John Forrest (Mallee, National Party, Shadow Parliamentary Secretary for Regional Development) Share this | Link to this | Hansard source

This issue is dear to the hearts of my constituents from two points of view. In regard to the first issue in the motion, my concern is about the high level of market concentration in the hands of a few, which opens the door to market manipulation and anticompetitive practices in the retail grocery sector, with consequential impacts on the fresh food sector. There are two sections of people I represent down in Mallee who will be disadvantaged by this scenario. The first group is the people who run small family owned grocery businesses. Many of these are the only retail grocery facilities in the small towns in Mallee and indeed around the closer settlement associated with Sunraysia, where there are a series of family owned stores on both sides of the river around Mildura. The second group are the thousands of suppliers of fresh fruit, vegetables and other products who can be held to ransom by inequitable market forces.

Excessive market power impacts on consumers, other retailers, processors, manufacturers and, in particular, those people at the start of the supply chain—the primary producers. Our farmers are in many cases at the bottom of the chain and are forced to be price takers because of the perishable nature of what they grow. Mr Deputy Speaker, you need to imagine hundreds or even thousands of family farmers all trying to sell their products to just a handful of major supermarkets. This is what is happening in Australia and it is not sustainable.

Nobody disagrees with healthy competition. The ACCC appears unable to appreciate or provide solutions about how the whole grocery and fresh food sector can move forward, remain profitable and be able to invest in even more efficient production. The ACCC seems content with comfortable oligopolies. In fact, it seems the commissioner is more determined to pursue the smaller independents because of their wholesale purchasing practices. They have little choice on that matter—there is only one significant independent wholesaler in the whole nation.

You can screw down your suppliers and prevent them from making a profit—and then suddenly they are less competitive compared to imported grocery items, which are often produced from cheap labour. The end result is that Australia will lose another producer, employer and valuable industry, especially in rural Australia. When the Australian dollar goes up to the recent high levels we saw several months ago, our food exporters have great difficulty competing with other Southern Hemisphere nations. When the dollar goes down, our producers can do well overseas, but they get a beating from cheap food imports into Australia. These sectors need better margins and more market stability. They need that to have the certainty to grow in the future.

I long for the day the ACCC realises that market share, market power and competition are already out of balance in Australia with respect to grocery retailing. Successive governments have tackled this issue over a long period of time, and my belief is the ACCC has the legislative power to take stronger action than it actually does. The ACCC describes the Australian grocery market as ‘workably competitive’, as the second part of the motion refers to. I wonder what the ACCC thinks that that term means when many of us wonder if the two major supermarkets are as competitive against each other as they say they are. The term ‘workably competitive’ is not recognised in competition laws. I wonder what it means.

Complacency, a relaxation of the competitive nature of retailing, and higher prices across the board are ultimately possible if you are up against only one competitor with whom you share, according to the ACCC’s estimates, 70 per cent of the packaged market. Woolworths and Coles actually have a higher concentration than that, as maintained by the independent grocery sector, at 80 per cent. Even if you take the ACCC’s figures, with the independents having 17 per cent of the market and Franklins and Aldi having a few per cent between them, that leaves 80 per cent. It is simple arithmetic. But that is a semantic issue. Even at 70 per cent, this lack of attention is already starting to have its impact.

We need to know what the definition of a ‘workably competitive’ market is and we need to have it more clearly defined, as other nations have in fact done. What constitutes a smaller store in direct competition with a major? I see this happening around Mildura, with the big supermarkets present and the small family-owned independent competitor trying its best to compete and getting very little assistance out of the government’s GroceryWatch program. It defies logic to argue that there is anything but market dominance and huge market power when we have two players so dominant in the grocery-retailing market.

The ACCC does not appear to address this issue or suggest any regulatory measure that might bring fundamental change, including fair trading in line with world’s best practice. It is true that we cannot regulate to the point of telling a shopkeeper or service station in either Canberra or outback or remote Australia how much they should charge for their food and their fuel. However, everybody has a right to make a decent living, and we have to make a stand to prevent the abuse of market power. Sometimes we should pause and wonder if Australia and the ACCC are on the right track in an equation that seems to favour the big boys, an equation that ultimately will impact adversely on consumers—and their cost of living—in the long run.

