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Wednesday, 11 February 2009
Page: 952

Dr STONE (3:39 PM) —The Trade Practices Amendment (Cartel Conduct and Other Measures) Bill 2008 is supported by the coalition because it aims to curb the behaviour of competitors in a market where they manipulate prices, rig bids, restrict output or attempt to divide and share markets. Put simply, a cartel is an agreement between competitors not to compete. Such behaviour ultimately disadvantages the customers, reducing their choices and often also leading to higher prices. It squeezes their suppliers, particularly in their viability and capacity to innovate, and it can kill off other competitors, of course, who do not want to be—or cannot be—part of that dominating cartel.

The bill outlines that cartel type offences should no longer be described with the words ‘with the intention of dishonestly obtaining a benefit’. That concept of dishonesty has been replaced by the general principles of criminal responsibility applicable under the Commonwealth Criminal Code, which deal with intention, knowledge and belief. Thus this bill criminalises conduct that was already prohibited under existing prohibitions. Stamping out cartel behaviour is a very serious concern for any economy and any population of consumers, but it is particularly serious for Australian communities. We have some of the globe’s greatest concentrations of ownership in areas such as retail—and within retail, in groceries, alcohol and hardware sales.

The duopoly of Coles and Woolworths, for example, has cornered over 70 per cent of the Australian grocery market through successive small and larger acquisitions over time. As a consequence, suppliers to these big two have very little leverage. Each year, even more suppliers of fresh and manufactured grocery lines become price takers as the supermarkets continue to chase market share and supply chain control through their relentless pursuit of home brands. This has serious consequences for the viability of primary production and food manufacturing in Australia, as well as for all of the support industries which, together, take food from paddock to plate. I am talking about the irrigation infrastructure industries, the transport industries, all of those who are involved with packaging and logistics and, ultimately, all those who are marketing products.

There are also, of course, environmental consequences when you squeeze your suppliers so hard that they have to cut corners or simply drop back in the queue of supplying altogether. Every farmer knows that it is very difficult to be green when you are in the red. When farmers are pushed too far in price for product and are pushed into debt, all the environmental services farmers contribute to the community suffer, including the maintenance of fresh water, fresh air, biodiversity protection and protection of nutrients in the soil. None of those services can be delivered by a farm sector which is, every year, being squeezed harder and harder on price for its product. Vegetable and fruit producers in the Goulburn and Murray valleys in my electorate of Murray have not seen an increase in returns for fine, clean, green produce for decades, when you consider the costs that they have to bear and the virtually flat price they receive for produce.

There are also ever-increasing demands made by the duopoly for suppliers to increase packaging quality and quantity and in other ways to add value to the product—a stamp on the apple here, an extra section in the box there, the keeping of the product longer in the cool stores or the delivering of it within a five- or 10-minute slot. All of this additional value-adding to the supplier’s task comes, of course, at a cost to the supplier. They do not get the price back from the retailer to cover these additional costs. Complaints from suppliers are ineffectual when the message sent back down the line from the retailers is that there are others in the queue ready to sell to them anytime.

I have to say, too, that the transport sector is often given an impossible deadline or timeslot in bringing product to market—often they are owner-operator businesses and their margins are extremely thin. When you have an extremely concentrated retail sector—such as there is in the supermarket sector—and you may be asked to take products from, say, Shepparton to Sydney, with only 15 minutes leeway for on-time delivery. If you are held up on the way on the Hume—your logbooks are checked yet again and you miss that slot—that could be the end of your capacity to pay your hire-purchase and to survive in that owner-operated business.

The coalition tried to deal with this sort of market power leveraged against those in the upstream section of the value chain. We brought in regulations which tried to apportion blame for an accident, for example, on the parts of the value chain which were responsible for unrealistic deadlines or which were forcing dangerous practice in order for the business to comply with the demands of, say, very tight time frames of delivery. I am regularly told by my own transport industry—and we have one of the biggest regional transport sectors in Australia in the Murray and Goulburn valleys—that, even with that regulation, there is a danger to drivers, as they try their best to meet unrealistic deadlines, knowing that, if they do not, there will be another owner-operator transport business contracted for the next job.

