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Tuesday, 14 August 2012
Page: 5210


Senator XENOPHON (South Australia) (19:10): I rise tonight to speak on an issue which is of huge significance, and that is the supermarket duopoly strangling Australian grocery market competition and the impact of that on consumers. It is interesting to note that Senator Kim Carr is in the chamber. His comments a number of months ago about the duopoly and their impact on food processors were very welcome. They were strong comments, they were sensible comments and they were comments that I think triggered an increased debate about the supermarket duopoly. Those comments by Senator Carr were very welcome.

Just yesterday Master Grocers Australia, which represents independent supermarket operators across the country, released a report titled Let's have fair competition: the risk of losing retail diversity, choice and true competition in the Australian supermarket industry.Its findings were grim but, sadly, not surprising. For years I have listened to the stories of people who say that they are feeling the effects of the Coles and Woolworths supermarket duopoly in this country, not just in the grocery market but also in the petrol, liquor and hardware markets. These are all industries into which the tentacles of Coles and Woolworths have spread. I also think that these are issues which relate to the food processing sector. An inquiry chaired by our colleague Senator Richard Colbeck into food processing is due to report shortly. These issues were in the terms of reference of the inquiry and they were closely looked at.

Independent supermarket operators feel the effects of what they say is an unfair playing field. They are up against huge stores that offer big discounts both on the shelves and through schemes like shopper dockets. Superficially, that may seem like a good thing for consumers, but if the effect of that is to squeeze out competition and to force independents out of marketplaces then consumers are left with less choice, less diversity and, ultimately, with less competition and that can lead to prices being forced up. The big players have enough backing that they can carry any losses associated with schemes like these. Smaller operators simply cannot compete on an unfair playing field like this.

These sorts of stories are backed up by the Master Grocers Australia industry report. Master Grocers Australia's President, Rod Allen, outlined the findings. They included a pattern of behaviour where the big players develop large supermarkets in small local markets—an example is Bright in Victoria. Anyone who saw Lateline last night on ABC1 would have seen the impact that that had on a relatively small community's population of 2,000 people. There was one big supermarket, one of the big two, and it really crowded out competition; it put the squeeze on those small operators. The impact of that on the community is significant. There is also the issue of store saturation, anticompetitive price discrimination, shopper docket schemes and cross-subsidisation, where, in effect, you might be getting your petrol a bit cheaper but you end up paying more for grocery items.

It is time for the ACCC to act in relation to these matters. I do congratulate Rod Sims, the relatively new chairman of the ACCC, on the way in which he has looked at these issues, because a number of people have come forward with complaints. I suggest that they are very much the tip of the iceberg. To give you an idea that the several dozen complaints that the ACCC received, as I understand it, is the tip of the iceberg, a few months ago ABC Lateline ran a story about the food processing sector and the power of Coles and Woolworths, with their 80 per cent of that market dominating the sector. Apparently Lateline's producers made well over 100 calls in order to get someone to appear before a camera, to speak out about the practices that food processors were concerned about—practices perpetrated by Coles and Woolworths. Not one person came forward. Apparently, one person was willing to speak out but then they changed their mind at the last minute, as I understand it. So these are important issues.

I support the recommendation of the Let's have fair competition! report for the ACCC to ban Coles and Woolworths using shopper docket schemes. I also support the recommendation made by Masters Grocers Australia to 'ensure the ACCC has the legislative power to require prior notification by the major chains of any proposed acquisition of a site, lease or existing business'. I agree with Master Grocers Australia's Chief Executive Officer, Jos de Bruin, who says Master Grocers Australia wants 'a fair go for the smaller independents'. The South Australian Deputy Small Business Commissioner, Associate Professor Frank Zumbo from the University of New South Wales, shares these concerns. Professor Zumbo is well known to those on the Senate Economics Legislation Committee for his tireless advocacy for competition in the sector, for consumers and for small businesses in this country. This report highlights many of the concerns that Professor Zumbo has raised over many year—that there is evidence of anticompetitive behaviour in the supermarket industry. In fact, Professor Zumbo was the author of Senator Joyce's amendment, the so-called 'Birdsville amendment', that was moved and passed in 2007, but we have yet to see any prosecution launched in relation to predatory pricing. That concerns me because it seemed to me to be a robust amendment that added to the body of protections in competition and consumer law of this country.

Let's put in perspective just how big Coles and Woolworths are. A 2008 inquiry into the competitiveness of retail prices for standard groceries found that Coles and Woolworths accounted for 70 per cent of packaged grocery sales in Australia and about 50 per cent of fresh produce sales, including meat, fruit and vegetables. My understanding is that has increased and the overall benchmark is closer now to 80 per cent. These big two own 87 per cent of all Australian supermarkets with floor space of 2,000 square metres or more. That is simply unprecedented. There is no other country in the world where just two large grocery retailers have that amount of market power. Compare this with the United States. The two biggest supermarkets in the United States accounted for something like 20 per cent of sales in 2007. In the United Kingdom in 2011, the four largest supermarkets accounted for 75 per cent of sales. It is fair to say that enough is enough. It is time to act.

Master Grocers Australia made a number of recommendations. They recommended that the ACCC:

i. determines whether the major chains are cross-subsidising a substantial number of loss-making supermarkets for anti-competitive purposes and determine whether this is misuse of market power, and

ii. revokes the authorisations issued to Coles and Woolworths in relation to shopper docket schemes between related entities.

Master Grocers Australia also recommended that the Australian government:

i. reintroduces a prohibition on anti-competitive price discrimination similar to laws in other OECD countries;

ii. repeals the provision allowing cross-subsidies between related entities;

iii. develops a Retail Sustainability Assessment to assist local government to determine whether major retail development proposals are of appropriate size;

iv. recommends to COAG certain specific changes to planning legislation to encourage improved planning of activity centres and new estates, and

v. ensures the ACCC has the legislative power to require prior notification by the major chains of any proposed acquisition of a site, lease or existing business.

I believe we need to go further. I believe that the courts in this country ought to have the power to require the divestiture of a company that has been found to abuse its market power, because right now that power of divestiture does not even exist in our competition and consumer law. If it is tethered to an abuse of market power, I think that is an appropriate thing to do. It will keep those companies that have a huge market share on their toes to ensure that they are behaving appropriately in the marketplace, in a way that serves the best interests of consumers, and the best interests of consumers are served by robust competition, by having a marketplace that is open and by allowing the smaller, independent operators to be able to compete robustly.

The comments made by Minister Kim Carr a number of months ago were very welcome. I think it is important that they are heeded by all sides of politics because, unless we act on the sensible recommendations made by Master Grocers Australia, we will find a situation where more and more small businesses hit the wall and will not be able to compete, and the long-term consequence of that is that there will be less competition and higher prices for Australian consumers. Enough is enough. We need to act. The Master Grocers Australia report is a good first step.