The other issue is the general creeping acquisition by supermarket majors, which is shrinking the space in which smaller supermarkets operate. The ACCC does not seem to be concerned about this erosion of competition because it occurs by a series of small acquisitions which go under its radar. However, in aggregate it is a substantial erosion. The issue of market concentration must be addressed on a number of fronts to achieve improved outcomes for consumers, food producers and retailers in general. To halt further concentration, the act needs to be amended to require the notification of acquisitions, however small they are, by dominant corporations in concentrated population areas. Such acquisition notifications should include an assessment of the impacts of that acquisition and take into account previous acquisitions. The competition test needs to be modified to apply to a lessening of competition rather than the current requirement of demonstrating a ‘substantial’ lessening of competition—it has an adjective in front of it. Whatever the erosion, it needs to be taken into account.

I also make an additional point. A review of the practices and culture of the ACCC must be undertaken to ensure there is no barrier to the proper and diligent application of competition tests required for acquisitions under the act. As I said before, my belief is that the ACCC already has underutilised powers to address the issue.

The other big issue is the definition of ‘unconscionable conduct’ under the Trade Practices Act, where, despite concerns, few cases have ever been successfully prosecuted. There are a number of reasons why that occurs, but there are a number of things that should be done. A clear definition of ‘unconscionable conduct’ must be developed and included in the act. There must be better recognition by the regulator and the courts of the potential for damage to competition in the Australian economy through unconscionable conduct. Regulators must be more willing to address unconscionable conduct. Guidelines as to what constitutes unconscionable conduct must be developed, and the ACCC must be prepared to act. There also needs to be an inclusion in the act of guidance to a court on awarding damages and penalties for noncompliance.

Price discrimination must be prohibited and ways developed to ensure a critical mass is maintained and developed in the smaller retail grocers and their suppliers. Some account must be given to their wholesale purchasing practices, rather than the attention by the commissioner that is currently being paid to the fact that almost all of them, no matter what independent banner they come under, deal with the same wholesaler. Quite often, as I have said, these smaller retail grocers service regional Australia, where the market is not large enough to tempt entry by the big majors. I worry about house brands and how the individuality and pride that goes into production, especially of fresh fruit and vegetables, will be lost when they get disguised by a brand that does not recognise that calibre and quality of product. The other thing that the ACCC always argues is that, if a supplier is not complaining about such practices, there is no evidence that they occur. For a supplier who is threatened, even in an unsaid way, by the fact that his future contracts will be affected, that is not an excuse. It is occurring, and those suppliers need protection.

Sure, there are economies of scale, but my concern is that, where the dominance of the supermarket sector continues to grow, the eventual outcome will be rises in prices to consumers, and prices paid for Australian fresh value-added products will reduce. The middleman will reap the cream, Australian producers will all but disappear, and everyone around us will suddenly ask, ‘How on earth did we let that happen?’ It is time for action. Successive governments have made valiant attempts at that, and it is time for the Chairman of the Australian Competition and Consumer Commission to take action on the legislation and more that he already has at his disposal.

Jill Hall (Shortland, Australian Labor Party) Share this | Link to this | Hansard source

I thank the member for Mallee for bringing this motion on the grocery sector to the House. It is an issue that has been of great concern to most members in the House. I am a bit disappointed that it was not dealt with under the last government and that he did not bring a motion to the parliament when the Howard government was in power for 12 years. But the Rudd government does acknowledge and has acknowledged the impact that rising food prices have on Australians.

