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Transcript of interview with Alan Jones: 2GB: 19 November 2013: supermarket industry code of conduct



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Minister for Small Business Bruce Billson

19 November 2013 Interview with Alan Jones, 2GB SUBJECTS: Supermarket Industry Code of Conduct

ALAN JONES:

But Woolworths and Coles have seen the writing on the wall and they’ve grabbed the Australian Food and Grocery Council hook, line and sinker. We supposedly have a new code of conduct. They are kidding me. Woolworths and Coles, it’s a contradiction in terms. Good conduct doesn’t fit with Woolworths and Coles. The code of conduct supposedly will restrict Woolworths and Coles from their ability to retrospectively change agreements with suppliers. Its supposedly will require the supermarkets to be transparent about shelf space allocation. Well I’m sorry I’ve been around too long and read too many letters and listened to too many small business people and suppliers to swallow this utter nonsense. Bruce Billson ought to know better, than to welcome this draft food and grocery code of conduct by Coles and Woolworths and the Australian Food and Grocery Council. As for balancing out relationships between retailers and suppliers, forget it. As for the industry collaboratively working together to achieve an outcome which regulates the way suppliers and retailers interact, forget it. Now I’m a Bruce Billson supporter. I think this bloke is the hope of the side for small business. But I’m sorry Bruce, you went soft yesterday saying the Coalition has managed to get the parties back around the table - that is Coles and Woolworths and the Food and Grocery Council and that these entities understand the Government’s expectations. Well they are certainly terrified of the government that’s for sure. Thankfully the government says it will analyse the draft industry led code to ensure there are no ‘unintended consequences’. And that the ACCC will look at the draft industry code. They’ve been a toothless tiger in the past. Look, I’m a great supporter of Rod Simms but the ACCC haven’t been worth two bob when it comes to Woolworths and Coles. Let me just tell you a couple of things before I talk to Bruce Billson, about Woolworths and Coles. Firstly, they dominate about 80 per cent of the grocery market, fifty per cent of the fuel and liquor market and they are bullies. And they’ve got fuel dockets. And the Australian Retailers Association and the Master Grocers Association and the Australian Newsagents Association and Small Business Australia said back in August that if fuel dockets continue it’ll be very hard for anyone else to compete. And they rightly said back in August, we’ll finish up with two players selling food and groceries. I’ve been saying that for 20 years. Nothing has changed. And these people, the Australian Retailers Association, the Master Grocers Association, the Australian Newsagents Association and Small Business Australia said they were ‘four organisations representing two million Australians and five million employees. But you see Coles and Woolworths want to be chemists, the newsagents, the butcher, the baker, the candlestick maker, the fuel retailer. They wanna be the lot. And these four groups were arguing only a couple of months ago that the government, whoever the government might be, should make sure that Woolworths and Coles fuel docket discounts are not misused. Well forget that. Fuel docket discounts should not exist. Let me take you to July. Coles was accused of misleading customers by claiming Irish made bread was ‘baked today, sold today and freshly baked in store.’ Well they were found out. Woolworths was forced to change its car insurance advertising campaign which claimed quote ‘on average our customers saved $240 when they switched from another insurance policy.’ ASIC said the comparison didn’t compare like policies, in other words it was untruthful. Woolworths ran for cover, accepted ASICs criticism and said we will take it

