Nick Xenophon (SA, Independent) Share this | Link to this | Hansard source

I seek leave to make a statement about the incorporation of my second reading speech on the Trade Practices Amendment (Guaranteed Lowest Prices—Blacktown Amendment) Bill 2009.

Alan Ferguson (SA, Deputy-President) Share this | Link to this | Hansard source

Will it be a short statement, Senator Xenophon?

Nick Xenophon (SA, Independent) Share this | Link to this | Hansard source

Yes. It will be less than 30 seconds.

Leave granted.

I thank the Senate. It has been drawn to my attention that, due to a technical error, my second reading speech on the Trade Practices Amendment (Guaranteed Lowest Prices—Blacktown Amendment) Bill 2009 has unfortunately not been incorporated in the Hansard along with Senator Joyce’s fine speech on the bill. Given that the relevant Hansard has now been finalised, I seek leave instead to have my speech on the bill incorporated in today’s Hansard.

Leave granted.

The speech read as follows—

Along with my colleague, Senator Barnaby Joyce, it is with great satisfaction that I jointly introduce with him the Trade Practices Amendment (Guaranteed Lowest Prices—Blacktown Amendment) Bill 2009 or the Blacktown Amendment as it has become popularly known.

The Blacktown Amendment has been named in honour of the independent petrol retailer Ms Marie El Khoury in the Sydney suburb of Blacktown.

Marie El Khoury has been a tireless campaigner for a fairer deal for independent petrol retailers and motorists.

She represents the silent majority of small business people out there in every part of this country who are on the receiving end of the ever growing market share and power of the big supermarket chains, the big banks and the big oil companies.

Marie and her brother Elia with the support of their family have stood up to send a message to the wider community about the plight of small businesses in this country and how consumers will suffer higher prices if those small businesses are driven out of the market.

To make her point, Marie has on various occasions sold petrol in Blacktown for as low as 41.9 cents a litre – effectively the cost of the fuel excise and the GST on that.

She has received tremendous support from the public that have waited patiently in line to buy cheap petrol and who have returned to support her business.

She has received great support from the media.

She has received a great deal of correspondence from fellow small business people who, like Marie and Elia El Khoury, face an ongoing struggle to combat the games played by the major supermarket chains and the oil companies.

These games include predatory pricing allegations where the major supermarket chains and the oil companies can sell petrol at a retail price significantly lower than the published terminal gate price for petrol on the given day.

Given that the terminal gate price may be the wholesale price at which independents are forced to buy their petrol, it is clear that independents are being forced to buy petrol at a price higher than the price at which the major supermarket chains and the oil companies are retailing the petrol.

It doesn’t take too long for independents to go out business if they are forced to sell at a loss to match the major supermarket chains and the oil companies.

Sadly, that is exactly what has been happening with independent petrol retailers.

Over the years an increasing number of independent petrol retailers have been driven out of business.

Its not difficult to understand how that’s happened.

Quite simply, independents petrol retailers are ambushed in two ways.

First, they are forced to buy at inflated wholesale prices.

That reflects at lack of real competition at the wholesale level.

The oil companies have a stranglehold over wholesaling in this country and this gives them immense pricing power which of course they use whenever they can.

As a result, independents will at times struggle to buy their petrol at competitive wholesale prices.

On this issue we need greater transparency over the wholesaling arrangements between the oil companies.

We need greater transparency over wholesale prices paid by independents.

These are issues on which we need action from the Government and the ACCC.

In this regard, I call on the Government to strengthen OilCode as mandated under the Trade Practices Act to provide greater transparency over wholesale prices.

Of course, we need more competition in the petrol industry.

This requires that independents have a strong presence in the market.

The more independents we have in the market the more genuine and vigorous the competition in the market.

In this regard, I call on the ACCC to intervene to ensure that independents get as many of the Mobil service stations earmarked for Caltex as possible.

This will be a test of Australia’s competition laws and whether or not section 50 of the Trade Practices Act is sufficient to stop the growing numbers of mergers that are leading to Australia having some of the most concentrated markets in the OECD.

Currently, around 97% of mergers considered by the ACCC are approved by them.

Let’s hope for competition sake that the Mobil service stations end up in the hands of independents.

Otherwise, we will see higher petrol prices in the same way that we have seen higher bank fees and charges following the Westpac takeover of St George, a merger approved by the ACCC.

The second way in which independents are ambushed is through the practice of geographic price discrimination.

This occurs where a retailer sells the same product at a different price at different locations.

With petrol a major supermarket chain may charge one price at one retail outlet and a different price at another outlet even though they may be in adjoining suburbs.

Why the difference in price?

Well, some may say that’s just competition at work.

But such a reaction however is only partially true and misses the point.

Yes, the price is lower in a local market where there is competition from an independent retailer, but of course the price is higher in those ever increasing number of local markets where there is an absence of competition from independents.