One of the first acts of the Rudd government was to instigate an inquiry into the competitiveness of retail prices for standard groceries. The report was completed and forwarded to the Minister for Competition Policy and Consumer Affairs. That is the ACCC report that is mentioned in the motion moved by the member for Mallee, which in part 2 says: 

… this is a situation that the Australian Competition and Consumer Commission describes as ‘workably competitive’ …

I think we need to have a little look at the report. It says that, but then it makes a statement that there are a number of factors that currently limit the level of price competition. So the ACCC does acknowledge in its report that there are impediments and barriers. It talks about the high barriers to expansion, particularly in relation to the difficulty of finding sites for development; limited incentives for Coles and Woolworths to compete aggressively on prices; and limited price competition between Coles and Woolworths. I think one of the key factors is that 80 per cent of the market is controlled by Coles and Woolworths. That is a problem and it is mentioned by the National Association of Retail Grocers of Australia in their submission to the inquiry. I note that the inquiry solicited some 250 submissions. Of those, about 120 were late submissions, but the inquiry obviously connected enormously with the community.

One of the ongoing concerns that is raised with me as a member of parliament is the issue of increases in grocery prices. This inquiry took place in response to the fact that there is a problem—and I think it is more than a perceived problem; it is a problem—in relation to the prices that are being paid for groceries. It is the people that are on lower incomes, fixed incomes, who are finding that it has the greatest impact.

The problem also impacts on many of the people that the member for Mallee represents in this House. That is identified in the National Farmers Federation submission to the inquiry, which states that agriculture is a key stakeholder in the Australian domestic food supply chain and, as such, has a very strong interest in looking at the supply chain. It argues for transparency of competition and fairness. It talks about farm gate share of the retail market, and retail prices not always reflecting the farm gate price.

I think any member of parliament who has taken the time to go and speak with producers will know that they are paid a very small amount in comparison to what people like me pay in the supermarket. That is a problem. The submission talks about other aspects—the balance between rationalisation and market power—and really reflects the thoughts and the interests of the people that the National Farmers Federation represents.

There is also a submission by the Transport Workers Union of Australia. It talks about the domination of the grocery market by the two major retailers and the significant flow-on effects that that has on other participants in the supply chain. The excessive market power demonstrated by the major retailers in the transporting services and the impact that that has on the workers concerned the Transport Workers Union.

So you have got suppliers, the Transport Workers Union and distributors to the larger supermarkets, and you have the concentration of market dominance in the hands of Woolworths and Coles. That is 80 per cent in relation to groceries and 60 per cent in relation to petrol; the linking of grocery prices to petrol is an expansion even further.

NARGA, in their submission to the inquiry, believe that the question of market share and market concentration is critical to the price of groceries that is paid. All of us in the House represent people who pay these prices—people like the constituents of the member for Mallee and the member for Maribyrnong. It is a very complex issue, an issue that impacts on an enormous number of people. It impacts on us all and it was because of that that the Rudd government took the issue so seriously. It has really put a lot of effort into looking at food prices. With looking at food prices, NARGA pointed out that you cannot remove that from looking at the market share.

I would like to refer to CHOICE. They conducted a survey of more than 1,000 consumers in February 2008 and they found that 83 per cent of the consumers believe that they spend more on groceries compared to three years ago; only two per cent believe they are spending less. They point out that food price inflation has been greater in Australia over the last 10 to 12 years than in any other developed country and has increased by 43.6 per cent since 1996. CHOICE suggested the introduction of a food consumer price index that would be published by the Australian Bureau of Statistics each quarter.

I would like to mention that earlier this year, in legislation that was introduced where the utilities allowance was increased, the pension basket—the average goods that a pensioner purchases—was changed. It was either average male weekly earnings or looking at that basket. That, in itself, was acknowledging the impact that rising food prices have.

CHOICE suggested that food is part of the overall CPI index. The figures in relation to the prices of food have been masked by the significant increase in the volatility in food and grocery markets. CHOICE said that Australia has one of the most concentrated supermarket grocery sectors in the world. They went on to say that Woolworths and Coles have considerable market share. The supermarkets have the potential to bring cheaper prices through economies of scale but they also reduce competition in the sector, and I think that that is what the member for Mallee is pointing out.

