Monday, 24 June 2013
I rise tonight to talk briefly about competition policy, particularly with regard to supermarkets in Australia. Competition policy is a complex area. In the grocery space, this complexity is added to by the sheer amount of public and media interest in issues surrounding the supermarket duopoly. One thing I can tell people, having taken over the competition portfolio only nine months ago, is that there are no easy answers, and you cannot just superficially brush over the issues. But there are serious concerns, and very obvious concerns, for those who want to take the time to have a look at competition policy, particularly food concentration and issues surrounding that, in Australia.
The public is concerned—and rightly concerned—about small businesses such as bakeries, butchers and smaller grocers, struggling to compete with big supermarkets such as Coles and Woolworths. The major supermarkets are estimated to control anywhere between 55 and 80 per cent of the package grocery market in Australia, depending on who you talk to. There is also considerable concern about the relationship these supermarkets have with farmers and other agricultural suppliers. And there is growing evidence about the uncompetitive tactics the major supermarkets are taking in negotiating agreements with suppliers and processors in the food industry. At the same time, consumers are obtaining low prices for their groceries. How do we handle a situation in which the suppliers to the supermarkets are unable to compete and stay in business and their future is in doubt? Do we doubt that low prices will continue and that they will stay at the level they have been at into the future?
A number of community concerns have also arisen as to new supermarket sites, both in my home state of Tasmania and around the country. Many communities around Australia are dealing with the impact of major supermarkets coming to an area and changing the very fabric of their local community. Just today there are media reports about Bungendore, a town near Canberra, dealing with a proposal for a new Woolworths supermarket. Similar to other reports in the media, it is titled, 'Woolies, Coles not welcome in Bungendore'. In my home state of Tasmania there is a proposal for a Woolworths supermarket in the northern town of Shearwater, not far from Launceston. Woolworths is planning to build a supermarket 700 metres from the current town centre. I attended a public meeting there over three months ago and was genuinely surprised by the amount of feeling in the room about the supermarket proposal. People in Shearwater are worried about their local businesses—businesses that have been there since they can remember, for generations—and especially where they will be located and if it is even viable for them to be located there, should there be a major supermarket development in their area.
A number of reviews have been conducted, and no doubt there has been significant discussion in this chamber, the Senate, over a long period of time in relation to competition issues in the food and grocery sector in Australia. A number of Senate inquiries over the past few years have looked into various angles of the grocery industry and have tried to assess the validity of claims of competition abuses and abuses of market power.
In 2008, the ACCC carried out a comprehensive review of the grocery sector. They identified barriers to entry for new entrants into the market—more specifically, access to new sites—as being the biggest issue for competition in the sector. The inquiry heard evidence that Coles and Woolworths engage in deliberate strategies designed to ensure they maintain exclusive access to prime sites. This is sometimes called greenfield acquisitions. You buy the land and keep it vacant, or you make sure that you have a portfolio of real estate properties sewn up long in advance before any potential planning, so should new sites become available they are ready to go for you and for your supermarket chain. Only recently this issue was raised again by the ACCC. The current head of the ACCC, Rod Sims, was reported in the media two weeks ago, following a decision by the ACCC regarding a new supermarket site in Glenmore Park. He said that supermarket competition in new suburbs such as Glenmore was an Australia-wide issue, not just an issue in Glenmore. This is the first time the ACCC has actually knocked back a greenfield site for a supermarket.
The Greens believe a way must be found to slow the growth of the major supermarkets to allow other players to increase their market share. Suppliers and small business also need protection from abusive market power. Back in 2008, the Senate inquiry found that there were over 700 greenfield sites that have been put aside by the two major supermarkets for future expansion. While the supermarkets have agreed to whittle away and reduce that number, I have not been able to find through any research or any inquiries to the major supermarkets exactly how many sites they do have. My understanding is that it is still several hundred sites.
Greens' policies are very clearly going to target this area in terms of new supermarket development. We announced recently that we would like to see a temporary ban on all new expansion by Coles and Woolworths while the ACCC carries out a comprehensive ex-post assessment of their decisions relating to supermarkets over the past decade, particularly in regard to site selection and land banking. An ex-post assessment would also look at creeping acquisitions and the problems surrounding them. That is simply that acquisitions, when taken individually in terms of their competition impacts, is a lot harder to address. Going back and having a look at them over time might provide an interesting reference point for the ACCC, particularly in terms of getting information that they need to properly assess competition policy in this country. Ex-post assessments are very common overseas, particularly in European countries. More than 60 per cent of EU nations conduct regular ex-post assessments, yet we have never conducted one in competition policy in the food and grocery sector in Australia.
We would also like to amend section 46 of the Competition and Consumer Act 2010 to prohibit misuse of market power in reference to anti-competitive price discrimination and predatory pricing. This would include the introduction of an effects test. We would also like to grant divestiture powers to the ACCC to enable it to split up companies that have too much market power. Of course, that would be subject to the details from the ex-post assessment. We would also like to ensure that the ACCC is properly resourced to take on cases in the competitive space. We will be announcing an additional suite of competition policies in the next couple of months going into the election.
One thing that concerned me was an article in the Financial Review nearly two months ago concerning Woolworths purchase of Barossa Valley Estate. Woolworths has already been in the wine industry. There have already been concerns around supermarkets directly buying processing facilities such as winemaking facilities. This was looked at by the ACCC who found no uncompetitive behaviour in terms of their previous acquisitions. The difference with Barossa Valley Estate is that they are also looking at buying the land that the vineyards are on and the vineyards themselves. I have written to Woolworths about this and asked them if they have further designs on buying agricultural land. This would be the first time that they would completely have closed the supply chain in terms of their business.
I think it would be a troubling precedent if large supermarkets were to buy agricultural land and the businesses on those lands. They have moved down the supply chain all the way from the retail end through to processing, and the agricultural land would be the last way to close the loop. That would potentially have significant impacts on their ability to price, particularly through predatory pricing, and force competitors out of the market. No doubt, farmers around the country would not be pleased to see the large supermarkets buying agricultural land. This is a range of issues that the Greens believe need to be addressed, and we have a series of policies to do that.