What: We all know the stock market is getting jittery with the S&P/ASX 200 Index (INDEXASX: XJO) down a whopping 4.6% in the last month. In the case of blue-chip stocks Woolworths Limited (ASX: WOW) and Wesfarmers Ltd (ASX: WES) the falling share prices may be about more than just a declining market.
So what: On Monday a draft Competition Policy Review was released by the Federal Government. Amongst the outcomes contained in the report was a view that the market power of dominant players in industries such as supermarket retailing needs to be reined in.
Now what: Professor Ian Harper who is heading up the review has, according to a report in the Fairfax press, recommended the introduction of an 'effects test'. Essentially this test would "prohibit a company taking action that has the effect of lessening competition."
Woolworths and Coles (owned by Wesfarmers) are no strangers to the Australian Competition and Consumer Commission (ACCC). While still in draft form, should this review lead to a strengthening of the ACCC's power and tighter restrictions on the supermarket giants' market power this could prove to be a negative for shareholders.