I would also like to put on the record another issue for the supermarket sector, the phenomenon of creeping acquisitions, which has been identified by CHOICE and in other submissions to the ACCC, and its impact on market share and competition in the sector. I think that this is a very complex issue. We on this side of the House are committed to looking at and resolving the issue and bringing cheaper prices to Australians—(Time expired)

Bruce Scott (Maranoa, National Party) Share this | Link to this | Hansard source

I rise tonight to second the motion by my colleague John Forrest, the member for Mallee, who is calling on the House to note with concern the high level of market concentration in the retail grocery sector which the ACCC rather inappropriately calls ‘workably competitive’. Talk about bureaucratic doublespeak. It is a classic example of the ACCC’s work so often being about doing nothing but bringing forward reports. Here is an opportunity for them to do something about the duopoly that is impacting on small grocery retailers—yet they see the market at the moment as ‘workably competitive’. I also want to support the member for Mallee in his call for this Labor government to address the issue of market concentration in the grocery sector and to implement policies to achieve improved outcomes for consumers, food manufacturers and producers.

Medium sized and family owned grocery stores are the lifeblood of many small towns in my electorate of Maranoa. IGAs are often the only large grocery stores in town. FoodWorks stores are also present. They are so often family run, with a family investing their life savings and work and effort into that business. Locals rely on these stores, often run by someone they know very well, to provide them with their daily bread, fruit and vegetables, not to mention other very important non-perishables.

So I share my colleague’s concern for the fate of many small to medium enterprises in the retail grocery sector. The evidence showing that Woolworths and Coles share almost 80 per cent of the market is particularly disturbing, very much so as their dominance extends out to petrol, hardware, clothing and now even liquor. Yet more people—and this is an interesting point—across Australia are employed by independent grocery retailers than the large supermarkets. In fact, 57 per cent of full-time employees in the retail grocery sector are employed by independent retailers, compared to 43 per cent employed by Woolworths, Franklins, Coles and Aldi.

As we know, Woolworths, Franklins and Coles, and Aldi to some extent, cherry-pick the markets into which they will go. They go in aggressively, with the intent to capture the dominant share of a market which so often is a position that has been occupied by a smaller grocery supplier in the past. Should these smaller grocery retailers be eventually squeezed out, I would be very worried about how this will impact on not only the stores but also the employees, because those smaller retailers are still the majority employers, in percentage terms, in the grocery sector across Australia.

But my concern also extends beyond the success of independent grocery retailers in my electorate to the future of farmers in my electorate, and the farmers of the Mallee electorate—I am very concerned about them—who supply this country with clean, green food, so often taken for granted in this nation. It is clean and green and it is some of the most affordable food in the world, and of course it has always been available so it is taken for granted. Australian producers are already battling cheaper imports. I particularly point to the impact of the importation of pork, fish and other seafood on local producers here in this country. And then of course they have to deal with the power of the Coles-Woolworth duopoly, which, if it continues, may see many farmers forced out of business—because of the power in the market share of those two major retail grocery chains.

Food security is another important issue, and some countries are already experiencing a food crisis. The 6 November media release of the United Nations Food and Agriculture Organisation states:

World agriculture is facing serious long-term challenges, including land and water constraints, low investments in rural infrastructure and agricultural research, expensive agricultural inputs ...

relative to farm gate prices—

and little adaptation to climate change.

FAO estimates that to feed a projected world population of more than nine billion people by 2050 ... global food production must nearly double.

(Time expired)

Steve Georganas (Hindmarsh, Australian Labor Party) Share this | Link to this | Hansard source

I welcome this motion and congratulate the member for Mallee for bringing such an important issue to the parliament. It is very important because we should all be concerned about the high level of market concentration in the retail grocery sector. As we heard from previous speeches on both sides earlier, depending who you listen to the two big supermarkets control anything between 70 and 80 per cent of the entire grocery market. That is not a good position for us to be in.

I am also very pleased that one of the first acts of the Rudd Labor government, which has been in office for less than 12 months, was to implement significant pro-competitive reform—with more to come. We have recognised that there are increasing cost-of-living pressures for all Australians, and we are addressing these issues. When you look back, the opposition had 12 years to address these issues, but not much was done about market competition in those 12 years. One of the first things we did when we won government was ask the ACCC to look into the competitiveness of the grocery sector and the impact it had on prices. The ACCC report, as we all saw, highlighted the positive impact on grocery prices of greater competition from supermarket chains like Aldi. Where there is greater competition, as we all know, we all benefit.

