Rachel Siewert (WA, Australian Greens) Share this | Link to this | Hansard source

asked the Minister representing the Treasurer, upon notice, on 25 November 2011:

(1) Given that the Minister has stated that he is concerned that the retail supply chains are getting so badly damaged and consumers' choices are being limited, can an explanation be provided as to whether the Labor Government members were fully advised prior to introducing the National Competition Policy that it was not based on classical market theory but the Baumol based 'contestability theory', which supported corporate market dominance.

(2) Is the Minister aware that the Baumol based 'contestability theory' was the basis for the major recommendation for removing the restrictions on price discrimination by retailers to their suppliers.

(3) Is the Minister aware that in their 2008 grocery price inquiry, the Australian Competition and Consumer Commission (ACCC) avoided admitting that the basic pre-conditions of 'contestability' did not exist in Australia's retail grocery sector.

(4) Is the Minister also aware that the ACCC avoided assessing the impacts of the National Competition Policy on the Australian retail grocery sector in their 2008 grocery price inquiry.

(5) Given that the ACCC chose to ignore that the majority of Australia's primary producer organisations advised it that there was a growing gap between farmgate and retail prices, how will the Minister ensure that the ACCC will properly assess the serious concerns and complaints of Australia's grocery supply sector.

Penny Wong (SA, Australian Labor Party, Minister for Finance and Deregulation) Share this | Link to this | Hansard source

The Treasurer has provided the following answer to the honourable senator's question:

In October 1992, all levels of Government agreed to establish an independent inquiry into competition policy in Australia (known as the Hilmer inquiry), which conducted extensive public consultation and reported to Government in 1993. The Hilmer report was released publicly, prompting widespread discussion and review of the principles proposed and their basis in economic theory including independent analysis of the potential benefits of the Hilmer reforms by the Industry Commission (a predecessor of the Productivity Commission). The Hilmer report considered a wide range of evidence, submissions and economic theories, including but not limited to contestability theory, in arriving at its recommendations.

Publishing comprehensive analysis of the reform proposals and articulating the economy-wide benefits of reform culminated in 1995 with all Governments agreeing to an ambitious plan to promote enhanced competition, known as the National Competition Policy (NCP), which was implemented over a ten year period. In 2005, the Productivity Commission Review of National Competition Policy Reforms estimated that NCP reforms have served to permanently increase Australia's GDP by around 2.5 per cent or $A20 billion.

National Competition Policy and the subsequent Council of Australian Government's reform agenda play an important role in enhancing competition in the Australian economy to promote economic growth and efficiency. A fundamental principle underlying competition policy is that the competitive process – which maximises the wellbeing of both consumers and producers – should be protected, rather than individual competitors or particular market structures.

The then Trade Practices Act 1974 contained an explicit prohibition from 1974 to 1995 on specific types of price discrimination which had the effect of substantially lessening competition. The repeal of the former section 49 of the Act, which prohibited anti competitive price discrimination, was recommended by the Swanson Committee, the Blunt Committee and the Hilmer Committee. The inquiries raised various concerns, including that the former prohibition: caused price inflexibility; reduced price competition; was contrary to economic efficiency; and had not been of assistance to small business. The Hilmer Committee noted that price discrimination generally enhances economic efficiency, except where such conduct would contravene sections 45 (anti competitive agreements) or 46 (misuse of market power).

The prohibition was subsequently repealed in 1995. Its repeal was subsequently endorsed by the Dawson Committee.

International experience has been consistent with the repeal of section 49. Canada repealed its anti competitive price discrimination provision in 2009. The United States Antitrust Modernisation Commission in its 2007 report recommended that the Robinson-Patman Act 1936 (RPA) be repealed. This was consistent with the reviews which reported in 1955, 1969 and 1977 that recommended the repeal or substantial overhaul of the RPA.

In the Report of the ACCC inquiry into the competitiveness of retail prices for standard groceries in 2008, the ACCC concluded that the grocery retailing market is 'workably competitive' but that there are a number of factors that limit the level of price competition. The report also noted the positive impact that ALDI has had on grocery prices competition. Since the release of the report, Costco has also entered the Australian market and the expansion of ALDI has led to further price competition.

The ACCC, as the independent regulator responsible for the investigation and enforcement of the competition and consumer laws, is actively monitoring issues in the supermarket sector and is equipped to take action should evidence arise of a breach in the Competition and Consumer Act 2010. The Government is confident in the capability of the ACCC to enforce the law.