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Jul 28, 2011

Planning used to entrench ‘duopoly’

Just about every politician and consumer advocate with a spare soapbox is on it railing about the Coles/Woolworths duopoly and how it wrecks competition in Australia. The theory is that these two dictate to the market through sheer volume of trade, thus calls for limitations on their size are warranted. In reality in a competitive market place there is no room for the state to start dictating market share, consumers will do that for you.

If they are ripping off consumers those shoppers will go elsewhere, unless there is no alternative to go to. In reality these two are at war for market share, but if there is little in the way of other competition, perhaps there are reasons for this other than predatory pricing. It seems that this is showing in a news item today.

Westfield is opposing the development of an Aldi complex at Taigum on Brisbane's north side in the Brisbane District Court. Council approved Aldi's application for the store subject to conditions. Westfield’s closest development is two suburbs away at Chermside but Westfield argues that the Aldi store would "unduly impact on the other retail development in the area:"

The documents filed by law firm Minter Ellison on behalf of Westfield also claim there "is no demand in the area for the proposed development" and it would create "unacceptable traffic impacts."

"The application does not incorporate sufficient car parking on the land," reads the document.

"Unacceptable traffic will be generated by the proposed use into Roghan Road and Handford Road and the proposed access arrangements for the development into other streets are not acceptable.”
While some of the more naïve among us, and those who seem to be against any development good or bad, may applaud Westfield’s concern for the civic amenity, there is in reality no doubt that this constitutes anticompetitive behavior. While critics tend to concentrate on predatory pricing as the issue, the reality is, that planning regulations create the situation where a major retailer is able to stop or delay the arrival of a competitor.

Recently in this area, a developer had to wait for two years to get council approval for a shopping centre on the western side of the river, which is regularly cut off by floods. Residents have been urging this development for years. Looking at this it is little wonder that competition is sparse, given that millions were invested in land, market research, and building plans etc. You would need to be pretty determined just to put up with this crap.

On an SBS Insight program, “Going Shopping,” this issue was debated and some aspects of anti-competitive government action were brought out by Graeme Samuel, Chairman of the ACCC and Craig Emerson, the Minister for small business. Transcript Here. Some of the more interesting comments were as follows:
GRAEME SAMUEL: What becomes of concern to us is if there are barriers to entry or expansion by other players. For example, until recently, there was a major barrier to expansion by the IGA group, by Franklins, by Aldi, indeed by Cosco in terms of locating site where they can open stores. …

CRAIG EMERSON: …. But when you have such restrictions such as centers policy, which basically say the only place you can set up a retail outlet is in a big shopping centre and it's against the law to take on that competition anywhere else, that is anti-competitive. …

CRAIG EMERSON: Anti-competitive elements in the zoning laws. That is where people use the zoning laws, sometimes very frivolously to just object and object and object. This could be bigger players or smaller players, jam the system up. Some one might be saying I want to set up and take on this other outlet and they can't because it goes to court, there are appeals and it goes on and on. It is all nothing to do with amenity, with traffic management. It's all designed about someone who is there, saying, "I don't want competition". Who loses out of that? Consumers.
While the government and the press blame the two main retailers for the lack of competition it is mainly caused by the difficulties caused to potential competitors by their own idiotic interference in the market. The answer is not more regulation, the answer is for them to get the hell out of the way and let natural market forces sort the whole mess out.

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