Video rental entrepreneur attacks Coles over massive DVD discount promotion

The owner of the Video Ezy and Blockbuster brands has again attacked supermarket giant Coles for misusing its market power over its latest DVD discount offer.

In full page newspaper advertisements yesterday Coles offered a recently-released animated DVD called Up for just $9 when customers spend over $100.

This follows similar heavily discounted promotions for DVDs including the latest Harry Potter film and another animated feature, Ice Age 2.

Paul Uniacke, the owner of Franchise Entertainment Group which runs the Video Ezy and Blockbuster franchise chains, claims the supermarket giants are using predatory pricing to lure customers away from DVD rental stores, many of which also sell DVDs.

He has taken his case to the Australian Competition and Consumer Commission and Federal parliamentarians. Last month he held a private meeting with Small Business Minster Craig Emerson to discuss the matter.

While Uniacke won’t divulge the contents of that meeting, he says Franchise Entertainment Group received a “good hearing”.

“We got a fair hearing and from what I can see and what I can gather the ACCC are certainly looking further into this matter.”

Uniacke says there are two issues: the use of lowest price guarantees by Coles and Woolworths (an issue that supermarket chain Aldi is also taking legal action over) and predatory pricing.

He acknowledges that the second will be much harder to prove.

“I think they’ll probably act, it’s just at what level,” he says.

The ACCC have a policy of not commenting on on-going investigations.

Uniacke is also hopeful the issue will be brought up when ACCC chief Graeme Samuel appears before the Senate’s Committee on Finance and Public Administration in February and says several members of that committee have expressed support.

“We’ve had massive amounts of support from politicians, both front and back bench,” he says.

“We are pushing an uphill battle with the ACCC and what are very powerful players in Coles and Woolworths, but we are not just going to stand by.”

Uniacke has also referred to evidence given by Coles to the ACCC’s inquiry into the grocery sector held in 2008, at which the supermarket giant claimed its margin on $100 worth of groceries was $3.50. At that level, Uniacke argues, the DVD promotions cannot be economic.

“The numbers based on their own evidence don’t make any sense in terms of what they are doing. So what are they doing and why? I think that’s a pretty powerful question for the ACCC to ask as well.”

Uniacke has been told Woolworths will match the Coles discount offer on Up today, but he believes the chain will confine its promotions of the offer to in-store marketing.

“They’ve elected not to go above the line on this, which I think is an interesting development,” he says.

A Coles spokesman said its latest promotion is aimed at giving customers a great offer.

“Our latest DVD offer is about giving our customers a great deal, as the FEG media release notes. Contrary to the claims by the FEG, Coles is paying for this great offer for customers, it is not being funded through increased grocery prices.”

“We are not a major player in the DVD sale or rental business, we account for less than 5% of Australia’s DVD sales. These industries are predominantly operated by large multinationals.”

“We’ve had a very strong customer response to our earlier DVD promotions, with our first Harry Potter offer selling out on the first day.”

Uniacke has also hit back at suggestions in a research report by IBISWorld that revenue in the video rental industry will decline by 3.7%.

The report has prompted the video rental peak body, the Australian Video Rental Retailers Association, to release a whitepaper claiming growth will be 9.25%.

Uniacke says the IBISWorld report contained factual errors and is looking at revenue growth of 6% in line with 2009. He expects the first half of the year to be particularly strong as the box office smash Avatar hits video stores.

“The first half of this year, we are looking for an absolute pearler. There is an absolute raft of brilliant product in the first six months.”

“Big movies sell all movies.”