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Tuesday, 25 June 2013
Page: 7056

Mr CRAIG KELLY (Hughes) (16:57): I rise to speak on the Grape and Wine Legislation Amendment (Australian Grape and Wine Authority) Bill 2013, the Primary Industries (Customs) Charges Amendment (Australian Grape and Wine Authority) Bill 2013 and the Primary Industries (Excise) Levies Amendment (Australian Grape and Wine Authority) Bill 2013. These three bills amend the Wine Australia Corporation Act 1980 and also the Primary Industries (Customs) Charges Act 1999 and the Primary Industries (Excise) Levies Act 1999 to implement the merger of the Grape and Wine Research and Development Corporation and the Wine Australia Corporation to create a new statutory authority, to be called the Australian Grape and Wine Authority. This authority will direct research and development in the industry and it will have a combined budget of close to $35 million, which will come jointly from levies upon growers and from a matching contribution from the taxpayer.

This is an important move. It is supported by the industry and is also supported by the coalition. The wine industry is perhaps one of our most important agricultural industries. Here are some of the numbers from 2011. In Australia our consumption of wine was 455 million litres, which works out to something like 20 litres per person. I am sure there are some that drink quite a lot more than that. Our exports in this industry are even more impressive. Something like 66 per cent, or two-thirds, of our production of wine in Australia is exported. In the last calendar year we exported over 700 million litres of wine.

It is very important that this industry remains diverse, has many players and continues to experiment—to develop new ideas and new methods of marketing—and to look for new export markets. It is also important that we have an environment that encourages investment and risk-taking amongst the entrepreneurs in the industry. However, there are threats to this industry. There is the threat of the carbon tax. A typical winery, producing 50,000 tonnes, will see its electricity bills increase close to $500,000. If the current government is re-elected, we will have the carbon tax extended to transport costs, and that would also have a substantial effect on the wine industry. Every grape has to be moved around the country. Movements from country areas to city ports will increase the tax.

Perhaps one of the main threats to the industry is the increasing market concentration in our retail sector. In that sector, under the current legislative settings of the Trade Practices Act, today we have two players, our supermarket duopoly, controlling something in the vicinity of 60 to 70 per cent of the wine sales of our nation. That has come about simply because of the legislative settings of our Trade Practices Act, which is based on the delusion that small business in the industry cannot be efficient. It has evolved so that we now see a policy that encourages not survival of the fittest, which is what we want, but survival of the biggest.

These problems with market concentration affect the wine industry in a few ways. Firstly, there are mergers. We have seen many mergers in the industry. A lot of those mergers and consolidations have been through bullying. A paper written by Professor Evan Jones details a few of the difficulties. It cites how in 1995 in Adelaide a small market trader of organic products applied for a liquor licence to sell organic wines. Coles fought the application in the Licensing Court of South Australia and appealed an adverse judgement in the Supreme Court, all with highly paid counsel. Although Coles lost the battle, the fact that they were prepared to expend substantial resources on harassment of a minnow is indicative of a strategy of market dominance.

The other issue that we see in our wine-retailing sector is the issue of price discrimination. Certainly if someone is buying a smaller quantity of wine they would expect to pay a higher price. Likewise, if someone is buying a larger quantity, they would expect to receive a discount. But, when retailers in the liquor industry can go to their larger competitors and buy wine at a retail level at a lower price than they can get it from a wholesaler, something is significantly wrong with the workings of the market. That is simply because of price discrimination, which we are seeing rampant in the liquor and wine retail industry.

Then there is the issue of predatory pricing. For many years, we had no effective law to combat predatory pricing. However, that was remedied in 2007 when the former Treasurer Peter Costello brought in what was known as the Birdsville amendment, legislation written and drafted by Professor Zumbo. But, in the last six years of this government, the ACCC has not brought one case under that legislation. There have also been examples of geographic price discrimination damaging independent retailers.

This is very important for our farmers and our wine producers. We need legislation not only to protect the consumer but also to make sure that our wine producers have several players to sell to. If they are forced into a market where two players control 60 to 70 per cent of the market, that damages the supply chain. That becomes a discouragement to investment. It simply becomes more difficult for a wine producer who is experimenting with a new label to get that label onto the nation's supermarket shelves and get it before consumers.

The other issue that affects our wine producers is our law on retail price maintenance. This law is a hangover from bygone years, taken from American antitrust legislation, when it was the producers who actually had the market power. Today we are seeing the inverse. The American courts have in many cases overridden that law against retail price maintenance and it is no longer anticompetitive and against the law of America. Again, that affects premium wine producers who would like to market their products at the premium end and to maintain a price.

Another law that leads to market concentration is our current licensing regime. Under that regime, anyone who wants to enter the market to sell wine on a retail basis has such regulatory barriers that the result is that only the largest players in the market have the resources to wade through all the legislation, regulation and red tape and be able to compete in the market. These are the risks to our wine producers from market concentration. We do not want to see a situation where our wine producers are the same as our dairy farmers, where they are being screwed down to the last penny, there is a lack of investment in the industry, they are getting low prices and they are basically being held hostage. This is the problem we face.

We must also look at the risks to the consumer from such market concentration in our retail wine sales. Despite the theory telling us that market concentration would lead to lower prices, what we have seen in our supermarket sector is that market concentration for food and groceries has led to the Australian consumer having to suffer some of the highest rates of food inflation in the developed world. If we do apples-for-apples comparisons of items on our grocery shelves and those in any other country, we find Australian consumers are paying some of the highest prices. For consumers who enjoy wine—and, as I said, the average is 20 litres per person; for every man, woman and child in the country—that is a risk they face from the increase in market concentration. So the idea that it will benefit consumers is wrong. There is pressure coming from this unnecessary market concentration, both for the consumer and for the supply chain.

The coalition welcomes this legislation. We hope it will lead to some benefits and we wish the wine industry well. We hope that their marketing and research will lead to innovation and to some new export markets that Australian wine producers can sell to. But we must have a look at our competition laws to ensure we do not get greater concentration, because that is not in the best interests of this important industry.