Kevin Hogan (Page, National Party) Share this | Link to this | Hansard source

I move:

That this House:

(1) notes that:

  (a) the disparity of petrol prices between regional and rural areas compared to city prices is not explainable and must be investigated; and

  (b) allegations of misuse of market power, unconscionable conduct and the use of unfair contract terms by the large supermarket chains Woolworths, Coles and Aldi, must be investigated; and

(2) calls on the Government to:

  (a) request the Governor-General to establish a Royal Commission into the supermarket and petrol retailing sectors; and

  (b) draft terms of reference that will investigate all facets of the major operators of the supermarkets and petrol retailing industries, including but not limited to, business practices, conduct and culture with regard to:

     (i) misuse of market power;

     (ii) unfair contract terms;

     (iii) unconscionable conduct; and

     (iv) pricing collusion.

In 2008, there was a major ACCC inquiry into the power of supermarkets. This was followed by a Productivity Commission inquiry and two Senate inquiries. Fines were issued, a voluntary Food and Grocery Code of Conduct was adopted and the effects test legislation has been enacted. This is because it is well-known and documented that there are serious issues in relation to the major supermarkets. I say that things have not changed. The problems are systemic. It needs a royal commission.

Allegations of bullying, intimidation and unfair contracts are rampant. Suppliers won't make complaints for fear of retaliation. As we found out in the Woolworths action in the Federal Court last year, what the ACCC finds to be unconscionable behaviour, the court can declare is perfectly legal. As the ACCC's Rod Sims said at the time:

If you're a supplier subject to arbitrary demands, it's very hard to make future investment decisions in the face of financial uncertainty.

One supplier of a well-known grocery item from a different state from me told me that one supermarket wanted to run a special one item of theirs at cost price. When the supplier declined, the supermarket pulled 13 of the supplier's lines. They also lost priority shelf space for three months in retaliation.

Another was forced into administration after supplying fresh products for 30 years. A number of years ago, he tried to negotiate a price increase after his costs, including labour and power, had jumped 14½ per cent. He was told he had to keep his costs down. The suppliers said that the only way he could do that would be to pay under award wages, and he was not prepared to do that. A couple of months later, they received a call instructing them to accept a price cut across all their lines of between five and 30 per cent. It was the end of their business.

Many suppliers have also told me agreements are only verbal and are often ignored. The closest thing they get to a contract is the last delivery order, and the quantity of any order can be massively cut just hours before it is to be shipped because the supermarket has found a cheaper supplier. This leaves the supplier footing the bill of wasted produce. The extraordinary time it takes to negotiate with the supermarket to sell through its doors and the buy-in cost means moving to rival supermarkets can be prohibitive. In effect, each supermarket is its own single market, and the supplier is punished if it is not compliant. Those are just some examples. I could quote many more. The pattern, though, is that the supermarkets are bullies; they act like bullies, they are bullies to their suppliers, and it is not okay.

In the royal commission I have called for, I also want to look at Australia's retail petrol market. Why is there such a large disparity between pump prices in the capital cities and those in a regional community like mine? It is not unusual for there to be a 20c to 30c per litre differential between regional and city prices. This is not explainable by transport costs or any other cost input. In fact, in my region for the last five weeks, it has been 40c higher than in the capital city two hours ago. With very little public transport options in the country, and the longer distance travelled, it's a huge impost on people and regional economies.

As a member of the Standing Committee on Economics, I asked the head of the ACCC, Rod Sims, about this when he appeared before the committee in August 2016. Even he couldn't give a satisfactory answer as to why regional petrol prices are so much higher. It in fact seems to be one of the seven wonders of the world. There have been inquiries into this that have also not got to the bottom of why, which is why the royal commission needs to investigate this as well. People living in regional Australia, bringing up families, should not be gouged simply because of where they live.

The examples I have mentioned only skim the surface, but they do point to systemic problems. The behaviour of both threaten many small and medium-sized businesses in my community, because petrol is a serious cost input—and also if they are having to negotiate with the major supermarkets. I ask this House to take the lead on ensuring true and fair competition to support the aspirations of the largest employer of Australians—the small business sector—and to stop the rip-offs occurring at the petrol bowser for people living in regional Australia.

Maria Vamvakinou (Calwell, Australian Labor Party) Share this | Link to this | Hansard source

Is the motion seconded?

Luke Gosling (Solomon, Australian Labor Party) Share this | Link to this | Hansard source

The member for Page is quite right to raise the issue of competition policy. It's a significant concern for the whole Australian community. But, when he talks about issues affecting regional areas, I must say we feel that pain too up in the far north: in my electorate areas of Darwin and Palmerstone, but also further out into the Territory's regional areas in the member for Lingiari's electorate. We see the ramifications of market concentration. We see the effect of a lack of competition and higher retail margins that often do lead to significantly higher fuel prices and, in some cases, as the member for Page mentioned, outright gouging by shameless operators. I've seen it myself. When you're down south and you get back home to the Territory, you are paying 20c to 30c a litre more for fuel. This affects Territorians; it affects Australians around this country every day. It also impacts on businesses.

I do understand why some in the Territory, including in my electorate, and in other areas of regional Australia allege collusion. I understand that. I understand why the member for Page is so frustrated, as there have been many inquiries and many reports into this. I will offer that I think part of the problem is that resources have been stripped out of the ACCC, and that's a problem, but I do also want to provide some information about the way forward.

