Because they can !

When two giant trading companies have about eighty percent of grocery sales in Australia they wield enormous power when it comes to negotiations with the manufacturers of the products they sell.  Doing a "deal " with either company is a vastly involved trade-off of expectations, each of which is expected to be honoured - with failure involving a penalty.  Coles has come under fire with complaints from smaller companies that it is ruthless in screwing them with ever increasing rules and penalties - and that getting shelf space for their products requires the manufacturer to "jump through hoops "!

In particular, they claim that Coles sets sales expectations that - if unmet - results in "fines "for waste and markdowns.  If the supplier refuses, further business may be subjected to "commercially detrimental " conditions.  In many cases, the viability of a product may rest on it's ability to claim a place on the shelves of the duopoly - and failure will see it disappear from the market place.

The grocery trade is indeed complex.  In many cases, the decision to stock a product relies on what level of supporting advertising will be provided by the manufacturer and a special and lower price will be required to offset the "special "retail price offered in store for a given period of time.  Then there are "credits " that apply where that product is displayed at eye height, rather than in a less appealing shelf position to attract sales.

The duopoly has mastered the art of negotiating the best terms to not only improve their own profitability, but also present their pricing to keep the customers rolling through their doors - and that is precisely what is required of a successful merchant in this day and age.   The only question is - how ethically is this power balanced.

In both the political and military sense, the maxim that "Power corrupts - and absolute power corrupts absolutely " seems to be a fact of life.  There needs to be limits on power, but the moment well intended rules come into play they tend to stifle the creativity and ingenuity that enable an organization to rise above the level of the common herd.  We live in an age where new ideas and new methods are constantly shouldering out the less competitive - and creating fortunes for those with the insight and determination to take calculated risks.

That is the enigma faced by the various levels of government.   At one stage the duopoly was deliberately selling under costs to drive competitors out of business and secure a sales monopoly in shopping malls.   The government implanted a code of conduct which the duopoly accepted voluntarily  - under threat that refusal would see draconian legislation enacted.  That seems to have been scrupulously obeyed - and there is peace in that business sector.

A similar arrangement may be possible to protect small suppliers from the rapacious tendencies of the duopoly.  It would probably need some sort of independent ombudsman to be constantly monitoring the stock acquisition policies - and it would need to avoid having those affected lodge a formal complaint. Few would be comfortable with that, knowing that future relations with their biggest customer would be adversely affected.  An astute ombudsman could weed out unfair buying practices by voluntary agreement -  with the muscle of legislation as the fall back position if required.

The important thing is to recognise that there is a problem - and not implement some ham fisted solution that produces unintended consequences.   The iron fist in a velvet glove can be far more affective that beating an opponent about the ears with a club.   This problem seems to call for the " softly - softly "approach !