC's list of products for only two
days. They would download the product list using a personal digital assistant
(PDA) network the night before the price collection task and access to the list
would be removed following completion of data collection.
The ACCC's contract with Retail*Facts also specified that 'all internal
control procedures, processes and practices would be open to ...
an agreed audit test'.
When asked whether any in-field checks had been carried out, the ACCC
responded: 'we never got to that point because we did not see any evidence of
anything being wrong with the data'.
The ACCC explained that it undertook a desktop analysis of the Retail*Facts
... we were crossmatching the data looking for outriders and
for data which did not seem to be consistent. We saw no evidence that there
was any manipulation going on or that any information had leaked.
Associate Professor Zumbo commented:
The fact that they included an audit provision is good audit
practice ... It is disappointing that they did not at any stage undertake that
audit. You do not have to check all the data, just spot checks.
He also raised the potential for Retail*Facts to have 'made a killing on
If you have the same data collection team collecting for
Woolworths and Woolworths is paying you for that, and then you have the same
data collection team collecting for GROCERYchoice, and the government is also
paying you for that, you are killing two birds with one stone—you are getting
paid double for doing the same thing.
Giving evidence to the committee, Retail*Facts argued that its data
collection offer to the ACCC was one of complete integrity and transparency.
Retail*Facts had disclosed its existing relationships with Woolworths and ALDI
and had listed them as referees in the tender documentation. Retail*Facts also
highlighted the confidentiality undertakings signed by its collectors and
explained the systems in place to ensure data confidentiality:
... we developed proprietary systems to provide specific
product information to the price collectors and had that information available
on a limited time. In most instances it was no more than 48 hours when that
information was then taken away from their identification. Also to ensure
confidentiality, specific and separately designed databases were used for each
customer ... The notion that there was one database—that there was a price
collector in a store collecting across a multiple number of our customers—is
absolutely wrong. Every price collection that was undertaken was undertaken in
a dedicated way. By way of explanation, every customer has different price
audit requirements in relation to products, timings and the specific stores
that are required. So there is no commonality apart from the fact that they are
Retail*Facts described its extensive internal data validation processes,
including its own 'mystery' audits, undertaken monthly by a supervisory team on
a minimum of 10 per cent of stores to review the data collected.
Retail*Facts stated it was unaware of any in-field audits undertaken by the
The inference that Retail*Facts could have undertaken 'dual collecting'
for both the ACCC and Woolworths was staunchly rejected as 'ridiculous':
It not only shows a lack of understanding but a complete
disregard for the way Retail*Facts does and will continue to do business, both
with integrity and transparency.
A point that supports this is that throughout the 11 months
that Retail*Facts conducted the price collections for the ACCC we visited some
6,255 stores across Australia and we collected details on approximately
2,400,000 products, which totalled, for the record, nearly 12 million at the
points. It also should be noted that during the price collection process,
throughout this massive undertaking, there was not one instance of dual
collecting presented to us or to anybody that I am aware of. We are very proud
of and would put on record the job we have done with the ACCC.
When asked whether the same field force undertook the data collection
for both the ACCC and Woolworths, Retail*Facts responded:
Mr Marshall—We did not use a completely separate field
team. The point I would like to make, though, is that the way our business
operates is that every activity that was undertaken for the ACCC, or for any
price audit, is what we call a dedicated activity. That particular price audit
person would be in the store and only operating for that particular customer on
that particular day.
Senator BARNETT—Was it the same field force?
Mr Marshall—There would be instances where some people
would be collecting on behalf of the ACCC and those same people, in a different
situation—a different circumstance—and different stores, may be collecting on
behalf of Woolworths. The point I would also like to make is that those persons
do not have the knowledge of who they are collecting on behalf of.
Retail*Facts also stated that the ACCC had queried 0.0001 per cent of
their results (around 50 to 100 products) per check.
Potential for 'gaming' the basket
In its advice to the Minister in February 2008, the ACCC acknowledged
the potential for problems when price surveyors are sent out into the field.
To alleviate risks, the ACCC proposed to:
... liaise closely with the price survey firm to ensure that
price surveyors are thoroughly trained and that adequate and comprehensive
contingency plans are in place ... The ACCC would need to ensure that data
problems are dealt with appropriately (e.g. the goods are not on the shelf, or
are a different size) and that surveyors maintain confidentiality and are not
'followed' by supermarket representatives (which is a common problems for this
kind of work).
If it is true that Woolworths came out on top most of the
time, that should spark questions with the ACCC about, perhaps, the basket of
goods they were putting together or the methodologies that were being used ...
One of the problems with the ACCC site is that it only looked
at a basket of goods of just under 45 items ... I suggest it was quite easy to
game that basket. It is easier to work out what is in the basket of 45 items
than it is a basket of 1,500. You could argue that, if you had a basket of
1,500 or 5,000 and supermarkets want to game those prices, that could be in the
interests of consumers.
Regarding the secrecy of the ACCC's basket contents, NARGA commented:
It is my belief—I have no evidence of this—that people other
than the tight circle would know what that basket was, if not in its entirety
at least on some of the items. Very simply, as a retailer you just had to stand
beside the person collecting the data and you knew that it was 750 gram-packets
of Weet-Bix that they were taking the price of. You could not keep it secret
Associate Professor Zumbo also drew attention to the potential for
gaming or manipulation of the basket of goods, while also pointing out the
'Catch 22' situation were the basket's contents to be rotated too often:
If it was rotated all the time, that would have provided some
measure of feeling that perhaps there was some anonymity. But if at any point
the rotation stopped and there was the same basket from month to month, it
would not have taken long for the industry to know what was going on,
particularly given that Retail*Facts also collected for Woolworths ... The other
problem is: if you keep rotating the baskets, you are not comparing like to
like from month to month, so there is a downside to rotating the basket too
often. If you do not rotate it enough, they game the system; if you rotate it
too much, consumers do not have a point of comparison. That is the fundamental
flaw in the design of the ACCC website.
The committee has serious concerns about the thoroughness of the ACCC's
evaluation process for the GROCERYchoice data collection contract. The time
pressure that the Government placed on the ACCC to launch the website clearly
led to hasty decision-making and little consideration of the potential saving
to the taxpayer of $2.7 million (the cost differential between the two
data collection bids).
It appears that at least $2.7 million could have been saved if the
Government had been more flexible and kept its eye on the ball. The launch date
for the website was arbitrary and politically motivated.
While not suggesting a lack of integrity on the part of Retail*Facts,
the company that won the contract, the committee is disappointed by the ACCC's
apparent indifference to the risks inherent in Retail*Facts' simultaneous data
collection activities for Woolworths.
2.96 The committee recommends that the Commonwealth Auditor-General
investigate the tender process undertaken by the Australian Competition and
Consumer Commission in relation to the data collection contract for the
The ACCC's decision not to undertake any in-field checks of
Retail*Facts' price collection, as authorised by the contract, is particularly
concerning to the committee. This lack of due diligence on the part of the ACCC
leaves open the possibility that the integrity and secrecy of the GROCERYchoice
data may have been compromised.
The committee recommends that the Australian Competition and Consumer
Commission take more care in the future to monitor and assess the performance
of contractors that undertake data collection on its behalf.
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