The government’s plan for the grocery sector includes introducing a nationally consistent unit price regime for major supermarkets and using COAG to help ensure state and local planning laws are used to boost competition between supermarkets. We have seen how some of these big chain supermarkets use their local planning laws to slow down the process of more competition coming into their area, so that is a very important initiative. We are also introducing a creeping acquisitions law to keep up competition in local areas and setting up GROCERYchoice to give consumers a quick and easy way to see which supermarkets sell a basket of goods at the cheapest price. For example, in my electorate, in the suburbs of Mile End, Torrensville, Hilton and Cowandilla we have a choice of Foodland, Woolworths and, further down the road, another independent grocer. GROCERYchoice gives to the people living in that immediate area the opportunity to have a look at who sells the basket of goods at a better price, giving them the choice to buy where the cheaper product is.

The Rudd government’s plan comes on the back of other important reforms as well: strengthening the Trade Practices Act to target the abuse of market power by larger companies; relaxing the restrictions on foreign supermarkets to develop new sites, allowing more competition; and introducing jail terms for serious cartel behaviour, a very serious offence. The government’s action plan for the grocery sector is an important step in driving and promoting competition to the benefit of the consumer. Contrast that with a coalition that had 12 years to do something but did nothing except argue that working families had never been better off. This government is committed to encouraging new entrants to the market, whether at the retail or the wholesale level, and has already relaxed restrictions that have prevented foreigners from buying vacant land to build new supermarkets.

The government also welcomed the ACCC’s plan to review more cases so that restrictive provisions in leases between supermarkets and shopping centres that prevent or delay the entry of other supermarkets into a centre are, where appropriate, prohibited under the Trade Practices Act 1974.

The government is also fulfilling its election commitment, made by the then Leader of the Opposition in July last year, to set up a dedicated website that gives consumers a snapshot, as I said earlier, of local grocery prices. The GROCERYchoice website became active in August this year. The website, as I said, provides a consumer guide to the cheaper supermarkets in their region. Consumers will then be able to make their choices, based on customer service, convenience and other factors.

Unit pricing is also important. Unit pricing will allow consumers to more easily compare the price of different sized products and get the best value for their dollar. Comparative pricing is the display of the price of goods per unit of measure—for example, per 100 grams, per kilogram, per litre or per item. (Time expired)

Sussan Ley (Farrer, Liberal Party, Shadow Minister for Justice and Customs) Share this | Link to this | Hansard source

I am delighted to support my colleague and neighbour the member for Mallee on this very important motion. I would like to quickly respond to comments made by the member for Hindmarsh that we as a coalition government did nothing during the time we were in power and to remind government colleagues that the coalition established a horticulture code of conduct. We kept pharmacies out of supermarkets, which was absolutely critical, and we had an ongoing program of support for the agricultural sector, which meant that small family farmers could supply produce to supermarkets. We are now in danger of seeing a lack of supply, so our support for the agricultural sector was a critical component of keeping competition, particularly for fresh fruit and vegetables in the farm sector. And we had the diesel fuel rebate—which, I might add, is under threat from the present government—which, effectively, kept the transport costs of grocery goods down.

Looking at our landscape, we do have the highest concentration of retail grocery in the OECD. Our two major grocery chains have a large share of the markets for petrol, liquor, hardware, merchandise and clothing. Anyone who says that this high concentration of ownership does not lead to high prices for consumers is kidding themselves. A supplier will charge what the market can bear, and that is what we are clearly seeing happen with our largest supermarket chains—an effective duopoly, Coles and Woolworths. I do not want to turn this into a Coles and Woolies bashing exercise. They are good companies, they often employ Australian kids and they provide a service. It is not a personal issue; it is about providing sufficient competition to keep prices as low as possible. It is also about supporting the independent grocery sector.

