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Thursday, 3 November 2011
Page: 8130


Senator MARK BISHOP (Western Australia) (12:05): I rise to make a few remarks on the impacts of supermarket price decisions on the dairy industry. I joined the Economics References Committee in the final stages of this inquiry. There were, however, government senators involved in committee hearings and deliberations earlier in the year and I had been closely observing its progress. Government senators on the committee agree with a number of findings and recommendations in the report, and this is outlined in our additional comments. However, we disagree with two other recommendations.

I want to make one or two observations about the nature of this inquiry. As the report notes, some elements of the inquiry appear unusual in many respects. It is obvious that consumers who purchase milk will be better off because of the price discounts. Government senators concur that the benefits gained by the silent majority of consumers due to the lower price of a staple good have not received enough attention in this debate. In recent years, discussions about the grocery sector have focused on grocery prices being far too high. There have also been questions about the competitiveness of the sector. It seems unusual that a company cutting the price of a staple good with the purpose of challenging its major competitor in a way that benefits consumers should lead to calls for Australia's competition laws to be amended. The ACCC investigated Coles's pricing decisions and concluded that it was unlikely to breach the Competition and Consumer Act. This inquiry has provided a forum for some vested interests to run predictable arguments about the need to change competition law. Competition policy is not designed to protect particular players, companies or institutions; it is principally concerned with protecting the competitive process. If attempts to move away from this approach are successful, there is of course a predictable outcome: consumers will be forced to pay more. Accordingly, government senators do not support the recommendation that an independent review of the Competition and Consumer Act be initiated.

A number of key amendments were made in 2007-08 to section 46 of that act. This is the section that deals with the misuse of market power. These amendments are yet to be considered by the courts. As the amendments are relatively recent, it is possible it may be some time before a court comes to make a judgment upon them. Investigations under these sections are time consuming and the cases are hard fought, as the penalties are substantial. However, these amended provisions do need to be tested. At this time it is difficult to see how a meaningful review of the Competition and Consumer Act could be undertaken without this having occurred.

There appears to be merit in the recommendation that the ACCC be more up-front about some of its enforcement activities. It could also better communicate them, where it is appropriate to do so. The ACCC is an independent statutory authority, and I will leave it to them to determine how they respond to this aspect of the report.

Ongoing scrutiny of the major supermarkets is also needed to ensure they do not engage in predatory or other anticompetitive behaviour. Movements in farm-gate prices and the outcomes of negotiations between processors and farmers also need close attention so that we have a clear picture of what is going on in this industry. However, government senators do not believe that price cuts warrant wide-ranging government action and intervention in the marketplace. A lot of the concern with the price cuts came from some milk processors. Other stakeholders were also quick to put forward processors' arguments. These concerns were centred on the effects price cuts of the home-brand product would have on the profitability and value of the processors' brands. Evidence to the inquiry made it clear there is no substantive difference in the products themselves—in either quality or other specifications of home-brand regular milk and their private-label equivalents. Changes to the sales patterns of these brands should not be a matter for governments. The purchasing decisions of consumers will indicate whether or not they still value the brands, and the market will adjust accordingly.

As the ACCC found in its 2008 grocery inquiry, it is the processors who have become worse off from the increasing market share of private-label milk. This growth has not resulted in a reduced farm-gate price. I can understand the sentiments behind the arguments from individual farmers and I am sympathetic to their concerns; it is a tough and demanding industry. There are a number of recommendations in this report that are very worthy of consideration; however, certain proposals are of much greater benefit to other vocal interests and are unlikely to help those farmers. Others go far beyond the dairy industry itself. The case has not been made for those recommendations to be pursued.