December 6th 2008

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Articles from this issue:

COVER STORY: Opposition tensions to resurface in 2009?

EDITORIAL: Left-liberals to dominate Obama Administration

GLOBAL FINANCIAL CRISIS: Disentangling the new world disorder

SUPERMARKETS: GroceryWatch is a white elephant

POLITICAL IDEAS: The realisable goal of property for all

STRAWS IN THE WIND: Giving to the have-mores / How long can Labor last? / Degraded educational standards / Future prospects

BANKING: The Medici — manipulators of money and soft power

REPRODUCTIVE HEALTH: Abortion increases risk of pre-term births

EUGENICS: The menace of eugenics, yesterday and today

MARRIAGE: US battle to preserve traditional marriage

CINEMA: Depraved film the symptom of a sick culture - the Coen Brothers' Burn After Reading

Australian Christian Lobby responds (letter)

Chechen terrorists (letter)

BOOKS: WARSAW 1920: Lenin's Failed Conquest of Europe, by Adam Zamoyski

Books promotion page

GroceryWatch is a white elephant

by Frank Zumbo

News Weekly, December 6, 2008
If GroceryChoice cannot provide consumers with regular, timely and specific pricing information about the cheapest individual supermarket in their local area, it should be shut down, argues Frank Zumbo.

The Federal Government's GroceryChoice website needs to be urgently fixed or shut down. With consumers having abandoned GroceryChoice, the website has become a white elephant and a waste of taxpayers' money.

GroceryChoice fails to excite consumers. With the visits to the website down to a bare minimum, it is clear that consumers see GroceryChoice as a waste of their time and have not returned to the website.

Consumers are quite savvy. They won't return to a website that fails to give them meaningful information they can readily use. Consumers want something new and original from GroceryChoice. To consumers, GroceryChoice provides only a general impression about "general" grocery prices across very large regions of Australia. Consumers already have a "general" (typically negative) feeling about grocery prices. What consumers want is specific pricing information that they can use to identify the cheapest products in the cheapest individual supermarket in their local area.

Out-of-date information

GroceryChoice fails to tell consumers which is the cheapest individual supermarket in their local area in a timely and regular manner. Instead, GroceryChoice only gives generalised, out-of-date monthly pricing information covering large regions of Australia.

GroceryChoice fails to survey all major supermarket stores. GroceryChoice surveys only 600 supermarkets Australia-wide covering 61 regions. This is an average of just 10 individual supermarkets per region. With all of the regions covering large areas of Australia, GroceryChoice's sample is far too small to generate any meaningful pricing information.

As the sample of individual supermarkets used is very small, the pricing information will be distorted even further if, for example, the particular Coles and Woolworths supermarkets used in the sample for GroceryChoice are not representative of the pricing structure used at other Coles and Woolworths supermarkets in the region. As Coles and Woolworths vary their pricing structures across their stores, the small sample size used in GroceryChoice is a fundamental flaw in its design.

The website fails to tell consumers that Coles and Woolworths charge different prices for the same products at their different stores. This is called geographic price discrimination and means that the major supermarket chains charge higher prices on products where there is lack of independent competition in the local area and charge lower prices where they are forced to do so by independents.

So when GroceryChoice says, for example, that Coles is the cheapest "overall" in a region, that does not mean that all of the individual Coles supermarkets are the cheapest in that region. Consumers are being misled by GroceryChoice as the information does not name individual supermarkets. As a result, consumers may not be shopping in the cheapest individual supermarket in their region.

GroceryChoice fails to separately identify the role of particular independent supermarkets in keeping grocery prices down. GroceryChoice gives the false impression that independents are more expensive, but this may not be true of the independent supermarket in the consumer's particular area. GroceryChoice is misleading consumers as they don't know the prices charged at individual independent supermarkets. GroceryChoice is also misleading as it generally lumps all independents together, despite independent supermarkets being of different sizes and having different pricing structures.

The website fails to give consumers any opportunity to compare prices from month to month. As products included in each month's GroceryChoice survey are rotated, consumers have no ability whatsoever to compare prices month to month. Not only are the numbers found on GroceryChoice so generalised and meaningless in the first place, but there is not even the ability for consumers to compare prices month to month, as each month's basket is different from the previous month's basket. As a result, the GroceryChoice methodology is random and unscientific.

Unless GroceryChoice is urgently fixed to provide consumers with regular, timely and specific pricing information about the cheapest individual supermarket in their local area, it should be shut down so as to stop wasting taxpayers' money.

The Federal Government needs to strengthen the Trade Practices Act to outlaw geographic price discrimination. This practice can be used by big business to drive out small businesses, to the detriment of consumers. The practice is outlawed in Canada and should be outlawed here.

Finally, the Federal Government needs to give Australian courts the power to break up large and powerful companies that use anti-competitive practices to drive out small businesses. Small business retailers keep big businesses honest and help deliver a better outcome for consumers.

The United States has long given its courts a divestiture power, which has been used in the past to break up oil and telecommunication monopolies for the benefit of consumers.

— Associate Professor Frank Zumbo, of the University of NSW School of Business, co-drafted the "Birdsville Amendment" to the Trade Practices Act, which outlaws predatory pricing. Queensland Nationals Senator Barnaby Joyce successfully put it through parliament in the dying days of the Howard Coalition Government.

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