In the small towns of the Farrer electorate—and my colleague the member for Mallee has alluded to the Sunraysia district where we have small supermarket chains—the Fisher family supermarkets are, in many cases, the only choice available to people, unless they want to travel, with higher petrol costs, to larger centres. So it is not just about saying, ‘We’ve got Coles and Woolworths and now we have Aldi.’ These options are not always available. We have to ensure that those who live in small towns, although they obviously do not have the range of choice and probably not the level of price that you would find in Coles and Woolworths in the nearest regional centre, still have meaningful options, that they can still shop locally and still have a range of choice and be supplied with what they need. I would like to see the government implement measures to stop these creeping acquisitions. They are not caught by the Trade Practices Act and they are a prohibition on price discrimination.

I was delighted to see the ACCC recognise the drought in their report, because I very rarely see the ACCC acknowledging an understanding of the drought. They actually recognise that one of the factors of high food prices is the duration of the drought, lack of stored water, our adverse weather conditions and local supply disruptions due to quarantine restrictions. So a big bunch of roses for the ACCC for recognising the realities of farming in our difficult landscape at the moment.

I want to highlight the fragility of the supply chain for fresh food in this country and make the point that it is about more than the factors mentioned by the ACCC in its report. It is far more serious for suppliers than consumers, because for consumers it might just be a decision not to buy a certain product on a certain day because the price is a bit too high. But it can actually affect the viability of a farm business. I do not know how we can explain this to consumers, but I think they would be receptive to the message that we do not want to see price fixing, we do not want to see guaranteed returns for farmers, but we do want to see guaranteed supply of farm produce over time. What we are seeing is family farmers being wiped out, squeezed out, because basically they have no bargaining power against big supermarkets. My concern is that we are going to lose them completely and our options for supplying fresh food are going to narrow. Ultimately, that is going to be bad for consumers. More producers will go out of business, more food will be imported, more family farms will go under. Anyone who has dealt with growers will hear the stories about market power being exercised openly and also subtly as an implied threat: only selecting selective grower supplies, forcing some suppliers into secondary markets; and coercive demands, otherwise you are excommunicated, for example through the quality systems, the packaging, the delivery—not really relevant to what you are doing, but something that is beyond your control. (Time expired)

Julie Owens (Parramatta, Australian Labor Party) Share this | Link to this | Hansard source

I rise to speak in support of the motion, although I would like to comment that it does include one of my pet dislikes—that is, statements in particular that call on an action imply that there has been no action, so in calling on the government to address the issue, there is the implication that there has not been any action. Of course there has, and I will cover some of that later in this speech.

It seems a general view that there is extreme concentration in the grocery industry. It is perhaps not as bad as the independents make out. They tend to use the figures for packaged groceries, which are of course quite high—over 70 per cent. In the areas of fruit and vegetable, fresh meat, bakery, dairy products, deli products and eggs the figure is closer to 50 per cent—still a substantial market share when you are talking about two major supermarket chains, Coles and Woolworths. In Australia we are also not as bad as some international comparisons—for example, New Zealand and Canada—yet we in government do believe that there is the need for real reform in the grocery sector. That is why, upon our election, we acted almost immediately. One of the first acts of the Rudd government was to commission an ACCC inquiry into the competitiveness of retail prices for standard groceries. The ACCC reported back to government, stating that Australian consumers would benefit significantly if Coles and Woolworths faced more competitive threats that encouraged more aggressive pricing strategies.

The ACCC made a number of recommendations that would improve competition. The ACCC report showed that prices are lower when there is a major competitor or Aldi within one kilometre and recommended changes to zoning and planning laws to have specific regard for the likely impact on competition for new retail development applications. In implementing that recommendation, the government has referred the anticompetitive impacts of state and local zoning and planning laws to COAG, and this is very much about getting more competition in more communities to put downward pressure on local food prices.

The ACCC also expressed concern about creeping acquisition. Creeping acquisition has been seen as an issue for several years. In fact the 1999 report of the Parliamentary Joint Select Committee on the Retailing Sector, the Baird committee, made reference to it, as did the Dawson review in 2003, and the Senate Economics reference committee in 2004 noted that, ‘as a matter of logic’, creeping acquisitions in concentrated markets must, over time, substantially lessen competition. So the need to act in this area has been well known since at least 1999. The Rudd government issued a discussion paper calling for public comment on the best way forward for creeping acquisitions law on 1 September this year, and several models are being investigated and legislation will follow soon. On 23 April this year, the government announced changes to foreign investment rules to make it easier for the likes of Aldi to set up more shops and create more competition in the market.

