to Associate Professor Frank Zumbo from the University of New South Wales,
shoppers in metropolitan regions tend to travel no more than five kilometres to
purchase supermarket products.
Associate Professor Zumbo stated in his submission to the Committee that:
of consumer behaviour is crucial to configuring an effective consumer-focussed
website; however, it's understood no modelling was undertaken by the
Government, Treasury, the ACCC or CHOICE to ensure GROCERYchoice would be
relevant to the Australian public:
Senator XENOPHON—Has any
modelling or analysis been done by Treasury in terms of the benefit to
consumers from giving consumers full price transparency?
that I'm aware of.
questioning was followed up by Senator Barnett during the Committee hearing:
Senator BARNETT—Do you have any
evidence to suggest that it would work? There must have been some document,
some modelling undertaken, some information and research undertaken by the
department so as to say to the government, ‘Yes, this is going to work.’ Where
is that evidence? Can you identify it for us?
response to questions on notice we provided some documents which had been
developed by CHOICE which were made available to government, to the best of my
recollection, in August-September 2008 setting out a proposal for a CHOICE-run
Senator BARNETT—I am not
talking about the CHOICE—
are talking about the original—
Senator BARNETT—The original
one, taken by the ACCC.
obviously at the time—it would have been in the lead-up to the 2008-09 budget—provided
the government with our advice. In terms of the question of whether we
undertook detailed modelling, not being there at the time, I guess it would
have been that we did not, and there would have been no detailed economic
modelling undertaken on it. That is probably fair to say.
Mr Chisholm—To the best of
our knowledge, no.
Senator BARNETT—You are saying
that there is no evidence, no modelling, that you just sort of came up with the
idea. You do not just spend $13 million over a four-year period and put it in
the budget and say, ‘We hope it is going to work.’ There must have been some
basis for that. Can you please advise the committee of the reasons for it and
of the evidence or modelling you relied on to put forward a budget proposal of
some $13 million over four years.
Mr Martine—If you are
talking about quantitative economic modelling, where one looks at a proposal
and undertakes an assessment of its impact on consumers or prices, anything
like that, then the answer in this case is no, we did not undertake
quantitative analysis. Just sitting here today, I would probably scratch my
head trying to work out what sort of quantitative analysis you could undertake.
Senator BARNETT—What analysis
did you undertake, Mr Martine?
Mr Martine—Like all budget
proposals, in fact any proposals the government is considering, we provide the
government and the relevant ministers with our views and advice on the merits
or otherwise of the proposals under consideration. In terms of the original
GROCERYchoice website that the ACCC were to run, we did provide that advice.
Senator BARNETT—I think it
would be fair for one to assume that, if there were no modelling or business
plan—and there is evidence that apparently that was not undertaken—some might
argue that it is policy on the run or ill-conceived.
Committee was advised by the ACCC in its Answers to Questions on Notice,
provided on 13 November 2009, that:
effectiveness of a policy proposal would form part of the policy decision for
the ACCC stated that:
policy and the parameters of a project are made by the Government with advice
from appropriate government departments.
the commencement date provided to the ACCC by the Government was a policy
parameter and as
such it appears not once that the ACCC questioned or discussed with the
Government as to whether it could be extended. This means that adequate
planning and preparation for the website was not able to be done.
to collect the data were received from five companies, including Retail Facts,
who was successful in the tender, and Informed Sources.
Facts' quote for $4.669 million (excluding GST) was the second cheapest of the
quotes, but was $2.694 million greater than the quote provided by Informed
Sources, of $1.975 million (excluding GST).
ACCC's explanation of awarding the tender to the more expensive quote of the
two companies during the Committee hearings was:
Mr Cassidy—...while the
Informed Sources tender was lower in price than the Retail Facts tender, which
we accepted, we were under some time pressure to get the GROCERYchoice website
up and running and we did have some doubts as to whether Informed Sources was
going to be able to deliver, particularly on the data collection side, within
the time frame we were operating in.
time pressure were you under, Mr Cassidy?
government was keen for the website to be up and running as soon as possible.
were working with an indicative time of having the first collection done so it
could be released in early August.
was this discussion? You are talking about a six-week period to get it up and
the time the contract was let, there would have been about six or seven weeks
to do the surveys.
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?
It was a policy and we had a budget so we just ran within that.
ACCC went on to state that it did also not believe Informed Sources would be
able to prepare a field force team within the six-week timeframe, as compared
to Retail Facts who already had a field force in place.
