Independent grocers and liquor retailers are planning a campaign to urge the government to beef up laws on the misuse of market power.

The Master Grocers Australia and Liquor Retailers Australia (MGA/LRA), representing the $14 billion independent grocery and retail sectors, say the government should show “genuine leadership” by taking on the supermarket duopoly.

A recent review into competition policy recommended the government ban companies with a substantial degree of power from engaging in conduct that would or would likely have the effect of substantially lessening competition.

The country’s biggest supermarkets, Woolworths and Coles, have argued that introducing a so-called “effects test” would increase prices for shoppers due to rising compliance and legal costs.

The MGA/LRA said: “The battle to change the competition laws will be hard fought. Two of Australia’s biggest and wealthiest conglomerates don’t want it.

“We believe this is an area where the federal government can show genuine leadership – to give the little guy the ability to grow their business and to create jobs. It can also send a clear message that the government is backing smaller operators to have a go.

“Our goal in the coming months is to take our case to the community of Australia and to the decision-makers of Canberra and to convince them that change is urgent, that the time to act is now.”

Coles managing director John Durkan hasplayed down the prospect of slower growth at Coles in the face of increased scrutiny of its dealings with suppliers, which have experienced lowered margins – and a major court win – in recent years.

Coles in December agreed to pay $10 million in penalties and to review contracts with suppliers after admitting to unconscionable conduct against eight of them.

But Mr Durkan said last week that “for all the talk that there are only two operators in Australia, there are plenty of people operating in the retail sector in Australia, so there’s plenty of opportunity for everyone”.

Woolworths and Coles have experienced deflation since the second half of calendar 2011. Responding to disappointing grocery sales and an improving Coles, Woolworths has announced it will spend $500 million on cutting prices, improving stores and increasing staffing. The country’s No. 1 supermarket has also scrapped the slight premium it charged for online buys versus in-store purchases.

Broker Macquarie has estimated that Woolworths was about 2.3 per cent cheaper than Coles at the end of the March, based on a basket of items such as fruit and veg, meat, bread and dairy.

But the MGA/LRA recently released a survey showing only 22 per cent of respondents said the level of competition in the grocery market was “healthy”, and 90 per cent wanted their local independent supermarket, liquor stores and hardware stores to survive. The survey was of 1000 respondents to an online survey plus six focus groups with 20 people each.

The industry groups say two other recommendations from the competition review – deregulating retail trading hours and allowing supermarkets to sell prescription medications – would further entrench the big two’s power.

“Taking away [independent retailers’] ability to trade on days when their larger competitors are closed … will ultimately have a detrimental effect on their survival,” said Jos de Bruin, MGA chief executive.

And allowing supermarkets to sell prescription medication would “commoditise pharmaceuticals and can only, as we have seen in other industry sectors, lead to two very large conglomerates dominating yet another retail sector in Australia”, Mr de Bruin said.

The year-long review Harper review made six recommendations on retail, including allowing supermarkets to sell alcohol in-store, and deregulating planning and zoning laws.

Grocery wholesaler Metcash and German discount supermarket chain Aldi have refused to comment on the report. US retailing giant Costco responded with: “We welcome the encouragement to have more competition in all areas of retailing.”

Extracted in full from the Sydney Morning Herald.