The Government has reviewed the operation of the Code. The review included assessment of research and industry trends and was informed by feedback from stakeholders, including:
- on the merits of maintaining unit pricing regulation through the Code or allowing it to sunset; and
- ideas for how the efficiency and effectiveness of the Code might be improved.
Extensive consultation was undertaken to inform the review, including through:
- the release of a discussion paper seeking feedback on the operation of key provisions in the Code and changes in the supermarket sector (released for consultation between 20 November 2018 and 28 February 2019);
- an online consumer survey attracting 3,733 responses (results can be found under 'Related documents');
- receiving public submissions (see below) and meetings with 22 stakeholders including consumer representatives and businesses/their representatives.
The Government will remake the Code without substantive changes and before its scheduled sunset date.
The Australian Competition and Consumer Commission (ACCC), in conjunction with state and territory fair trading regulators, has recently conducted an education campaign aimed at improving consumer awareness of the benefits of unit pricing.
The ACCC will review and update its guidance on unit pricing displays to take account of some of the feedback raised in submissions to the review, which will assist businesses looking to enhance their unit price displays.
Key findings of the review
The Code is operating efficiently and effectively in line with its primary objective of empowering consumers to make informed decisions about grocery purchases through greater price transparency.
The Code currently allows consumers to compare unit prices for the vast majority of grocery items and at the retailers where they buy most of their grocery supplies and when they make a large number of decisions under time pressure. It also promotes price competition between these grocery stores, while being well targeted in minimising regulatory costs for small retailers.
Evidence from academic literature indicates consumers use and benefit from unit pricing because it supports value for money assessment, helps to simplify consumer decisions and ultimately saves consumers time and money.
Consumer surveys and submissions provided further support for the benefits of unit pricing and there was broad support from stakeholders for the Unit Pricing Code to continue.
Feedback from businesses indicated that there are low ongoing regulatory costs associated with continuing to provide unit pricing in accordance with the Code, following significant initial costs of adopting unit pricing.
Amongst the more substantive suggestions for amending the Code were:
- larger print on supermarket shelf labels to ensure the unit price is noticed and used more often; and
- extending mandatory Code obligations to other retailers including:
- smaller grocery stores;
- specialty retailers that sell a limited number of groceries; and
- other types of retailers, such as hardware stores and pharmacies.
In examining suggestions, the Government obtained feedback from consumer groups and businesses/their representatives (in grocery and other sectors) about potential price comparability benefits for consumers and regulatory costs for retailers.
The Code requires unit prices to be prominent.
Consumer representatives suggested that unit prices are not sufficiently prominent to be easily seen and read and have sought greater specification of size requirements.
Contemporary Australian research has examined the effect of increasing the size of unit price print on supermarket shelf labels from those commonly used in Australia. The research did not demonstrate that consumers noticed the larger unit pricing information more or changed product selection decisions as a result.
In this context, the existing Code requirement remains an efficient basis for regulating unit pricing displays. It enables flexibility for the size of print to be tailored to the environment (e.g. to different online devices or store formats) and balances the way consumers use unit price information against additional regulatory costs, particularly where larger shelf labels might otherwise be required and there is limited space on existing shelf edges.
Where the ACCC has concerns about the prominence of unit prices, it is able to consider compliance and enforcement action.
Extending mandatory Code requirements to other grocery retailers
The Code currently applies to any retailers that sell a minimum range of 11 food-based staple grocery items (bread, breakfast cereal, butter, eggs, flour, fresh fruit and vegetables, fresh milk, meat, rice, sugar, and other packaged foods) either in a large store (>1000 square meters) or online; as well as any other retailers that sell the 11 items and voluntarily display at least one unit price.
Extending the mandatory coverage of the Code to a wider set of retailers was suggested to provide greater price transparency for consumers, allowing them to more easily compare the value of goods within and between retailers.
The parameters built into the Code recognise that most household spending on groceries occurs in major supermarket chains and large independent stores (approximately 86 per cent of industry revenues are generated by the five largest supermarket chains). These stores maintain a large product range, such that consumers make rapid value judgements about a large number of goods packaged in different sizes.
By comparison, the value of unit pricing to consumers shopping in small grocery stores and specialty retailers (who sell a very limited number of groceries) is more limited. This is particularly the case because there are fewer items in each grocery category to select from and because consumers often shop at such stores for convenience (e.g. to top-up items such as bread and milk) or to obtain a premium product.
The existing policy parameters remain an appropriate balance between promoting greater price transparency and competition amongst larger grocery retailers and enabling small retailers to comply with the Code. Feedback suggested that changes to IT platforms, software and label replacement costs remain a significant concern for smaller retailers.
Where small grocery retailers decide to voluntarily display at least one unit price (having regard to the preferences of their customers and their ability to absorb regulatory costs), they will continue to be bound by the Code as long as they stock the minimum range of 11 food-based grocery items.
Future consideration can be given to whether the Code should apply to grocery sales by specialty retailers if such retailers gather a more substantial market share. While some online retailers are selling grocery items, this has tended to be a limited number of pre-packaged non-perishable goods (e.g. breakfast cereals or detergents). The cost of transport refrigeration is likely to be a significant barrier to further product range expansion but, where adopted, may bring such retailers within the requirements of the Code.
Some submissions suggested that consumers could benefit from unit pricing being applied to other retailers such as pharmacies and hardware stores.
In examining product ranges available in such retailers, it was noted that there are a large number of single unit or specialty items with limited substitutes, for which a mandatory requirement to provide a unit price would have no or very limited price transparency benefits.
In contrast to groceries, most consumers spend a smaller proportion of their incomes in these stores, make far fewer purchasing decisions and may rely more on prior research or advice because their purchases are often driven by the need to fix a problem.
In the hardware sector, it was also noted that stores typically maintain separate pricing arrangements for trade customers.
In these respects, there do not appear to be significant consumer benefits from imposing mandatory unit pricing in these sectors. Some businesses/their representatives in the pharmacy and hardware sectors highlighted the potential for significant regulatory costs ranging from updating software and replacing shelf labels and, in some cases, replacing existing shelving, which can be quite different from supermarkets.