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Monday, 30 August 1999
Page: 7937


Senator FERRIS (4:08 PM) —This report of the Joint Select Committee on the Retailing Sector represents a very important step in addressing the dramatic changes that have occurred in the food retailing industry, particularly in the past decade. The three major retail chains, Coles, Woolworths and Franklins, now have 75 per cent market share of the supermarket and grocery industry, according to the ABS figures. This is one of the highest levels in the OECD. The changes in the way that we shop have had considerable financial pressure on the small business sector and on our independent and small shopkeepers in the corner store.

Our inquiry into the retail sector was established in December last year with terms of reference to examine the degree of industry concentration and to observe how this compared with other countries. We have actually tried to see what possible revenue neutral action our government could take. Earlier this year, because of the level of interest in this inquiry, we adopted a wider interpretation of the terms of reference, including to examine the purchasing practices of the retailing sector and particularly those affecting primary producers. We wanted to see how industry concentration in this sector was affecting rural and regional communities. I must say that this was my primary reason for joining this committee. It is an area in which I have a great interest.

In all, the committee received 332 written submissions, which represented a very wide range of individuals, small businesses, retail associations and producer groups, and, of course, a very impressive array of submissions from the industry major suppliers. We conducted hearings right around Australia, including some very interesting hearings in small towns, in Cooma, Bendigo, Dubbo, Kingaroy, Bundaberg and so on. A total of 183 people gave evidence during the committee's hearings.

There are, as Senator Schacht has already said, a total of 10 recommendations, the most important of which I believe is the establishment of an independent retail industry ombudsman. This would allow many of the complaints that were raised with us during the hearings to be taken to a higher level, to a retail industry ombudsman, who can, if you like, send out to the state legislatures particular complaints relating to those jurisdictions. Most importantly, the ombudsman would be completely independent of any of the industry majors and would be required to report his activities to parliament at least twice a year. We recognise the need for this independence from the majors, and it was certainly a point made to us many times over during the inquiry.

In assisting small business, the ombudsman would also be required to make use of the mandatory retail code of conduct, which we are suggesting be approved by the ACCC. This code will contain a `truth in branding' provision whereby businesses which are subsidiaries of a retail major would be required to note that association on their shopfront signs and on their stationery. We were surprised many times when we took evidence from people to find that there was a remarkable level of ignorance about the ownership of some of the apparently independent stores in Australia which are, of course, owned by the majors such as Coles Myer. This particular recommendation will address that issue.

The code will also contain provisions relating to transparency in those volatile supply markets which are characterised by risk exposure and the perishable nature of many of the products that are offered for sale. It will address product labelling requirements, contractual uncertainty and also the general principle of like terms for customers to ensue a greater transparency. Again and again this issue was raised with us: why is it that a particular product that is sold to us is cheaper in the larger supermarkets? It was asked by the primary producers why products that are perishable suddenly become a glut on the market and the price drops when only a matter of days before the product was not available for sale at all.

Mandatory notification of retail grocery stores bought by publicly listed companies will also be contained in the code, and the ACCC will be required to assess the impact on local businesses of such acquisitions. We heard evidence of a small country town in New South Wales where one of the majors now owns the two large retail food outlets in the town, following a takeover.

The committee has recommended that the Trade Practices Act be amended to give the ACCC the power to take representative actions and to seek damages on behalf of third parties. The evidence was that individual shopkeepers did not feel strong enough and certainly were not financially equipped to take action against the larger suppliers. Some of the stories from this evidence were really quite tragic. Furthermore, we have recommended that when the ACCC assesses mergers and acquisitions it should consider the impact on heavily concentrated regional markets.

Small businesses will also have greater access to the unconscionable conduct provisions of the TPA as it is recommended that the transactional limitation be increased to a level of $3 million. Future acquisitions of suppliers/wholesalers by retailers and vice versa will also be subject to mandatory notification and approval by the ACCC so that the competitive impacts of such acquisitions can be more effectively determined.

Looking to the future, the committee's last recommendation is for parliament to reconstitute the committee three years from now so that we can review the progress of the other recommendations that have been made and, in particular, the progress of the code of conduct to decide if further legislative action is necessary. I am particularly keen to see the infusion of a greater degree of transparency in relation to the rent and occupancy costs of small business.

The secrecy and complexity of the current arrangements ensure that landlords are in a very powerful position. The knowledge that they have and the difficulty in accessing it enables some landlords to engage in discriminatory and predatory pricing in relation to the provision of retail space. The Small Retailers Association of South Australia, for example, claimed that two major chains in that state often pay only 20 per cent of the going rate. Some of the evidence that we received in relation to this was quite heartbreaking. I think in particular of a couple of small businesspeople in country towns who had entered into what I would call quite open leases. They had paid the highest financial price.

I am very pleased that this committee has recognised the imbalance that exists between landlord and tenant and has recommended the implementation of a uniform retail tenancy code. In my view, it is vital that we give small business the ability to make informed decisions more effectively when deciding on where to take their rental dollar and at what cost—as an input cost—to their businesses.

In conclusion, the committee did appreciate the opportunity to listen to the many people who appeared before the inquiry and gave evidence. It was clearly a daunting experience for them. For many it was the first time that they had appeared before a committee such as this but they coped very well. I think many of them were buoyed by the level of interest, particularly in regional towns, that some of the other shopkeepers showed.

This is very clearly an issue which has been bubbling along in the community, particularly in regional Australia, for a very long time. From the car parts store owner in Dubbo to the butcher in Kingaroy we received many very well argued and certainly very well prepared submissions. The whole process was an excellent opportunity for my colleagues and me to gain a very valuable insight into this critical activity, which is such an important part of the private sector.