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Tuesday, 19 August 1980
Page: 397

Mr Jacobi (HAWKER, SOUTH AUSTRALIA) asked the Minister for Business and Consumer Affairs, upon notice, on 20 February 1980:

(1)   Further to my question on 13 November 1979, regarding a report of the Prices Justification Tribunal on processed food prices (Hansard, page 2877), the answer to question No. 5114 (Hansard, 21 February 1980, page 319) and your media statement of 31 January 1980 which states that the Government considers that the industry should rectify the matters raised by the Tribunal without outside intervention, is every conclusion of the Tribunal in its report capable of rectification by the industry without outside intervention.

(2)   If not, which conclusions require Government action and what action does the Government propose to take.

(3)   In view of (a) the Tribunal's finding that the specials system appears to be raising the prices of processed food, and (b) the apparent inability of manufacturers to overcome the power of major retailers in this regard, will he take action to protect (i) consumers who are paying more than necessary for their goods and (ii) the small business sector which is unable to compete because of the unfair competition inflicted upon them by large retailers and suppliers.

(4)   Will he investigate whether the multiplicity of allowances and discounts from manufacturers' selling prices, which are over and above those relating to bulk discounts and promotional expenses, infringe the price discrimination provisions of the Trade Practices Act.

(5)   Will he examine the effect co-operating advertising payments have on the cost of goods to the consumer.

(6)   Is it a fact that, as claimed in a recent statement by a food industry leader in Queensland, an amount of 4 per cent in co-operative advertising payments was justified.

(7)   If so, how are payments to large retailing chains controlled.

(8)   Have repeated representations been made to the Trade Practices Commission through small business associations throughout Australia who are concerned at food distribution monopolies, for protection, and have these representations been repeatedly rejected.

(9)   What are the number and nature of complaints and the cases lodged with the Trade Practices Commission during the last S years.

(10)   How many cases were dealt with and what was the result.

(11)   Did the result extend any relief or protection within the small business sector; if not, will he take immediate steps to amend the price discrimination section of the Trade Practices Act to extend effective and efficient protection against predatory practice which the small business sector has been seeking for years.

Mr Garland - The answer to the honourable member's question is as follows:

(1)   and (2) No. As foreshadowed in my media release, I have asked the Prices Justification Tribunal to monitor, through its normal surveillance role, price margins applied by the major wholesalers and retailers on high turnover and house-brand products, and to report to me on what further action, if any, might in its view be appropriate in regard to wholesale and retail prices for processed foods.

The PJT has also been asked to report further on the effects on prices of over-award payments in the processed foods industry.

In the matter of the need for uniformity in food legislation, which was noted by the PJT, there has been consultation with the States and a model Food Bill is in preparation.

(3)   In addition to the measures outlined in answer to ( I ) and (2), above, the Government is currently considering the report of the Trade Practices Consultative Committee on Small Business and the Trade Practices Act. The report was released for public comment in January, 1980 and the Government will have regard to the views expressed, including those of groups representing small retailers in the processed food sector.

(4)   For there to be a breach of the price discrimination provisions of the Act the conduct in question must have the effect or be likely to have the effect of substantially lessening competition in the relevant market and not be capable of meeting either of the two defences provided by the Act- cost justification or meeting of competition in good faith.

The Trade Practices Commission has conducted two wideranging surveys of retailers and followed these up with a number of manufacturers in response to allegations of price discrimination against food and drink manufacturers by small business associations. (See, also, answer to (8) below).

(5)   , (6) and (7) In its report, the PJT commented that the costs of advertising and promotional programs are borne predominantly by manufacturers. The PJT stated that this could be encouraging avoidable costs if excessive advertising is being applied by retailers in the absence of the commercial constraints which would normally apply to those paying the major share of advertising/promotional expenditure.

The level of advertising and the costs incurred are matters for the individual judgment of the companies concerned.