Informed Sources did advise the ACCC that it would indeed be able to prepare a team
within the required timeframe:
Senator XENOPHON—Sure. But
weren’t you satisfied at the outcome of that subsequent supplementary meeting
with Informed Sources that they would be able to deliver within the time frame
that was requested?
Mr Pearson—We had no
doubts about their integrity, their process, the fact that they could do work,
because they are doing an extremely good job for us now with petrol. The risk
was too high for us, because if they could not do it—
Senator XENOPHON—So are you
saying that the reason that Informed Sources did not get the job, even though
it was $2.7 million cheaper, was based on a belief, notwithstanding that you
have said that they have a track record of doing a good job for the commission
and, I think, they were also responsible for undertaking the mammoth task of
price monitoring after the introduction of the GST?
Mr Pearson—They have done
a wonderful job for us. In fact, we signed another a contract with them either
in June last year or June this year. We extended our petrol monitoring for two
years. It was purely within that time frame and the fact that we believed that
they did not have the staff ready to put on the ground ....
Senator XENOPHON—Can I go back a
step. The ACCC’s relationship with Informed Sources goes back how many
years—since the introduction of the GST?
Mr Pearson—A fair while.
Senator XENOPHON—About a decade?
Senator XENOPHON—Have they ever
let you down before in terms of their commitments to the ACCC?
Mr Pearson—Not that I am
Senator XENOPHON—I suggest to
you that the answer is no. Someone’s track record would be important to you in
terms of assessing a tender and assessing their ability?
Mr Pearson—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. So that did come to bear and we did look at it.
Senator XENOPHON—Although they
previously had an unblemished record with the ACCC, you were holding back
because you did not think they could deliver. That is effectively what
happened, that is the reason why they did not get the tender, but I still do
not understand the basis on which you made that decision.
Mr Pearson—We just did not
believe they would be able to get sufficient well-trained staff on the ground
by the August date. That was our concern. We had to weigh up the fact that we
had one potential operator who can confirm they had those staff and another one
that said they could train the staff in time. We did not believe that time
frame would be sufficient.
Senator XENOPHON—I think this
goes to the nub of it: if a successful tenderer does not deliver the goods for
the ACCC, there would be contractual consequences. There would be a breach of
contract and you could potentially pursue damages against an entity that does
not deliver the goods. Also, that would presumably put a big black mark against
them in terms of any further work with the ACCC.
Mr Pearson—Yes, without a
Senator XENOPHON—Here is an
organisation that has a long track record of providing massive surveys, not
just on fuel but also on groceries, for the ACCC in the past. They have never
let the ACCC down before.
the question of cost, Senator Barnett during the Committee Hearings asked the
Chairman of the National Association of Retail Grocers of Australia,
Mr John Cummings, a retailer himself, how much a private company would likely
have paid for the same work to be conducted.
do you think would be more realistic?
would have thought that it would be well under $1 million.
undertake the work?
And that is not only collection of data but also interpretation of the data and
then setting price files.
initial bid was $4.669 million and subsequently it signed up at, I think, $5
million-plus. The Informed Sources tender was $1.975 million, and you are
saying that in fact it should be about $1 million or less to undertake that
sort of work.
is what I think private enterprise would be expecting to pay.
Cummings also advised the Committee that private enterprise would also likely
demand regular auditing, spot checking and reviews to ensure best practice;
however, no audits of GROCERYchoice were undertaken while it was operating.
addition to being significantly more expensive, Retail Facts already had a
contract with Woolworths when it took on the GROCERYchoice tender, and Retail
Facts' potential conflict of interest regarding the integrity of the data
collected was raised.
the fact that the contract referred an opportunity for an audit, such an audit
was never undertaken. What is your view about that, and should such a contract
ever have been signed up?
were always concerned about that, and we were always concerned about the data
collection and the integrity of that data, especially when it came down to some
of the smaller stores that were being gone into and having that price data
taken out of. One of our concerns there was, of course, a smaller store might not
have the entire range. If you take my particular instance, you have a larger
independent, or Coles or Woolworths, that would sit at somewhere around 22,000
or 23,000 SKUs. In my particular instance, we sit on about 16,500 SKUs. Seeing
as nobody knows what is in the prices that they are taking, if I do not range
one of those products and they come into my store, what do they actually mark
down? Do they take a larger size, a smaller size? Was that veracity ever
checked? Again you have that same problem if you look at a shelf label. Even
for one who is in the industry, when you go to short descriptions it is very
difficult to actually figure out what the short description stands for. Quite
often you have to go to an item number or a PLU to get what the actual product
is. There is a whole pile of issues in there that make the data collection
right. I want to go back to the initial website the ACCC was setting up, and I
have read your submission and some of the compelling arguments that you have
put. You have got 500 products, 600 supermarkets and 61 regions. Frankly, in
your view, was it ever going to work?
still cannot see what the relevance is of a product available in Merredin to a
product in Broome—which was the area that you are looking at. It would be like
travelling from Greece to London to do your grocery shopping in the afternoon.
the way it was designed was a fatal flaw?
