Nick McKim (Tasmania, Australian Greens) Share this | Link to this | Hansard source

I move:

That this bill be now read a second time.

I seek leave to table an explanatory memorandum related to the bill.

Leave granted.

I table the explanatory memorandum. I seek leave to have the second reading speech incorporated in Hansard.

Leave granted.

The speech read as follows—

The Greens' Competition and Consumer Amendment (Divestiture Powers) Bill 2024 gives the Court the power, under an application by the Australian Competition and Consumer Agency, to order a company to reduce their power or share of the market by divesting assets if they are found to have misused their market power under section 46 of the Competition and Consumer Act 2010.

In effect, this Bill gives the Courts and competition regulators the power—where misuse of market power has occurred—to break up firms right across the economy, including, but not limited to the supermarket duopoly: Coles and Woolworths.

Some examples of a divestment order that a Court could make would be:

Monopolies and oligopolies are bad for consumers, bad for workers, bad for suppliers and bad for the economy more broadly.

When a corporation has an excessive share of the market they often abuse their power by:

Market concentration impedes competition and is a massive drain on the economy as a whole. It reduces productivity growth, slows innovation, impacts the quality of products available to consumers and leads to higher inflation through excessive prices.

Evidence shows the more market share a corporation has, the easier it is for them to maintain and increase their power. Instead of spending their time focusing on improving productivity they use their excessive power to aggressively block competitors and influence key decision makers to weaken any attempts at regulation.

In Australia, our economy is getting much less competitive as top firms across the economy hold a high and growing share of the market. Recent Treasury analysis shows that the market power of Australia's largest firms has increased in the last two decades. This has coincided with higher price markups and sluggish productivity. Average firm mark-ups in Australia increased by around 6 per cent between 2004 and 2017.

Australia's high level of market concentration across the economy has contributed to the inflationary cycle Australians are currently experiencing. At Estimates in February this year, Reserve Bank Governor, Michelle Bullock agreed that some firms are using a lack of competition and the cover of high inflation to hike prices above what would be required to meet increases in their input costs.

Ms Bullock joins growing consensus among economists, including at the OECD, the IMF, the European Central Bank, the Bank of England, the Federal Reserve, former ACCC Chair Allan Fels and the Australia Institute that corporations are price gouging to boost their own profits, in a cost of living crisis, which is making inflation worse.

Increased markups and price gouging represents millions more profits for corporations while everyday people increasingly struggle to afford to pay for essential products and services.

Every day that this Parliament refuses to act to reign in the power of big corporations, more and more people skip meals, fall behind on their rent and mortgage payments, and delay vital medical appointments.

Nowhere is the issue of market concentration more stark than in Australia's supermarket sector. In the 1950s Woolworths and Coles had around 10 per cent market share, and in the 1970s they had 34 per cent.

Today, the duopoly dominate the sector, with 65 per cent market share. According to former ACCC Chair, Professor Allan Fels, Australia's grocery sector is amongst the most concentrated in the world. It is more concentrated than comparator countries, including the UK, Germany and the United States.

At its most recent full year results, Coles posted $1.1 billion full-year profit, while Woolworths lifted its annual profit to $1.6 billion. Professor Fels has found that high market concentration has resulted in supermarket profits that are higher than they would be in a competitive market.

Take for example, the UK. It has 6 major retailers, who had operating margins in the 2022-23 financial year, ranging from 1 to 4 per cent. The top two retailers have 40 per cent market share. Not perfect, but significantly better than in Australia.

Contrast this with the profits of Australia's duopoly. In 2023, Woolworths reported an operating margin of 6 per cent and Coles reported 4.8 per cent.

Interestingly, the average operating margins of the major grocery retailers in the UK fell at the same time that the market share of discounters, Aldi and Lidl, was increasing.

It's clear that greater competition reduces supermarket profits and brings down prices for consumers.

When the Prime Minister was asked about divestiture powers a few weeks ago, he dismissed the idea as 'Soviet Union' policy.

However, this is not a controversial or radical idea. The United States of America has had divestiture powers for over 130 years, since 1890, where they've been used effectively to reduce the market power of companies in a range of industries, including the break-up of the AT&T telephone monopoly in the 1980s.

The UK also has divestiture powers. The competition agencies of Ireland, Italy and the Netherlands have all recently required the divestment of supermarket assets in order to increase local competition.

Gina Cass-Gotlieb, the Chair of the ACCC—Australia's national competition regulator—has agreed that if divestiture powers were introduced, they could increase competition in the supermarket sector and under economic analysis, this would bring down the cost of grocery prices.

The Australian Council of Trade Unions, led by Professor Allan Fels recommended Australia should introduce a divestiture law to allow big firms to be broken up where the Court determines a firm has broken competition law.

The Parliament should support this Bill as a critical part of the toolkit to stop corporations using their market power to gouge prices while raking in billions of dollars in profits.

This Parliament should support the interests of people over corporate profits and greed.

I commend this Bill to the Senate.

I seek leave to continue my remarks later.

Leave granted; debate adjourned.