We won't protect you from Amazon, consumer watchdog tells Australian retailers

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This article was originally published on November 30, five days before Amazon Australia launched as a full-service store.

The Australian Competition and Consumer Commission chair Rod Sims has warned local retailers that it won’t protect them from Amazon’s entry into Australia.

Amazon is due to open its full-scale retail operations in Australia any day, with predictions from industry analysts that it could undercut local rivals by as much as 30% in order to gain market share.

Sims, in a speech reported by Fairfax Media, will say at an event on Thursday that Amazon’s launch in Australia will be a win for consumers, even if it means local incumbents are collateral damage.

“In competitive markets, some firms prosper while others go out of business,” Sims said.

“It is hard to see otherwise than that Amazon’s entry into Australia will be good for consumers, despite it not being good for incumbent retailers.”

He added that Amazon’s speculated undercutting stategy is not against the law.

“If you open a store in a new town and you set a common price point, you are going to lose money initially if you don’t have scale,” Sims said.

“Eventually if you get your business plan right you will make money at that price point. Even if it damages incumbent firms and puts some out of business, this is in no way illegal.”

Business Insider has contacted the ACCC for further comment.

Earlier this month, changes to the competition act passed into law, whereby large corporations are prevented from taking action that has the purpose or potential to reduce competition in a market. This made it easier for the ACCC to fight anti-competitive practices, which previously relied on the watchdog to demonstrate that a company took advantage of its dominance to send rivals to the wall.

The change was resisted by the bigger Australian retailers, but Sims found it ironic that those same companies were the ones now calling to be saved from Amazon, which will start with 0% market share.

“Getting called by the Financial Review wondering whether we can use the new Harper ‘misuse of market power’ provisions to protect retailers from the intrusion of Amazon, I thought was just fantastic,” he said at another event in Sydney last month.

The Amazon Australia website was for many years a bookstore for the US parent, but last week opened as a general store to a limited number of customers for testing.

Industry research firm IBISWorld, based on what’s happened in other countries, predicted that Amazon would significantly undercut local retailers as it absorbed losses early to establish its market share.

“The company intends to challenge domestic retail prices by offering items for 30% less than domestic retailers,” said IBISWorld senior industry analyst Kim Do.

“This is expected to appeal to price-conscious Australian consumers, and is likely to affect local retailers that have found it difficult to adjust to a shift in consumer spending behaviour over the past five years.”

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