Opposition Backs Power to ‘Break Up’ Major Supermarket Companies

Australian Opposition Leader Peter Dutton during post Budget media interviews at Parliament House in Canberra, Australia on May 15, 2024. (Tracey Nearmy/Getty Images)

Australia’s federal opposition has backed legislating divestiture powers for the government to break up major supermarket companies.

Opposition Leader Peter Dutton says the powers would only be a “last resort” and aimed at curbing rising supermarket prices.

Divestiture power enables authorities to force companies to strip themselves of assets, such as stores and brands.

Major supermarkets have posted profits amid the country’s cost-of-living crisis, fuelling accusations—and making them an easy target—from both sides of the political spectrum of price gouging and unfair deals with farmers.

Liberal leader Mr. Dutton and Nationals leader David Littleproud on July 2 said the Coalition would take a harder stance than the Labor government in “taking on” supermarket giants to help consumers and farmers.

Mr. Dutton claimed there was a “massive concentration of market share” within the supermarket sector made up of the duopoly of Coles and Woolworths.

“There are many complaints, and validly made by consumers as well, who are worried about what it means when they go to the checkout with ever-increasing prices,” he told reporters.

Meanwhile, Mr. Littleproud revealed the Liberal-National Coalition would establish a new supermarket commissioner role and give the consumer watchdog, the Australian Competition and Consumer Commission (ACCC), more tools and penalty powers.

The supermarket commissioner would be able to hear any complaints from suppliers and farmers, while the ACCC would be able to issue infringement notices with fines of up to $2 million (US$1.3 million).

At the moment, the Albanese government’s infringement penalties for the supermarket brands max out at $187,800.

“That’s to make sure the regulatory guardrails are there to make sure there’s fairness from the farm gate to your plate,” Mr. Littleproud said.

“This isn’t about fixing prices, and it won’t mean that tomorrow or when we get into government, we’re going to break up the supermarkets straight away,” he added. “This is a deterrent.”

He said the Coalition would make mandatory the Labor government’s proposed grocery code of conduct, which would fine supermarket giants up to $10 million (US$6.6 million) or 10 percent of the annual turnover for serious breaches and 600 penalty units (around $187,800) for lesser violations.

These policies will only affect supermarkets with an annual turnover of over $5 billion a year, which would include Woolworth, Coles, Aldi, and IGA owner, Metcash.

“What we want to do is make sure that we go well beyond what this government has done in terms of facing up to the threat of supermarkets, to consumers and farmers,” he added.

In terms of market share, Woolworths holds 37 percent, Coles 28 percent, and Aldi 10 percent.

“That’s not a fair market, and government should only get involved in markets when there is not fairness,” Mr. Littleproud said.

Concerns About a Centralised Economy

The opposition’s move comes in response to Prime Minister Anthony Albanese rejecting calls to break up the major supermarkets, likening it to the Soviet Union forcing businesses to sell assets to the state.

“We have a private sector economy in Australia and not a command and control economy. We’re not the old Soviet Union,” he told the ABC in February.

“So, we need to be very careful about the language that we use. And what we need to do is to put in place proper competition measures. That’s what the ACCC are looking at, constructive ways to go forward. And we will do that.”

The idea for divestiture powers was first proposed by the Greens, which have taken the current political climate to pressure the Albanese government into supporting the move.

“The Coalition’s support for divestiture powers in the supermarket sector makes this a moment of choice for Prime Minister Albanese. He can either keep holding hands with Coles and Woolworths, or he can side with Australian shoppers,” Greens Senator Nick McKim said.

“The Greens are proud to have led this debate, and to have helped highlight the need for divestiture through our recent Senate inquiry,” Mr. McKim said.

Consumers Will Be the Loser: Productivity Commission

However, the Productivity Commission previously warned that forcefully tearing down the Woolworths-Coles duopoly would bring about unintended consequences that would ultimately hurt consumers.

Michael Brennan, former chair of the commission, told the National Press Club in 2023 that the market needed more competition.

“It’s easy to look at that aggregate and say we need to break that down. We need competition,” he said.

“[But] in many cases, consumers feel better off when they’ve got a Coles or Woollies because the prices are cheaper and the range is better.”

A long-running debate about the issue of breaking up major corporations is whether it actually results in competition in the longer term.

For example, the forced break up of Standard Oil in 1911, eventually saw the remnants of the company merge together and come under four major brands by the 2000s.