We have also acted in the area of trade practices reform. During the last session of parliament the government introduced the biggest package of reforms to the Trade Practices Act in 22 years, including provisions to strengthen predatory pricing laws that will ensure that powerful companies—including the major supermarket chains—do not have the ability to persistently sell below cost and run small competitors out of the market. The ACCC also recommended that a mandatory nationally consistent unit-pricing regime be introduced for standard grocery items both in store and in advertising and the government have indicated we will be rolling out a mandatory consistent unit-pricing scheme, helping consumers determine value for money when it comes to different sized packages. It should be noted that Aldi has been using a unit-pricing scheme since November 2007, and the European Union introduced its legislation in 2002.

The member for Mallee is right to be concerned about a lack of competition in the grocery sector. Consumers are losers when concentration of ownership is high; prices are lower when there is competition in the market. Growers and suppliers are losers when concentration of ownership is high and there are few buyers for their products. But communities also are losers when we lose the small shopping centres that provide outlets for community interaction. We lose something much greater than just a place to buy our milk. We are right to be concerned and we are right to continue to act. The government have been acting all year on this, and we will continue to do so.

Sharman Stone (Murray, Liberal Party, Shadow Minister for Immigration and Citizenship) Share this | Link to this | Hansard source

I rise to strongly support the motion moved by my neighbour the honourable member for Mallee. He, like me, has some of Australia’s greatest food producers in his electorate. The concentration of ownership in grocery retailing in Australia is therefore of enormous importance to our two local economies. No other country has such concentration of ownership in the retail grocery sector. Australia is unique in this regard. Woolworths and Coles have close to 80 per cent of the retail grocery sector. These two chains also have a large share of the clothing, fuel, liquor and hardware sales in the country.

While it is well known that concentration of ownership erodes price competition, there are other major impacts of such concentration that concern me and should also concern this government. My electorate is still, despite the prolonged drought, the food bowl of Australia. We have the greatest concentration of food manufacturing compared with any other region in the country. This processed food includes dairy commodities and retail-ready production, processed fruits and vegetable products and an assortment of meats and wines. We have a stable, skilled local workforce, and the rail or road transport to the ports and domestic warehousing is fast and efficient. The fresh product is grown literally within sight and sound of the factories and processors. You could not think of a more ideal environment for growing and manufacturing great, clean and green Australian foods for local and international consumption.

But this is now in jeopardy—not because of the prolonged drought and not because of the pipeline that will take the food producers’ water to Melbourne. That pipeline is not yet built. That threat is yet to be delivered. The problem right now is the power of the grocery retailers to dictate terms to the food manufacturers and producers. Food producers nationwide are under extreme pressure from the two big grocery retailers to supply their home brands. These home brands compete directly with the companies’ own branded products and are produced in grades to mimic premium and low-cost branded options. They sit on the shelves beside the branded product. The home brands generate a far higher profit margin per unit for the supermarket than do the differently branded products, whose prices include marketing, product research and development costs.

The food manufacturing company is pressured to provide the contents of the home brand at a substantially lower price than the company’s own branded equivalent. They come to compete head-on with the same contents packaged differently, with a more competitive price on the home brand. There is no identification on the labelling to show who has supplied the product content, hence there is no customer loyalty to the food producer anymore. This gives the retailer enormous leverage over the supplier, who can be replaced with the next-lowest-priced supplier should they baulk at the extremely thin margins and the intense competition with their own branded product. Imported product can readily be switched with the locally grown produce in the home brands—that is, in the cans, the jars and the plastic packs—with little understanding from the shopper, who is very used to seeing most Australian foods sold with a label that says ‘Made from local and imported ingredients’.

