25 Jul 2011

Consumers benefit most from milk price war - ACCC

12:03 pm on 25 July 2011

The Australian Competition & Consumer Commission has found supermarkets are taking most of the profit hit from a price war over milk.

The ACCC says there is no evidence that Coles breached competition laws by selling milk below cost to reduce competition.

Instead, it says Coles was simply trying to draw customers into its stores with cheap home brand milk to take market share from other supermarkets, as would be expected in a competitive market.

Chairman Graeme Samuel said consumers have been the main beneficiaries, and supermarkets themselves the main losers.

''The major impact of the reduction in milk prices since January seems to have been a reduction in the supermarkets' profit margins on house brand milk,'' he said in a statement.

''These price reductions have benefited consumers who purchase house brand milk.''

The ACCC says it based its findings on extensive consultations with all levels of the dairy industry, from farmers to processors to supermarkets.

It says most farmers are paid the same price by processors, regardless of whether their milk is bound for home brands or branded milk.

The ABC reports Coles welcomed the ACCC's findings. It said the milk campaign had seen a better deal for customers and greater demand for Australian farmers' produce.

"It was never our intent to do anything that would be in breach of the law, our intent with the milk discounts was just to offer great value to customers," the company said.

''We're pleased the ACCC found that customers have been the beneficiaries,'' the company said.

The ACCC says it will continue monitoring the milk market for any signs of anti-competitive behaviour.