In particular, we see the powers of the duopoly and the need to have very close scrutiny from the ACCC when we look at the dairy industry and its products in Australian supermarkets. The prices paid by the grocery retailers for dairy products do not reflect domestic demand or competition because, quite simply, there is hardly any domestic competition when you have only got two major retailers, who have prices set centrally across the country. The duopoly’s competition comes from the opportunity Australian dairy manufacturers have to alternatively supply the export markets—to survive in these highly corrupted, subsidised export markets. Right now, we are staring down the barrel of a collapse in prices and demand in those export markets for dairy products, so you can imagine the opportunities now available to our big retail duopoly to do whatever they like with the Australian dairy suppliers in terms of prices.

In an extraordinary article in Queensland Country Life on 6 February—just a week or so ago—Mark Phelps wrote that Woolworths would reduce milk prices by 11c a litre on all drinking milk products on 23 February—in a week or so. This will be ‘in line with the end of the dairy adjustment levy’. Surely, the owners, the shareholders of the duopoly are aware that the actual producers of market milk in Australia had a 50 per cent cut in the prices offered to them by their manufacturers several weeks ago. These prices are below the cost of production for most manufactured milk suppliers. This industry is high cost but highly efficient, and we have managed in Australia to retain self-sufficiency in supplying good, clean, healthy dairy products across the nation for the last 150 years or so. Unfortunately, without a price rise in our domestic market, without the retailers being prepared to pay a decent price to the Australian dairy manufacturers, we are looking at the loss of our market milk producers in Australia—in particular, the irrigated market milk producers in my electorate of Murray.

We have a retailer—in this case it is Woolworths—boasting about dropping its milk prices in its supermarkets by 11c a litre on 23 February. We wonder what consumers will say when the dairy suppliers of manufactured milk go to the wall and all of the product in the future is from New Zealand or maybe from China. It is a prospect that I find daunting and a prospect that must make states like Victoria shudder, given that exports of dairy powder, for example, have been Victoria’s biggest agricultural export out of Geelong for many, many years.

So I am very concerned about the concentration of power that exists in Australia in the retail sector—particularly in relation to groceries and food production—about the consequences of there not being enough competition within Australia in food and beverages markets, about the consequences for the environment and about the consequences for rural communities who depend on the work generated by paddock-to-plate production. I am concerned that there does not seem to be any conscience when it comes to the big duopoly in relation to the long-term security and wellbeing of their Australian suppliers. There seems to be no sense that the consumer might want to continue to have a choice of Australian product as well as imported no-name brands from heaven knows where. We have seen food contamination scares internationally which should make every parent shudder. Australia’s food production is so highly regulated, so clean, that we can guarantee Australians a healthy eating future, but I am concerned that our duopoly in the grocery supermarket line has no such similar, or common, view.

We are also going to have to be very careful about concentrated power in areas like water sale and delivery. In Victoria, for example, our irrigated agriculturalists have no choice when it comes to who sells them their water and how that water is managed. The prices go up exponentially and the service does not necessarily match at all the price rises that are occurring. And, of course, in irrigated agriculture in northern Victoria, you pay for water that you cannot receive due to the drought. I think it is very important for the federal government and the states to look at cases where state owned authorities—in this case, irrigation authorities—hold monopolies at the expense of true innovation in delivery and where there is not world best practice, when, in the case of Victoria, they just have to look over the border into New South Wales to see how much better irrigation authorities can do when they are stakeholder owned and driven.

In making these remarks I want to say that we do appreciate the work of the ACCC and we watch their performance and behaviour carefully. There has been concern in the past that they were not really serious about cartel-like behaviour. Obviously, we need them to be strong and we need to be quite confident at all times that they behave and work with true authority and in a non-partisan way.

I also commend this bill in that it adds provisions which will help in detecting cartel behaviour—for example, telephone interceptions. I certainly believe that we must be very careful about protecting the so-called whistleblowers, who often expose themselves to real peer group sanction and public opprobrium when they tell the truth about cartel type behaviour. Very often, these whistleblowers are not adequately protected, yet they are the real heroes when it comes to exposing practices which damage the community at large or to smaller sectors. I commend this bill to the House. It deals with important issues not only for the Australian economy but also, in particular, for Australian suppliers of raw and manufactured product into our markets. It is extremely important that we watch, carefully regulate when we can and, indeed, apply greater sanctions if it appears that concentration of ownership or cartel behaviour occurs to an even greater extent in the future.