Why am I so concerned if the shopper says, ‘Well, we’ve still got the choice between home brand and the branded product’—the icon brand sometimes—‘on the same shelf just a few centimetres apart’? The problem is that, if you knock out Australian producers’ viability, if they are squeezed so hard that they become unviable, you have to ask: what supplier of this nation is then going to look after the environment? Who will be the stewards of the land and water resources, the providers of the environmental services that deliver to all of us the fresh air and the water supply? The nutritious foods themselves are of extreme importance, but Australia’s primary producers are also the stewards of our country and they provide the ecosystem services.

If the big two retailers make it too hard to get proper margins to stay in business then we are looking at a situation such as we have right now where citrus growers are struggling, where pork producers are just about out of business—yes, there will be a shortage of ham for Christmas—and where berry producers say it is just too hard. We in Australia will in the future go from product to product and say: ‘It’s not ours anymore; we cannot be food producers in this country because the big two have simply switched and swapped. Their home brands are full of imported ingredients and the shopper does not really know.’

Chris Trevor (Flynn, Australian Labor Party) Share this | Link to this | Hansard source

I rise to speak on this motion—and I thank the member for Mallee for it; it is an excellent one. My government, the Rudd Labor government, believes that there is real reform to be had in Australia’s grocery market. So do I. In my opinion, big business has too much market share. In its report to government, the ACCC states: ‘Australian consumers would significantly benefit if Coles and Woolworths faced more competitive threats that encouraged more aggressive pricing strategies.’ The first move the government made was to relax foreign investment rules to make it easier for the likes of Aldi to set up more shops and create more competition in the market. In addition, during the last session of parliament the government introduced the biggest package of reforms to the Trade Practices Act in 22 years. That included provisions to promote competition and protect smaller retailers from predatory pricing.

The government is moving on the key recommendations in the ACCC report into the price of groceries. The government will implement its action plan in response to the ACCC inquiry as a matter of urgency, namely referring the anticompetitive impacts of state and local zoning and planning laws to COAG, considering the best way to introduce a mandatory nationally consistent unit-pricing regime in consultation with industry and consumer groups, working with the horticulture industry on improvements to the horticulture code of conduct and implementing a creeping acquisition law following feedback on a discussion paper to gauge the best way forward.

Also, for the benefit of consumers and to put added pressure on retailers, the government has fulfilled its election commitment to set up a dedicated website that gives consumers a snapshot of local grocery prices by launching, on 6 August 2008, the GROCERYchoice website. I commend my government on these initiatives. After 12 years of neglect, the Rudd Labor government has taken, and is taking, positive steps to address the effects of a high level of concentration of market ownership in the retail grocery sector. We must ensure more vigorous competition in the retail grocery sector, and the Rudd Labor government has shown commitment to that. I look forward to seeing some more. I look forward to seeing more developments in this area so that consumers are given a fair choice, a fair deal and a fair price for their goods purchased at our supermarkets. After all these years of neglect, all Australians deserve that. The farmers and independent retailers, in my opinion, also deserve a fair go. I do not believe they are getting a fair go. I also note with interest that recently the price of fuel in my hometown of Gladstone was significantly higher than 20 to 30 kilometres down the road. I cannot comprehend why this is so. It beggars belief. I will ask the Petrol Commissioner to visit Gladstone to establish whether market share is influencing unfair market prices and forcing them upon the people of Gladstone.

I also want to comment tonight on GROCERYchoice, which I spoke about earlier today. The government announced that it will be working with retailers and consumer organisations to further enhance the GROCERYchoice website with additional information and applications in coming months. GROCERYchoice provides consumers with practical grocery price information, which was not previously available to consumers, that will assist them to compare general price levels for a large number of products in different regions. Allowing consumers to make more informed purchasing decisions will promote more vigorous competition between supermarkets. It is the increased competition between supermarkets which may put downward pressure on grocery prices. The website publishes price information for seven typical baskets of goods, including basic items such as meat, fruit, vegetables and dairy products, which reflect weekly grocery choices by the average Australian household.

Sid Sidebottom (Braddon, Australian Labor Party) Share this | Link to this | Hansard source

Thank you to all members who contributed to that debate. It being 8.30 pm, the debate is interrupted in accordance with standing order 41. The debate is adjourned and the resumption of the debate will be made an order of the day for the next sitting.