Mr Cummings—I have no doubt
that the consumers who looked at it voted with their fingers and decided to go
away from it because it did not deliver them any meaningful information.
ACCC advised the Committee in its Answers to Questions on Notice that:
The majority of
data collectors engaged by Retail Facts to collect price information for the
ACCC were not used for the collection of price information for Woolworths.
There were a very small number of exceptions to this in remote regional areas.
went on to say that in these instances, price collections for the ACCC and
Woolworths were undertaken in different weeks and were never performed in the
Professor Frank Zumbo argued that the ACCC should never have been given
operational management of the website to begin with.
ACCC was the wrong body to give this website to. I believe it was poorly
planned in the sense that there was a lot of time pressure being placed on the
ACCC to deliver. I think haste is not a good thing, especially when we are told
that the ACCC spent $3.64 million on this website, which was completely wasted.
Limitations of GROCERYchoice
grocery price comparison websites appear to operate relatively well.
the United Kingdom, a privately-funded and owned company operates a grocery comparison
website which allows consumers to select items for the country's four leading
supermarket chains: Tesco, Asda, Sainsbury's and Ocado. One feature of the
website includes the opportunity to for users to place an online order based on
their search. 
Italian Government has set up a similar service for grocery price comparison,
whereby consumers can send an SMS from their mobile phone to check the average
prices of different foods in across the various regions.
in July 2009, Ireland's National Consumer Agency announced that it intends to
set up a grocery price comparison website with real-time information for
the usage of these websites is small or yet to be determined – it's estimated
around only 3 percent of the UK population use www.mysupermarket.co.uk
– its approach appears to be decidedly more user friendly and useful to
consumers in the information it provides.
ACCC and CHOICE cited difficulties with the supermarket chains as a reason for
the ineffectiveness of GROCERYchoice.
CHOICE's submission to the Committee:
to the Australian National Retailers Association, which represents companies
including Woolworths, Coles and Franklins, providing price data on a real time
basis is not realistic and would incur significant compliance costs:
Woolworths was resistant to the idea
from the beginning. They cited a range of issues from technology constraints to
trade practices breaches, all of which CHOICE was willing and able to address.
ALDI and FoodWorks were supportive and cooperative and while they cited
technology as a challenge, they were willing to find solutions and work with
CHOICE. Coles and Franklins were initially cooperative and open to the idea, but
became increasingly distant.
No retailer has
a centralised data system which records in real time the prices of grocery
items sold across the chain.
ACCC similarly stated in its July 2008 report, Report of the ACCC inquiry
into the competitiveness of retail prices for standard groceries, that the
head offices of Coles and Woolworths:
...set the shelf
prices for most of its products in each of its stores. It also sets promotional
prices, although not all stores necessarily have the same promotions at any one
time. The local store manager can reduce prices below the standard shelf price
in a range of circumstances including clearances of discontinued stock and
stock approaching its use-by date and as a response to local competition.
supermarket IT systems do enable checkouts to price in real time. Associate
Professor Frank Zumbo in his submission to the Committee stated that:
pricing information through their checkouts is in real time, the major
supermarket chains could provide real time pricing information to the public if
they chose to do so.
advocates supermarkets commit to full pricing transparency:
Given that they
have some of the most sophisticated IT systems that enable them to collect all
pricing information scanned through their checkouts, it is clear that the major
supermarket chains have the technical ability to implement full price
transparency through their own websites in relation to all products sold in
each of their supermarkets.
issue which added to the apparent irrelevance of the website for consumers is
that data appears to have been out of date before it was even released online:
The ACCC's version of the GROCERYchoice
website only provided a very limited monthly "snapshot" that was out
of date as soon as it is put on the website. As supermarket shoppers will
typically shop on at least a weekly basis, they want the most up to date
information possible about the cheapest local supermarket and products in their
Professor Frank Zumbo explained in his submission that:
In the ACCC's version of the
GROCERYchoice website, the products included in each month's survey were
rotated, which meant that consumers had no ability whatsoever to compare prices
month to month.
