The alleged practice of buying sites without an intention to develop, or at least much earlier than planned, to block competitors moving into the same location, is in the sights of the consumer watchdog.
The Australian Competition and Consumer Commission is investigating whether land banking is occurring, and its potential impacts on competition, as part of its inquiry into supermarkets, which ends public hearings on Friday after Coles executives give a second round of evidence.
IGA-supplier Metcash and peak body NSW Farmers were concerned about the alleged practice.
Coles and Woolworths - which dominate two-thirds of the grocery market - can afford longer development timelines than independent grocers and snap up land they may not develop for some time, Metcash alleged in a submission to the inquiry's interim report.
But Coles chief executive Leah Weckert said the supermarket giant does not engage in land banking and wants to turn its sites into stores.
Coles CEO Leah Weckert denies the retail is engaging in land banking. (James Ross/AAP PHOTOS)
"As a company with a finite balance sheet we are trying to use as best we can, I want to be investing in properties that are going to give us a return," she told the hearing on Thursday.
As the company's property manager Fiona Mackenzie explained, building a supermarket is not an easy, or quick task.
Identifying a gap in the market, procuring a site, and planning a development can take up to seven years, if it goes well, she said.
It could explain why Coles - which aims to open 15 new stores a year - does about 70 per cent of them through leaseholds.
The site at Maylands in Perth, WA, was purchased in late 2008, to develop a "large format liquor" store, Ms Mackenzie said.
The company received "significant objection" and failed in its court bid to get a liquor licence.
It tried to offload the site to "another large retailer" but was declined in late 2019.
The current plans involve potentially developing a "dark store" to fulfil online orders.
It would not serve customers walking in, but they could continue a further 180 metres to the Coles supermarket which has existed across the road since before the undeveloped site was purchased.
It also has an attached Liquorland.
Ms Mackenzie denied Coles was holding the site to prevent competition.
"An IGA has opened immediately opposite, and an Aldi close to," she told the inquiry.
The neighbouring suburb of Inglewood features a Woolworths and a Coles about one kilometre apart, with an Aldi in between.
