Australia Regulator Reviews Claims of Woolworths and Coles ‘Land Banking’

By Byron Kaye

SYDNEY – Australia’s leading grocery chains have expressed interest in over 150 undeveloped sites, prompting an investigation by the antitrust regulator into whether their practices, described as "land banking," are harming competition within the industry.

The Australian Competition and Consumer Commission (ACCC) indicated that Woolworths and Coles, which collectively account for two-thirds of the nation’s grocery sales, operate as an effective oligopoly. The regulator is examining the implications of their control over supermarket real estate.

The ACCC received feedback from various stakeholders concerned that these grocery giants are acquiring land to prevent competitors from entering the market, thereby "creating or increasing barriers to entry or expansion." This finding was highlighted in an interim report on supermarket pricing released recently, with a final report expected in February 2025.

This inquiry into land banking adds to the mounting pressure from the public, government, and regulatory bodies on these companies, which have faced scrutiny during periods of rising energy prices, mortgage costs, and food inflation.

The federal government plans to implement a mandatory code of conduct governing the treatment of suppliers by large grocery retailers. Additionally, the ACCC has taken legal action against both Woolworths and Coles, alleging that they intentionally inflated prices to attract customers with misleading discounts.

In their responses to the ACCC’s pricing review, both companies explained that they might hold parcels of land for extended periods due to challenges such as obtaining planning approvals, construction delays, and slower-than-anticipated population growth.

Woolworths stated it would carefully review the ACCC report and provide additional input in the coming months. The ACCC clarified that it has yet to determine if land banking is indeed taking place, but it will explore the matter further as it prepares its final report.

According to the ACCC, land banking by supermarkets occurs when they acquire land without a clear intention to develop it promptly or to obstruct competitors from developing in those areas. The regulator reported that Woolworths has interests in 110 sites earmarked for future supermarkets, while Coles has 42. The specific stages of development for these sites were not disclosed.

In contrast, Germany’s ALDI, the third-largest grocery competitor in Australia, holds only 9% of the market after 20 years and has just 13 potential sites, according to the ACCC.

The interim report indicated that Woolworths and Coles possess competitive advantages in securing new sites, as they are often seen as the most desirable tenants and have the financial resources to outbid other potential lessees. The ACCC is evaluating the implications of this behavior on barriers for smaller, independent supermarkets entering or expanding in the market.