John Forrest (Mallee, National Party, Shadow Parliamentary Secretary for Regional Development) Share 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.

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