version of GROCERYchoice contained out of date pricing data and extremely
generalised information that failed to give consumers any meaningful data that
consumers could seek to rely on to help reduce their grocery bill. The key
failure of the ACCC's version of the GROCERYchoice website was that it failed
to assist consumers to find the cheapest individual local supermarket or to
find the cheapest individual products they may be looking to buy during their
next supermarket visit.
the 61 regions as set out by the ACCC's initial version of GROCERYchoice meant
that supermarkets hundreds of kilometres away, in some instances, were being
compared to each other.
state of Tasmania was broken up into three regions, for example:
Senator BARNETT—You can
understand their concerns, particularly in Tasmania where you had three regions
and you were comparing supermarkets in St Helens, Scottsdale and Launceston,
for example, which are up to 100 kilometres apart. In terms of the benefit or
merit of that to consumers it is, frankly, an absurdity.
ACCC advised the Senate Committee that:
Regions for the
GROCERYchoice website were determined using information from the Australian
Bureau of Statistics. Each region represented an aggregation of a number of
Local Government Areas.
as previously stated, shoppers tend not to venture further than 5 kilometres to
buy their groceries and as such this data became irrelevant.
the website did not detail which supermarkets had been surveyed, but rather
kept the details area-generic.
comparison, supermarkets employ an established practice that was not set to
cease under GROCERYchoice and which provide consumers with greater,
Coles, Aldi, Franklins and the thousands of independent grocery retailers
already spend many millions of dollars a year through print, radio and
television advertisements to tell customers which items on "special" represented the best value directly in the customer's area.
advised the Committee in its response to Questions on Notice that it alone
publishes 8 million brochures each week about its store specials and prices.
the intent behind the GROCERYchoice website was genuine, the practicality of it
in terms of its operations and its usefulness to consumers on a day-to-day
basis seems to have been an issue since its establishment.
these may have been identified and clarified had more time been allocated
towards the planning of the website rather than the rush in which it seems to
have been conceived, it appears that any grocery price comparison website will
not provide consumers with any additional useful knowledge unless it is
real-time, suburb specific, advertises the daily specials and lists all
products in store.
decision to close GROCERYchoice appears to have been rushed and without full
consultation by the newly-appointed Minister to the portfolio, Dr Craig
Emerson, with the website's new providers, CHOICE.
Minister Emerson clearly identified that the website in its current form,
without real-time, localised information, was not able to provide consumers
with relevant information, the Minister could have facilitated additional
dialogue between all supermarket chains and CHOICE regarding possible
improvements to GROCERYchoice before making his decision.
was raised during the Committee hearings that discussions have occurred to look
at establishing a similar website to GROCERYchoice; however, to date it remains
unclear whether this will eventuate.
to new OECD price data, food prices in Australia have increased 41.3 percent
since the start of 2000, so there's no question more needs to be done to
address these price hikes which appear to be driven largely as a result of a
market duopoly. Accordingly, a price comparison website based on real-time
information can only be part of the solution.
grocery price comparison website was considered initially because Coles and
Woolworths have such a dominant market share and it is this dominance which raises
the government wants to address high grocery prices, it needs to improve
competition in the groceries sector overall, by requiring supermarkets to
provide full price transparency to enable and empower consumers with pricing
information before they shop; by enabling greater entry to the market by
independents and small retailers; and by addressing geographic price
discrimination, predatory pricing and other anti-competitive practices.
That the government improves competition
in the groceries sector by requiring supermarkets to provide full price
transparency to enable and empower consumers with pricing information before
they shop, enabling greater entry to the market by independents and small
retailers; and by addressing geographic price discrimination, predatory pricing
and other anti-competitive practices.
That the system of dealing with tenders
by the ACCC be improved and more transparent given the curious and
unsatisfactory explanation given for why Informed Sources was not awarded this
tender on the basis of cost and its prior work with the ACCC.
That prior to any government-run or
government funded price comparison website being established in the future,
significant time be allocated towards planning, modelling and consultation so
to ensure effectiveness, relevance and requirements of such a website.
That companies providing bids for government
projects identify any potential conflict of interest and that they be required
to provide detailed information on how confidentiality and integrity of the
project will be adhered to. Further, that an ongoing audit of their work be
carried out at random intervals throughout the project, regardless of whether
an incident has first arisen to cause suspicion.
That the Trade Practices Amendment
(Guaranteed Lowest Prices – Blacktown Amendment) Bill 2009 is enacted, to deal
effectively with the anti-competitive practice of geographic price
Senator for South Australia
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