Andrew Leigh (Fenner, Australian Labor Party, Assistant Minister for Competition, Charities and Treasury) Share this | Hansard source

Australia's supermarket sector is among the most concentrated in the world. Woolworths, Coles and Aldi between them have a market share of 75 per cent. That is a considerably higher market share that in many other advanced countries and it warrants appropriate scrutiny. That's why, for this government, scrutiny of the supermarket sector has been such a high priority.

Last week, I announced the first results of the CHOICE quarterly price-monitoring exercise. The federal government has funded CHOICE, to the tune of $1.1 million, to carry out quarterly price monitoring in every state and territory. That revealed significant price differences—differences across jurisdictions, differences between supermarkets. It showed that in the two jurisdictions where Aldi doesn't operate, in Tasmania and the Northern Territory, shoppers are paying higher prices for groceries. And it showed the magnitude of the gaps between the different supermarkets. That's tangible information in the hands of consumers, which wouldn't have been there were it not for this government.

We've also announced an Australian Competition and Consumer Commission inquiry into the supermarkets, looking at issues such as loyalty card discounts in order to ensure that shoppers get the best deal. We understand that one of the big impacts of concentration can be on consumers, and so this ACCC deep dive, the interim results of which will be reported in August, is a part of what we're doing to ensure that shoppers get a fair deal.

One of the big stories we've heard is the impact on suppliers. In economic jargon we know that large firms can exercise monopoly power on their consumers, but we also know they can exercise monopsony power on their suppliers. As one farmer said of the grocery majors: 'We're at the mercy of them. We're price takers.' We've heard too many troubling tales about suppliers to the major supermarkets not getting a fair crack, about those suppliers being unwilling to make complaints because of a fear of reprisals.

Under the former government, the Food and Grocery Code of Conduct was set up as a voluntary code, without appropriate penalties. We've had the Leader of the Nationals out there this morning saying: 'Dearie, dearie me! Why didn't the government move to make it mandatory?' Well, we have. We've done what they failed to do in nine long years in government. Not only did they set it up as a voluntary code, they held a review and the former government decided, after their review, that it should continue to be a voluntary code. That changes today.

Alongside the minister for agriculture, Senator Watt, and Craig Emerson, we stood at the Dickson shops this morning—it was minus two degrees, a beautiful Canberra morning—to announce that the Food and Grocery Code of Conduct would be made mandatory. That follows an extensive review by Craig Emerson, one of Australia's best policy economists, who engaged in 65 bilateral meetings, four round tables, accepted 68 submissions and ultimately made 11 recommendations, which the Australian government will accept. The most important of those is that the food and grocery code be made mandatory.

But it also talks about the scope of that Food and Grocery Code of Conduct. Right now it covers Woolworths, with an estimated 2024 revenue of $50 billion; Coles, with an estimated 2024 revenue of $38 billion; Aldi, with an estimated 2024 revenue of $11 billion; and Metcash, an estimated 2024 revenue of $9 billion. It will probably soon apply to Costco, with an estimated revenue this year of $4.6 billion, not far shy of the $5 billion threshold.

The Emerson review also recommended the code place greater emphasis on addressing the fear of retribution by including protection against retribution in the purpose of the code, and by requiring that any incentive schemes and payments that apply to a supermarket's buying teams and category managers are consistent with the purpose of the code. Another recommendation of the Emerson review is that an anonymous complaints mechanism be established to enable suppliers and any other market participants to raise issues directly with the ACCC. The Emerson review recommended, and the government has accepted, that the code should provide parties with avenues for mediation and arbitration to resolve disputes.

What's important about the work that Dr Emerson did is that the government does not have constitutional authority to mandate mediation. And Dr Emerson engaged directly with Woolworths, Coles, Aldi and Metcash, who have all agreed in principle to be bound by a decision of their code mediator to award compensation of up to $5 million where agreed by a supplier. The review recommends a code supervisor who produces annual reports on disputes and the results of the confidential supplier survey. And it recommends particular remedies to address issues relating to fresh produce such that grocery supply agreements include the basis for determining prices and that fresh produce standards and specifications be reasonable. Under the code, the maximum penalties become the highest of any industry code: the greatest of $10 million or three times the benefit from the contravening conduct, or, if you can't determine the benefit, 10 per cent of turnover in the preceding 12 months. This is a code with teeth. Alongside this, the government will continue to focus on issues affecting suppliers through the ACCC inquiry.

And now we've had the Nationals and the Greens teaming up in an unusual left-right dance, to suggest that there should be divestiture powers. As Dr Emerson said in our press conference this morning, having looked carefully at the issue, 'Divestiture powers are not a credible threat.' The Leader of the Australian Greens has said it's time to break up the big supermarkets. This, coming from the leader of the Greens, is a bit like the message we had from the Leader of the Opposition in the lead-up to Australia Day, that Australians should boycott Woolworths. What both of them forget is that Woolworths is Australia's largest private sector employer. It employs around 200,000 Australians. And those people's jobs would be in jeopardy if this reckless plan were pursued.

The last three major competition reviews, the Harper review, the Dawson review and the Hilmer review all rejected divestiture powers. The National Farmers' Federation are opposed to divestiture; the ACTU has rejected divestiture; and a Senate Economics Legislation Committee in 2015 found:

Evidence has not demonstrated that the potential advantages of such a power would outweigh the likely disadvantages.

And:

The committee is concerned that court-ordered divestiture would risk significant disruption and economic damage, with unpredictable consequences for competition.

The fact is that the government is focused on solutions which will deliver a fair deal for families and a fair deal for farmers. We are concentrating on getting price information into the hand of consumers. We're focused on resetting the relationship between farmers, suppliers and the big supermarkets. We recognise the market power concerns, and our focus within the competition portfolio is squarely on the cost of living. That's why we have announced the biggest shake-up of Australia's merger laws in half a century. It's why we've announced that we're focusing on the issue of non-compete clauses, which constraint one in five Australian workers from moving to a better job. It's why we're revitalising the National Competition Policy, which, over the course of the 1990s, delivered some $5,000 a year to the typical Australian household through practical, sensible competition reforms.

We on this side of the House understand that the last couple of decades for Australia have seen an increase in market concentration and seen an increase in mark-ups. We've seen a decline in job-switching and seen a fall in the creation rate of employing start-up firms. We recognise that the decade in which the coalition was in office was one of the worst periods of productivity growth in the post-war era, and a lack of focus on competition may well be one of the issues behind that. We are focused on ensuring that the Australian economy becomes more competitive and more dynamic—a message which came out strongly from the House Economics Committee report, chaired so ably by the member for Fraser, Daniel Mulino. That report made a series of recommendations—not including divestiture, I must add—which will focus on ensuring that we get a more competitive and dynamic economy. Competition means better prices for consumers, better wages for workers, a better deal for farmers and a more dynamic, productive Australian economy. That is what this government is focused on.

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