As supermarket chains increase their participation in sectors such as home improvement, petrol and liquor, these changes will affect market structures, competitiveness and consumer choice, Australian Competition and Consumer Commission chairman, Rod Sims told a CEDA audience in Sydney.
The national chains, Westfarmers and Woolworths, are increasing their participation through small acquisitions, Mr Sims said.
"When the major supermarket chains (MSC) acquire an independent player, they remove an alternative from the market, with potentially a different product range and service offering," he said.
"This reduces consumer choice, and competition is unlikely to be replaced by a chain or a new independent given the local and/or national entry barriers."
While the Australian Competition and Consumer Commission (ACCC) recognises that growth by the major supermarket chains has brought benefits to consumers, there is a risk that with only two major national chains, competition between them to offer lower prices and better service will be softer than it otherwise might be, Mr Sims said.
Because of these concerns, he said the ACCC has been paying increased attention to acquisitions in the grocery, liquor, home improvement and petrol sectors to identify which acquisitions require review and which raise competition concerns.
He outlined that in the past, there has been an informal and cooperative arrangement between the ACCC, Wesfarmers and Woolworths regarding the supermarket transactions.
"The ACCC is now actively engaging with Woolworths and Wesfarmers to expand these arrangements to cover a wider range of acquisitions and sectors. We are proposing improved arrangements that we hope will bring mutual benefit," he said.
"We believe the process can be streamlined. This can, however, only occur with appropriate notification, co-operation and upfront information."
Mr Sims also discussed the privatisation of the electricity generation industry in NSW.
"If privatisation achieves a competitive market structure, NSW consumers can benefit from lower electricity prices in the future," he said.
"While in the short-term, most consumers do not feel these prices, as they have retail contracts that protect them from the volatility, in the medium to long term, high wholesale prices do flow onto all consumers.
"The NSW Government is in a unique position and has a one-off opportunity to influence the level of competition in NSW electricity generation."
Mr Sims also said the ACCC needs to communicate its role more widely and effectively to the community.
"The ACCC must be an effective communicator on all issues. In terms of our role, approach to issues, and consumer communication in relation to competition issues," he said.
"An important role for the ACCC is to communicate the importance of competition in promoting the long-term interests of Australian consumers."
"Many people, for example, do not understand our role in a market economy. We are sometimes so focussed on the doing, that we do not always explain our actions and, as important, our achievements sufficiently to the public."