Richard Colbeck (Tasmania, Liberal Party, Shadow Parliamentary Secretary for Fisheries and Forestry) Share this | Hansard source

This inquiry of the Senate Standing Committee on Economics has been a significant inquiry over a long period of time. As Senator Milne said, it comes on the back of another inquiry that was conducted by this committee into relationships in the dairy industry, particularly between the processors and the dairy farmers. It has been quite instructive to work our way through this particular inquiry to get an understanding of how the particular relationships work and also get a sense of what the impacts might be. The reason the report has been delayed is that the committee wanted to give the market a period of time to go through a cycle for contracts to be renewed with dairy farmers so we could generally assess whether or not the actions of Coles in discounting their own brand milk were going to have an impact on dairy farmers. Although it is not directly having an impact on dairy farmers through Coles and their supply chains, there is absolutely no question at all that the concept of generic milk is having an impact on the price that is paid to dairy farmers. That particularly comes through the relationship that Senator Bushby talked about in contracts that Parmalat has with its dairy farmers in Queensland and northern New South Wales. They pay a cheaper price for milk that goes into a generic product than for milk that is supplied into one of Parmalat's branded products. So there is a direct link between the pricing of a generic product in the supermarket and the price that is paid to dairy farmers.

At the outset of this process we expressed concern that the places where these impacts were going to be felt were in Queensland, New South Wales and Western Australia—and that is effectively where the impact has been felt. In the more efficient states, in Victoria and Tasmania, there is capacity to supply milk into the market at a cheap price, and it is more sustainable. But it is not sustainable in the states where the cost of producing milk is higher, particularly Queensland and northern New South Wales. One of the real concerns that we had through this process was whether the supply of milk through the supply chain was going to be sustainable. We did hear a lot of evidence. We heard from pretty much everybody in the supply chain. I do acknowledge the fact that the supermarkets were prepared to give us some information in confidence around the supply of the product and the prices that they were paying, which did assist the inquiry.

I am really quite bemused by the comments of the government senators on this committee, particularly given the statements made by Minister Carr yesterday. Again it demonstrates the mixed messages that this government sends to the community and its suppliers. Minister Carr, in addressing the Food and Grocery Council yesterday, was quite bullish about his concern around generic products generally. We have government senators here today saying that this is all good, that it is not something to be concerned about and that the majority committee report went too far in is recommendations, much more so than the recommendations in the additional comments made by other senators.

I am not sure that industry can actually understand where the government is coming from. Did Minister Carr make the comments he made yesterday just because he was in front of the Food and Grocery Council and had to have something to say or is he genuine in what he was wanting to talk about? As Senator Milne said, there was an inquiry into the supermarket industry by the ACCC in 2008. I think government senators have made mention of that as well. So there has been a process. The ACCC did have a very good, close look at Coles and their operations as a result of the work of this committee. I think it is quite fair to say that, as a result of evidence we received, the ACCC did go back and have another look at what was happening in this process and then came out with a report a little while ago, saying that it was not in breach of the Competition and Consumer Act.

That brings me to some recent comments by the new Chairman of the Australian Competition and Consumer Commission, Mr Sims. I, along with other members of the committee, am encouraged by the new attitude that he has brought to the role since being appointed, in looking at issues around the way collective bargaining for dairy farmers works, issues in the supply chain and concerns about the relationships between supermarkets and the use of their power. I think it is good that that attitude change has come with the new chair. I look forward to engaging into the future with Mr Sims and testing those relationships. I do make comment, as Senator Milne did, about the market prediction service that Coles are providing to all of their suppliers, not just their primary producers, but then saying that those suppliers have to pay for that new system. I have some problems with that.

One of the other difficulties that I had with that whole process was the denial by Coles that this was a marketing campaign. There is absolutely no question that this is effectively just a marketing campaign to get people into their supermarkets—and I have not found anybody except Coles that believes this. There is nothing wrong with that, but I had great difficulty with their denial of that. The other thing I had, and have, difficulty with is the advertising that they instituted as a part of this campaign.

I have with me a copy of a full-page advertisement in the Advocate on 26 January, so this campaign started on Australia Day. The advertisement talks of full cream milk going from $2.47 down to $2 a litre and Coles lite milk going from $2.49 down to $2 a litre. During the hearings, the CEO of Coles, Mr Ian McLeod, told us that the majority of milk supplied into the market was in fact coming from another product, which was priced at about $2.09. So most of the milk that they were discounting was being sold at $2, coming down from $2.09. The impression that the advertisement gave was that there was a significant discount being given across the board for the milk that Coles was selling into the market. There is absolutely no mention in this advertisement of the product that was priced at about $2.09 being reduced to $2 and that that was the majority of the product being sold into the market. In my mind this is deceptive advertising and it is one of the elements of the Coles campaign that I really do have some concern about. I would like the ACCC to investigate it, because I believe it is deceptive advertising. I do not have a problem with Coles telling the market what is going on, but if the majority of product being supplied into the market was actually being sold at a cheaper price in the first place, they are giving the impression to consumers that they are getting a much, much bigger discount than they generally are. I think the ACCC should look very closely at that.

I look forward to continuing to work with the ACCC, certainly the dairy farmers and the processors. I think it is a bit churlish for government members to suggest that vested interests came out in this. Part of our job is to actually look through the process, and certainly perspectives came across. We need to look very closely at the process. I do look forward to the continuing activity of the ACCC in this space and, if there is opportunity for us to improve the law, to making sure that there is a fair balance of market power down the supply chain. I think that is a very important goal for us all to strive for, whichever political persuasion we come from. I remember writing that in my diary very early in my discussions with dairy farmers: how, in a market economy—and we must remember that is what we are operating in—we ensure a fair distribution of power through the supply chain so that farmers across the board, particularly dairy farmers, get a fair price for their product without undue use of market power.