The Australian Competition and Consumer Commission (ACCC) released its inquiry into supermarket pricing and competition on Friday. It found that large supermarkets’ asymmetrical access to information and market power disadvantaged their small suppliers.

As an initial response, the government pledged $2.9 million towards fresh produce industry associations to deliver targeted education programs. These would aim to educate suppliers about their rights and equip them with knowledge to push back against unfair practices and secure more favourable commercial outcomes.

“This important action will help level the playing field for Australia’s farmers and producers,” Minister for Agriculture, Fisheries and Forestry, Julie Collins, said regarding the pledge to education.

“Our farmers produce exceptional, high-quality food and deserve a fair go when working with the supermarkets.”

Other senators have called for stronger government action, saying that the big supermarkets should be broken up to facilitate better competition in the sector.

Nationals senator Bridget McKenzie labelled the Treasury’s response as “flaccid”, speaking to Sky News, adding: “We put a very comprehensive plan on the table to address the lack of competition in our supermarket sector.”

The ACCC found that Australia’s supermarket industry is highly concentrated with an oligopoly structure, dominated by Coles and Woolworths. Additionally, fresh produce growers often don’t have the information they need to make efficient investment decisions.

“Where supermarket buyer power takes the form of monopsony power, suppliers may be exposed to harmful exercises of buyer power that undermines the efficient operation of markets,” the ACCC report said.

“The buyer power of Coles and Woolworths is most pronounced in those fresh produce supply chains where production is highly fragmented, products are perishable and homogeneous, and where a small number of supermarket chains are the primary sales channels,” it continued.

“Coles and Woolworths are able to exercise monopsony power in their trading relationships with many suppliers in these supply chains.”

A monopsony is a market situation where there is only one buyer, giving that buyer outsized bargaining power to negotiate lower prices from suppliers.

The ACCC inquiry found a “significant bargaining power imbalance” between Coles and Woolworths and their suppliers.

“There is substantial information asymmetry between fresh produce suppliers and supermarket chains when they participate in weekly tendering process,” the ACCC said in a media release.

A productivity commission report noted that supermarkets frequently forecast higher demand than they actually order because surplus food production lowers prices.

The ACCC recommended that Aldi, Coles and Woolworths be required to provide fresh produce suppliers with greater transparency during tendering processes used to negotiate price and volumes with suppliers.

Furthermore, the big supermarket chains should not be able to unilaterally reduce the price or volume agreed in purchase orders confirmed through their weekly tendering processes.

Lastly, supermarkets should be required to provide fresh produce suppliers with more detailed information about seasonal forecasts, allowing suppliers to assess their accuracy.

The government decision to boost education for small suppliers comes alongside efforts to extend unfair trading practice protections for small businesses.

“Too often, small businesses – including farmers and suppliers – get strong‑armed by bigger players who rewrite the rules to suit themselves,” Andrew Leigh, Assistant Minister for Competition, Charities and Treasury, said regarding the small business protections.

“That’s why we’re cracking down on unfair trading practices. A supermarket shouldn’t be able to drop a supplier just for asking for a fair price. A dominant firm shouldn’t get to ‘negotiate’ by holding all the cards and stacking the deck.

“When competition turns into coercion, it’s not competition at all.”