Aldi, the German discount supermarket chain, has recently opposed the inclusion of divestiture powers in Australian competition laws. The divestiture powers would allow authorities to force companies to strip themselves of assets, such as stores and brands, if they gain too much market power. Aldi’s opposition comes as the Greens party and the Coalition work on legislation that would give the consumer watchdog and the court the ability to break up large companies in order to tackle high market concentration.
During a Senate hearing on April 11, Aldi Australia CEO Anna McGrath expressed her concerns about the proposed divestiture legislation. She stated that the company is not supportive of divestiture due to the risk of unintended consequences. McGrath also highlighted the potential risk of increased grocery prices for consumers if divestiture were to take place.
Currently, Aldi holds 10.5 percent of the market share in Australia, with 590 stores across the country. However, the market is dominated by Woolworths and Coles, who together hold a total market share of 65 percent. These two major corporations have faced criticism for alleged price gouging, leading policymakers to develop new proposed policies such as a mandatory code of conduct for the sector.
Aldi Managing Director Jordan Lack emphasized the need for consolidation of different codes in the sector and a reduction in administrative burden for market participants. Lack stated that regulation should provide safeguards for suppliers, consumers, and retailers alike, while also reducing red tape and costs associated with implementing such a code.
One major issue hindering Aldi’s expansion in Australia is zoning. CEO Anna McGrath explained that zoning restrictions prevent the company from establishing new stores in many regions. Despite significant investments in its supply chain and distribution network, Aldi has been unable to penetrate certain catchments within major cities due to inappropriate zoning. McGrath also revealed that Aldi currently has no plans to enter the Tasmanian market due to the distance and complexity of the supply chain.
In conclusion, Aldi has declined the proposal to include divestiture powers in Australian competition laws. The supermarket chain believes that divestiture would bring unintended consequences and potentially increase grocery prices for consumers. Aldi also faces challenges in expanding its presence in Australia due to zoning restrictions and the complexity of the supply chain. The company calls for consolidation of codes in the sector and a reduction in administrative burden to facilitate growth and competition.