Currently, small businesses are less likely to take up private litigation against anticompetitive behaviour. This is because big businesses have deep pockets, obviously, and armies of lawyers, so the risk of a small business being bankrupted by legal fees is a significant disincentive to taking action against anticompetitive conduct. Labor's small business access to justice policy will restore the balance between small and large businesses by letting a small business request a 'no adverse costs order' early in a private court case regarding these abuses of market power. If the judge decides the case has merit, the small business will not have to pay the big business' legal costs.

Of course, we can't really rely solely on private litigation. The government should also back Labor's comprehensive suite of measures to create a stronger competition watchdog with the ACCC. Although the government has matched Labor's commitment to increase penalties under the Australian Consumer Law, it should also adopt our policy to adopt higher penalties for anticompetitive behaviour. It should match our commitment to effectively double the ACCC's litigation budget—an increase of $24.5 million a year—so that the watchdog can take on more cases of anticompetitive conduct to court.

In my electorate, and I'm sure in other regional members' electorates, we hear again and again: 'The ACCC is a toothless tiger. They can't do anything.' Yes, the ACCC is a toothless tiger if it hasn't got any teeth. If we're to put some resources back into the ACCC, it will have more teeth and it will be able to bite and cause the pain that we need to see in some of these unscrupulous companies that are making life difficult, particularly for people in regional areas. Labor has committed to giving the watchdog a completely independent market studies function so that it can explore public interest issues such as pricing discrepancies and increased market concentration. This does stand—and I understand why the member for Page is so frustrated—in stark contrast to the current government's position of sitting on its hands until the competition issue is at crisis levels and the minister needs to request a market study.

On this side, we have committed to ensuring courts apply for higher penalties for conduct that targets disadvantaged Australians and to prioritise such investigations. Many of these are in regional and rural areas. In addition, Labor is driving a better deal to put more money back into the pockets of car owners and to give independent repairers a boost. That's part of a suite of things that we are doing on this side to help people in regional and rural Australia.

Rebekha Sharkie (Mayo, Centre Alliance) Share this | Link to this | Hansard source

I rise to share the concerns expressed by the member for Page, and I thank the member for this motion. I recognise that petrol prices are predominantly dictated to us by global oil markets, over which the Australian government has little control, and I also recognise that the government relies upon the fuel excise tax to fund the maintenance of our federal roads and infrastructure.

But, as the member for Page rightly points out, there is one area in which the government certainly can act, and that is to enforce appropriate competition policy. I feel, as a member with a rural electorate, that we pay a rural petrol tax. I recognise that the cost of petrol is likely to increase somewhat to account for transportation costs, and further if it is shipped. But I also recognise there are higher operational costs in rural and regional Australia to account for this as well, and we are paying an extraordinary amount extra, above what metropolitan Australians are paying.

There are reasonable grounds to suspect that there is anticompetitive behaviour occurring, and, as such, collusion or abuse of market power between regional and rural Australia and metropolitan Australia, and the Australian Competition and Consumer Commission should step in. Farmers, growers and other rural Australians have long known that Coles and Woolworths have sought to squeeze Australia's agricultural supply chains in the pursuit of short-term profit at the cost of the long-term viability and sustainability of agricultural production for the domestic markets in this country.

It's never completely clear whether anticompetitive behaviour, as such, as a tactic—collusion—is occurring or not. But what is clear is that there is tacit complicity in the tactics that the Coles and Woolworths giants use against their agricultural suppliers. The way that they relentlessly squeeze our agricultural producers is unconscionable. It is this systemic undermining of the viability of Australia's agricultural production that I believe warrants further investigation.

The ACCC undertook a valuable investigation into the issue in 2008, producing a report on the competitiveness of retail prices for standard groceries. I would urge every member in this place to read the book Supermarket Monsters by Malcolm Knox; it is a sobering read, as to the price of the dominance of Coles and Woolworths, the two mega-retailers in Australia. In hardware, in petrol, in general merchandise, in liquor and, above all, in groceries, Coles and Woolworths jointly rule Australia's retail landscape. On average, every man, woman and child spends $100 each per week in their outlets. Knox reveals in his book the intimidating tactics of this duopoly. They take our farmers, our food producers, right to the edge. They don't want to kill them off; they just want to take them right to the edge, where they're on their knees, and then, when they think that they're on their knees, they'll take them even further. I know so many producers who say, 'I just can't afford to deal with the duopoly. I'd rather forgo production than have to deal with such difficult circumstances, where, if there's a special on, it's expected that the producer will wear the cost, over and over again.'

So, quickly: firstly, I recommend that the ACCC, as a matter of urgency, refresh their 10-year-old inquiry, but also provide specific recommendations on what regulations the government needs to implement to improve the operation of free and fair competition in domestic markets for agricultural products. Let's be clear: no other nation in the world has the concentration of our supermarket duopoly, and it affects our farmers more than anyone. Secondly, the ACCC desperately needs divestiture powers—that is, the power to break up uncompetitive or market-power-abusing monopolies and duopolies. I know the government has talked about this with respect to power companies. It has been the position of Centre Alliance for quite some time that we should have this more broadly across the scope. We believe that those powers should lie with the Federal Court, because ultimately we have a duopoly system, and the fines that now happen with the courts are just part of doing business when companies—Coles and Woolworths, in particular—are found to be anticompetitive. It's just a cost of them doing business. We need to have the power of courts to break them up so that their behaviour will change. I commend the member for this motion. We need to talk more about this in this place.

Debate adjourned.

Sitting suspended from 13:25 to 16:00