into account when we run other advertising campaigns. This mob had more convictions you could poke a stick at Woolworths and Coles. In July we learnt, they were retaining former politicians as lobbyists to ensure their influence with government. Woolworths and Coles lobbying the O’Farrell government to water down the O’Farrell government’s proposed guidelines on alcohol promotion, which all the public agreed with. The O’Farrell government wanted to ban supermarket coupon discounts which offered more than 50 per cent off alcohol purchases at Woolworths and Coles owned liquor retailers. Didn’t happen. Nathan Rees, the former NSW Premier said ‘there’s no question the alcohol lobby and large supermarket lobby exerted undue influence on this area of policy making.’ Woolworths employed Barry O’Farrell’s former chief of staff. Gave him a quarter of a million dollars. Made him Director of Corporate and Public Affairs. A report by KPMG in June found Coles had cut the prices of more than 6,000 grocery items by an average of 10 per cent since its ‘down down’ campaign began in 2010 and that forced Woolworths to do the same. But KPMG said ‘were Woolworths paying for this discounting?’ KPMG found not in your life. The KPMG report found suppliers were being charged 20.4 per cent more than they were in 2009 by Woolworths and Coles for rebates, promotions and shelf fees. 20.4 per cent more. The supplier was paying for the ‘down down’ campaign. And it found that suppliers had paid Woolworths and Coles $4.19 billion dollars, ‘b’ for billion, in these fees last year. Suppliers, that is, fees for rebates. Fees for promotion. Fees to have your goods. So Woolworths are advertising and the supplier is paying for it. Woolworths are placing new goods on the shelf but you’ve gotta pay for it. $4.19 billion. The report KPMG found the value of local suppliers operating profits was way below the international equivalent. And the report found that profitability by the Australian suppliers and manufacturers, that’s people providing milk and vegetables and canned foods. KPMG said ‘the profitability of Australian suppliers and manufacturers is significantly lower than their international peers and the gap is widening.’ Then the ACCC in June blocked a Woolworths supermarket at Glenmore Ridge. The ACCC found if allowed to allow the new store, would give Woolworths, which already had two supermarkets in nearby suburbs, a monopoly in the area. And the ACCC spokesperson said there should be a temporary ban on all new Coles and Woolworths stores pending a review of geographical competition. In other words, Woolworths and Coles the ACCC said, you better watch out. But that doesn’t stop Woolworths and Coles from buying up land, ostensibly for new stores, but that’s just to prevent rivals setting up in competition nearby. Then there’s parallel importing. Buying possibly damaged or discontinued Australian made products from places like Singapore and reselling them here at a standard price. Then there’s misleading advertising. I mentioned the reheated bread imported from Ireland. Sold by Coles as ‘baked today, freshly baked in stores.’ Don’t tell me the Abbott Government is going to swallow this nonsense about a code of conduct. In May we learnt that Woolworths had been buying Australian made Lynx, Rexona and Impulse deodorants from Singapore from 60 to 75 per cent of the price that they paid locally. And the manufacturer Unilever said ‘the products Woolworths sourced in Singapore could have been discontinued, damaged or otherwise disposed of.’ Don’t worry, sell them in Australia at a phenomenal profit. It’s called parallel importing. The code for pushing jobs and production offshore. So Woolworths and Coles importing stuff often damaged, often discontinued from overseas for 60 to 75 per cent of the price it would have to pay locally. Then there’s this business about removing brand named goods from supermarket shelves and replacing them with their own brands. The choice therefore is restricted to you the buyer. Competition gone. Consumers can only choose what’s in front of them and consumers are complaining. 7,000 private label products have been removed from Coles shelves alone in the past two years and the ACCC, we’re told earlier this year was investigating accusations that Woolworths and Coles habitually demand additional payment from suppliers and threaten these suppliers that they would remove their products

from the shelves unless the supplier coughs up. We learnt in April from the ACCC chairman Rodd Simms that 50 suppliers had approached the ACCC with evidence of this sort of bullying and illegal behaviour by Woolworths and Coles. This is what happens when you’ve got 80 per cent of the grocery market. We need US anti-trust laws to restrict Woolworths and Coles market share and we need them yesterday. Don’t buy this crap that was being fed to everyone yesterday. Bruce Billson is the Minister, Bruce what are you doing?

BRUCE BILLSON:

We’re working hard on all of those fronts Alan and you’ve outlined just what a substantial job it is and how much work is required. Yesterday was a step in the right direction but in no…

ALAN JONES:

What a voluntary code of conduct?

BRUCE BILLSON:

Yeah it’s a…

ALAN JONES:

Voluntary?

BRUCE BILLSON:

Yeah it’s voluntary…

ALAN JONES:

To see if you like it, if it’s okay?

BRUCE BILLSON:

Yeah no there’s a bit of misunderstanding about the voluntary nature of it. It’s voluntary for people to sign up to but once they sign up to the code it’s then binding on them and then is overseen by the ACCC so that….

ALAN JONES:

But you know this. In opposition you were told over and over again that Woolworths and Coles rule by bullying and blackmail. You pay us or you won’t get your product at the front of the shop.

BRUCE BILLSON:

Yeah and that’s the area where work is continuing. This code deals with supply agreements, fair minimum terms, none of this after the occasion renegotiation of contracts on a take it or leave it basis. I mean, the remarkable situation where if shoplifting occurs in a supermarket there are occasions where the supplier was being told to pay for that it was just ridiculous. The way…

ALAN JONES:

What is it? Code? You’re not going to change their way. Look they were dirtying their pants this mob because they suddenly saw the Abbott government coming and now they think ‘oh thank god for that. Billson swallowed this.’

BRUCE BILLSON:

Yeah no no they know there’s more to come. We’ve got the root and branch review of the competition laws which goes to the heart of those very big issues you touched on Alan in your introduction about the way market powers used or misused….

ALAN JONES:

Why am I seeing it Bruce and not you? You were the Minister yesterday and instead of saying to these people ‘this is a step in the right direction’ why didn’t you say ‘well these are the things I’ll need to have answered by this mob before they swallow this rubbish that they are forcing down our throats.’ Barry Fawcett the founder of the pickles maker, Aristocrat, back in March said this of Woolworths and Coles. ‘They were constantly putting forward requests for additional trading terms. They would find avenues to either squeeze more margins out of you or request more money to be spent on the product just to keep it on the shelf.’