The lower prices where there are independents only last as long as the independents do.

Once the independents are gone so is the incentive for the major supermarket chains and the oil companies to compete aggressively on price.

To do so would only cut their profit margins.

It is far easier for the major supermarket chains and the oil companies to act as a cosy club where there are no independents.

They may still compete on price but will only do so within in a much narrower price range than they would have if they were facing independents.

Experience has shown that where there are independents in the local market petrol prices can be significantly lower than where there are no local independents.

In engaging in geographic price discrimination the major supermarket chains and the oil companies are pursuing a simple but devastating practice that ambushes independents and disadvantages consumers.

This occurs because the lower prices in local markets where there are independents are not only being used to drive out those independents but those lower prices are being cross subsidised by consumers being forced to pay higher prices elsewhere.

The major supermarket chains and the oil companies can cross subsidise the lower prices to drive out independents by charging consumers much higher prices across their networks.

What do the major supermarket chains and oil companies do once the independent is driven from the market?

Of course, they raise their prices.

As there are fewer and fewer independents there are fewer and fewer locations with lower prices and naturally more and more locations with higher prices.

These higher prices reflect a collapse of competition in a local market following the exit of an independent.

The practice of geographic price discrimination continues until the independents are all driven from the market.

Where new independents seek to enter the market the practice of geographic price discrimination is rolled again with typically fatal consequences for the independent and consumers.

We have seen this not only in petrol, but also in relation to groceries, liquor, fruit and vegies.

There can be no doubt that geographic price discrimination is anti-competitive.

It is detrimental to consumers, competition and small businesses.

Accordingly, we are proposing the Blacktown Amendment whose purpose is to deal with geographic price discrimination.

The Blacktown Amendment does this by stating that a company must, at a retail outlet operated by the corporation, sell or offer to sell a particular product to a consumer at a price being the lowest price the product is offered for sale at the same time at any retail outlet operated by the company under the same trading name within a distance of 35 kilometres.

The Blacktown Amendment will require that the company sell the same product at the same price at all its retail outlets in the same geographic area.

The Blacktown Amendment will implement a guaranteed lowest prices rule that will ensure that consumers get guaranteed lowest prices everyday and everywhere.

Now the critics will say that the Blacktown Amendment will lead to higher prices.

This criticism is ill conceived as the only thing stopping the major supermarket chains from raising their prices at the moment is independents in the market place.

These independents will be there after the Blacktown Amendment comes into force so if the major supermarket chains choose to raise their prices under the Blacktown Amendment they will not only be treating their customers with contempt but they will lose business to those independents.

The independent will always keep their prices lower to compete with the major supermarket chains because that’s what independents do to get the greater volumes they need to survive against the major supermarket chains.

So the Blacktown Amendment will lead to lower prices because, first, the major supermarket chains need to keep their prices low to compete with independents and, two, because those lower prices to compete with independents will need to be offered by the major supermarket chains to all their other customers in the same geographic area.

The critics will say that we don’t need the Blacktown Amendment as the market will sort itself out.

Well, the fact that the market is failing is precisely the reason why we need the Blacktown Amendment.

The grocery and petrol markets are highly concentrated and that’s what’s pushing up prices in those local markets where there are no independents.

The market has failed in those local markets where there are no independents.

The Blacktown Amendment will act as a proxy for competition in those local markets where competition has collapsed or is failing.

The Blacktown Amendment is not anti-profit making.

It’s is just anti-profiteering in those local markets where competition has collapsed or is failing.

Others will say that this will prevent major retailers from competing on price.

Quite the contrary.

The Blacktown Amendment does not prevent retailers from changing their price.

All it does is to require major retailers to be consistent in their pricing for the benefit of all consumers.

Many retailers already do this.

Of course, the Blacktown Amendment recognises that there will legitimate reasons for isolated differences in prices.

In this regard, the Blacktown Amendment contains a number of clearly defined exceptions relating to factory outlets; closing down sales; imminently perishable products; damaged products; products to be permanently deleted from an outlet; and products that have deteriorated in value.

In summary, the Blacktown Amendment is a targeted measure to deal with the anti-competitive practice of geographic price discrimination.

It does this by ensuring that consumers have the benefit of guaranteed lowest prices.

Ultimately, the Blacktown Amendment is pro-consumers, pro-discounting, and pro-small business.

It is carefully balanced and in this regard we would like to acknowledge the work done on the Amendment by Professor Frank Zumbo from the University of New South Wales. Professor Zumbo is a dedicated consumer advocate who has long pursued a strong and effective Trade Practices Act.

Finally, we would like to thank Marie El Khoury and her family for their excellent efforts in seeking a fairer and more competitive market place for the benefit of consumers and small businesses.

The Blacktown Amendment is ultimately a tribute to Marie El Khoury and all Australian small businesses.

I commend the bill to the Senate.