Woolworths (ASX: WOW) has shone a light on some ridiculous Australian laws in its submission to the Inquiry into Microeconomic Reform in Western Australia. The most significant change it has proposed is to allow its regional supermarkets to trade on Sundays. It argues that this will create new employment opportunities and "extend the convenience of Sunday trading" to new communities.
Were this change to take place, Woolworths and Coles, owned by Wesfarmers (ASX: WES) would undoubtedly be able to increase revenues from existing stores. Significantly, it would also erode one of the last remaining competitive advantages held by small retailers in Western Australia.
Under current laws, small retail shops with fewer than 18 staff can already open on Sundays. As much as it might be convenient to visit the supermarket on a Sunday, it will make it more likely that small shops will go out of business. One company that might lose out is Metcash (ASX: MTS), which distributes to small independent retailers.
In its submission, Woolworths has criticised some pretty ridiculous laws. For example, its petrol stations can sell pantyhose after 9 pm but cannot sell underpants at that hour (on Thursdays). This seems nonsensical, but also somewhat irrelevant: how many people buy underpants from petrol stations?
The real story is that some of these arguably ridiculous laws give a competitive advantage to small retailers. In some instances, this might allow them to survive as profitable businesses even when competing with Woolworths. For example, regarding their Masters hardware stores, Woolworths has submitted that: "Competitors who stock a smaller range of products are able to open for extended hours – thus placing Masters at a competitive disadvantage. The situation is an inconvenience for customers and an anti-competitive restriction."
Another area ripe for reform is Western Australia's liquor licensing laws. Again, the current Western Australian laws put Dan Murphy's (Woolworths' large liquor store) at a disadvantage. The complaint is that whereas hotel licensees can sell alcohol on Sundays, Dan Murphy's cannot. The submission says that, "The existing regulations are unambiguously anti-competitive and obstruct customer choice and convenience."
The supermarket giant is also unhappy that local councils have refused development consent for the large Dan Murphy's stores on two occasions, forcing the retail giant to have the rulings overturned in the State Administrative Tribunal. Woolworths wants the state to define the grounds on which local councils can refuse development applications.
Foolish takeaway
Should Western Australia accept any of Woolworths recommendations, it will allow the company (and its only real competitor, Wesfarmers) to take more retail market share. Over the last couple of decades, the two retail giants have put plenty of small retailers out of business. The dominance of Coles and Woolworths is instructive to investors. Always consider long-term trends in the industries you invest in and keep an eye on the competition.
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Motley Fool contributor Claude Walker does not own shares in any of the companies mentioned in this article. Find him on Twitter @claudedwalker.
