US retailing giant Costco is appealing a court decision blocking it from selling alcohol at its new Adelaide store, as the government is urged to review restrictions on supermarkets.

Australia’s complicated alcohol retail market is under the spotlight after the Harper review into competition policy said restrictions preventing supermarkets from selling liquor “impede competition”.

Australia’s No.1 supermarket, Woolworths, and industry association the Australian Hotels Association last year successfully objected to Costco’s bid for a “Special Circumstances Licence” in SA.

The state’s licensing court concluded that Costco’s model for liquor retailing was not compatible with South Australian requirements and granting the big-box retailer a licence would risk setting “an undesirable precedent”.

Only one liquor licence has been issued in SA in the past nine years, said Jos de Bruin, chief executive of the Master Grocers Australia. MGA represents the $9 billion independent grocery sector.

Costco Australia managing director Patrick Noone told Fairfax Media he was hoping for a decision on the appeal in the next few months.

Victoria and the ACT have the country’s most liberal alcohol retail laws.

Costco sells alcohol in Victoria, the ACT and NSW. NSW requires Costco customers to pay for alcohol in a separate, defined area.

In Queensland, retailers must have a pub licence or a pub to sell alcohol. Costco has yet to set up in WA.

There are very few Coles, Woolworths and independent supermarkets, such as IGA, that are able to sell alcohol from the supermarket aisles, said Mr de Bruin. Instead, they sell alcohol in nearby but separate areas.

Discount supermarket retailer Aldi is able to display alcohol in its Victorian and NSW supermarkets near the counter, with expensive items locked in cabinets. It also sells alcohol online.

The government’s long-awaited Competition Policy Review this week recommended making it more difficult for large companies to competitively crush smaller ones by strengthening the Competition and Consumer Act, and deregulating retail shopping hours and planning and zoning rules.

In response to the recommendations, Mr Noone said: “We welcome the encouragement to have more competition in all areas of retailing.”

But the idea supermarkets might be able to sell alcohol in-store has “disappointed” Australian convenience stores, which complain their inability to sell alcohol deprives them of up to half a billion in sales.

Jeff Rogut, the chief executive of the Australasian Association of Convenience Stores, said enabling convenience stores to sell alcohol would deliver them about $400 million to $500 million in sales, from a $17 billion overall market.

Mr Rogut said rules in North America, the UK and Asia showed Australia’s liquor licensing laws were “really back in the [19]60s and ’70s.”

In the US, some convenience stores have “beer caves”, areas with cold beer, and customers can fill large containers called “growlers” with beers on tap, he said.

“There’s 160,000 convenience stores in the US,” Mr Rogut said. “There may be one or two isolated areas where they don’t allow alcohol – like Philadelphia or Pittsburgh, or somewhere up there – but the vast majority sell alcohol.

“We were in Japan and Korea last year, virtually every convenience store that we saw sold beer, wine and spirits, from individual, almost little cups that you can drink on the run, to full bottles.”

Mr Rogut also said giving the green light to supermarkets only would “further entrench the dominant players”, that is Woolworths and Coles, while depriving its members, such as 7-Eleven, BP and Caltex.

“It’s a difficult category [alcohol], generally, because a lot of people tend to look at the social impacts, without really considering the commercial impacts,” he said.

“What we’re saying is, it’s a legal category, it’s dominated by only a handful of players.

“We really should have the ability, for those stores that choose to sell beer and wine, and that’s really what we’re looking for, to be able to sell responsibly, as we sell tobacco, lottery, other restricted-type products.”

Grocery wholesaler Metcash did not respond on the prospect of selling alcohol on supermarket shelves.

The Harper review made six recommendations in relation to retail markets.

These were to develop “more effective misuse of market power provision, [to] consider competition in planning and zoning rules, [to] remove remaining restrictions on retail trading hours, [to] remove pharmacy ownership and location rules, [to] promote the development of industry codes with practical and effective dispute resolution processes, [and to] examine liquor licensing rules as part of a review of regulatory restrictions.”

Extracted in full from the Sydney Morning Herald.