(8)   I am advised that the Trade Practices Commission has undertaken wide-ranging enquiries in response to representations by the Victorian Retail Confectionery and Mixed Business Association and the South Australian Mixed Business Association. The Victorian enquiries are still being assessed. The South Australian enquiries revealed no breach of the price discrimination provisions of the Act and the Association was advised accordingly in January this year. Individual complaints are made to the Commission by members of small business associations and are examined on their merits- see also answer to (10) below.

(9)   Of the complaints and inquiries made to the Trade Practices Commission over the last five years 206 complaints and 37 inquiries concerned the food industry. These varied widely in nature but some common areas were: refusal of supply competitor's selling prices too low competitors receiving higher discounts than complainant minimum purchase requirements cessation of Sunday baking (in Victoria) exclusive dealing requirements e.g. soft drink cabinets only to be used for suppliers' goods requirement to trade only in specified areas.

(10)   Each complaint received by the Commission was examined and an assessment made as to the likelihood of a contravention of the Trade Practices Act being made out. Sometimes the matters raised by complainants bore no relation to the provisions of the Act. The facts will sometimes provide a defence against the relevant provisions e.g. in relation to complaints of price discrimination, quantity discounts are given which do not appear to be out of line with likely economies of fewer deliveries and larger drops per delivery. In other cases the particular market will appear to be such that competition is unlikely to be substantially lessened, which is a requirement before most sections of the Act are breached.

While this thorough screening narrowed the field, many cases remained where it seemed that the Act may have been contravened. In these cases involving milk and dairy products, liquor, tobacco, smallgoods, meat, fruit juice, margarine, oysters and pastrygoods, detailed investigations were conducted. Some complaints were taken up in the course of adjudication inquiries. In some cases further information was obtained which indicated that any attempt to prosecute would be unsuccessful. Court cases have been instituted involving bananas, beer (2 occasions), bread (2 occasions), fruit and vegetables and glucose.

The case involving price fixing by five Adelaide hotels resulted in the following orders: an injunction restraining the Morphett Arms Hotel and the Royal Oak Hotel from fixing the allowance for bottled beer the Royal Oak to pay a penalty of $8,000 the Morphett Arms to pay a penalty of $5,000 the Royal Oak and the Morphett Arms to pay three quarters of the Commission's costs the Commission to pay the Norwood Hotel's costs the Commission to pay one half of the Rex Hotel's costs the Commission to pay one third of the Old Lion Hotel's costs.

The NSW Chamber of Fruit and Vegetable Industries case, arising from an agreement to levy growers with sorting and stacking charges, resulted in the granting of injunctions and imposition of a penalty of $2,500 with costs on each of the eight defendants.

The ACT bread case, involving alleged price agreement between four bread manufacturers, was settled in the Federal Court on 20 April 1980. Proceedings were discontinued with all parties to bear their own costs. The bread manufacturers, while continuing to deny contravention of the Act, undertook to the Commission that:

(i)   they will not jointly announce increases in bread prices; and

(11)   they will not communicate with each other with respect to proposed alterations in their respective bread prices in the ACT.

The banana case has been stood over by ministerial direction pending a review by the Government of primary product exemption from the Trade Practices Act. The other cases are before the Court. Inquiries into a number of other matters are continuing. It is expected that the results of an inquiry into allegations of price discrimination made by the Victorian Retail Confectionery and Mixed Business Association will be available soon.

(II)   The effectiveness of the Trade Practices Act in the small business sector, or indeed in business and industry at large, is not merely measured by the number of successful cases instituted under its provisions. The Act, by its very existence has led to substantial changes in market and business conduct throughout Australia.

Notwithstanding this the Government has the Act under continual review, particularly as to its effect in the marketplace and, as stated in answer to (3) above, the Government is currently considering a number of proposals made by the Trade Practices Consultative Committee in its report on Small Business and the Trade Practices Act.

In the course of its consideration the Government is reviewing the effectiveness of sections 46 and 49 in dealing with predatory pricing in the light of the Committee's recommendation that section 49 be repealed and section 46 strengthened.

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