Australia’s regulator is looking into claims of Woolworths and Coles “land banking” by Reuters

SYDNEY (Reuters) – Australia’s two dominant grocery chains have declared interests in more than 150 unrealized development sites, the antitrust regulator said, adding it was investigating whether “land banking” was harming competition in the sector.

The Australian Competition and Consumer Commission (ACCC) has said Woolworths and Coles, which together sell two-thirds of the country’s groceries, are effectively an oligopoly and is looking into the effects of their stranglehold on supermarket real estate.

The regulator has received comments from market participants concerned that food giants are buying up land to prevent rivals from acquiring it, which “creates or increases barriers to entry or expansion”, it said in a report intermediate on supermarket prices published on Thursday.

A final report will take place in February 2025.

The land banking investigation reveals another element of public, government and regulatory pressure on the two companies, which have faced intense scrutiny during two years of rising energy, mortgage and food costs.

The federal government said it would introduce a mandatory code of conduct covering how major food retailers treat suppliers, while the ACCC sued both companies on September 23, accusing them of deliberately raising prices for to attract buyers with false discounts.

Woolworths and Coles told the ACCC in price assessment filings that they could hold parcels of land for long periods because of difficulties in obtaining planning permission, construction delays and slower-than-expected population growth, the regulator said.

The ACCC added that it had not formed a view on the possibility of buying land for future use in the sector, but that it would consider the matter further before the final report.

The regulator says that in the current context, land banking occurs when a supermarket buys land without the intention of developing that land or earlier than necessary to develop that land and/or to block competitors from developing the land in these locations.

Woolworths, the No. 1 grocer, was said to have interests in 110 sites for future supermarket use, while No. 2 player Coles had interests in 42 sites. He did not specify what stage of development the sites were in.

Australia’s third-biggest grocer, Germany’s ALDI, had 9 per cent of the grocery market after two decades and just 13 potential sites, the ACCC said.

“Our preliminary view is that Coles and Woolworths have competitive advantages in acquiring new sites as they may be the most attractive tenants for suitable sites and have the financial ability to outbid other potential tenants,” the interim report said.

“We consider whether this could have implications for barriers to entry and expansion for competitors, including smaller, independent supermarkets.”