BRUCE BILLSON:

Yes and this is where there is so much work needed. The law needs to be strengthened. The code which deals with day to day behaviour needs to be addressed.

ALAN JONES:

Well have you got a bill in the Parliament?

BRUCE BILLSON:

We’ve got the root and branch review of the competition laws that are being developed. We’ve got the A…

ALAN JONES:

What about anti-trust laws to restrict the supermarket share of the food and grocery market.

BRUCE BILLSON:

Yeah and that’s exactly the territory that that examination will cover Alan. We’ve got the ACCC with its investigation on unconscionable conduct and misuse of market power, the examination of the shopper docket issue, that’s underway….

ALAN JONES:

No. Mate you’re impatient. Coles this year misleading customers claiming Irish made bread was baked today, sold today, freshly baked in store… a lie…

BRUCE BILLSON:

And the law gets to them about misleading claims like that but in some of the areas…

ALAN JONES:

When when when…

BRUCE BILLSON:

Some of the areas you’ve touched on in terms of the way they bully and muscle. The law’s deficient Alan that’s why we are the only side of politics….

ALAN JONES:

Hang on, you’ve got a bill in the parliament now.

BRUCE BILLSON:

No we’ve got a bill, we’ve got a proposal to carry out our election commitment which is to look at this toolkit. We know the toolkit is deficient. We know it needs to be improved. We know provisions that are there now aren’t working the way that they were intended to operate and we know in our law in Australia Alan as you have pointed out, there aren’t some of the tools that are available in other jurisdictions.

ALAN JONES:

But you’ve gotta give them the teeth. I mean you’ve gotta….

BRUCE BILLSON:

That’s exactly right.

ALAN JONES:

You’ve gotta get that out to this mob. KPMG found in June that Coles had cut prices of more than 6,000 grocery items by an average of 10 per cent. Woolworths did the same but Woolworths and Coles weren’t paying for the discount no no no no. Suppliers were being charged 20.4 per cent more for promotions and shelf fees and rebates $4.19 billion from the little battling supplier.

BRUCE BILLSON:

Yep and that competition at the till has been hurting those smaller suppliers and that’s why we’ve said we need to get a toolkit in this country that deals with the particular nature of our economy. The enormous market share that in this area of the economy, the two big players have. They’re behemoth businesses Alan and our toolkit hasn’t been updated.

ALAN JONES:

But it hasn’t come down in size

BRUCE BILLSON:

Well our toolkit hasn’t been up to the task.

ALAN JONES:

Yep the toolkit. Mate this is blackmail. This is blackmail when you say to the supplier ‘well you can have your stuff on our shelves and you can have it front of shop but you’re going to have to pay $4.19 billion in one year to do the way we want it done.’ Come on.

BRUCE BILLSON:

Yeah and those and the code dealt with some of those issues but the other area where there’s a need for work and what we are doing is pursuing that work is where the law itself is insufficient and doesn’t offer the commission the tools it needs to change behaviour. What we need…

ALAN JONES:

Well they need to clean up the ACCC, they are supposed to have an investigation on foot.

BRUCE BILLSON:

Yep

ALAN JONES:

Woolworths and Coles habitually demand additional payments from suppliers and threaten to remove their products from shelves unless they pay up. That’s blackmail, its bullying, it’s illegal. Are you tickling up the ACCC and saying I want a report on this by the end of November?

BRUCE BILLSON:

Ah we’re saying get the report to us as soon as it’s finished, which they tell us will be early in the new year. While they’re doing the shopper docket inquiry, that investigation should be concluded by the end of the year Alan because what we’re seeing are those discounts are well beyond the margins. So that efficient, small businesses can’t compete because there is this predatory pricing strategy when these shopper dockets are of such large value that even the most efficient….

ALAN JONES:

But it’s against the law to sell a product cheaper than you can produce the product in order to knock out a competitor. And if it’s not against the law, it should be.

BRUCE BILLSON:

Yeah and the law says if you sell below cost for an extended period of time, with the intention to harm. We’ve got some of the most specific, detailed, technical laws in the world Alan. Some of those technicalities are too complicated…

ALAN JONES:

Well now Bruce I’ve gotta go, you’ve gotta go but listen.

BRUCE BILLSON:

Sorry

ALAN JONES:

You’ve got a tough lump of legislation there to clean this joint out. Let me know and you can have five hours for free.

BRUCE BILLSON:

(laughs) we’re having a red hot crack at it and I know you’ll keep me on the task Alan.

ALAN JONES:

I will.